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Sam’s club has begun wearing a new hat; Business lender. They offer business loans through the SBA’s community express program. To be precise, they are not actually making the loans, they have partnered with Superior Financial Group, a leading SBA lender.  This seems like a strange fit for Sam’s club, a large retailer, to be playing financier. But it highlights an important shift in how businesses are demanding money; they want it quick and easy.

There was a recent article on entrepreneur magazine’s website called “The Post-Banking Loan.” It is a very appropriately titled article about the factoring industry and how an increasing number of small businesses are turning to factors as a source of capital in the current lending environment.

However factoring, as a service, was a bit misrepresented in this article and I would like to take this time to correct a few of the points made and add some of the glaring omissions as well.

The purpose and goal of a factoring arrangement is simple: Improve cash flows. That is the primary value that a factor provides to their clients. However, a factor’s value does not start and end with simply providing financing.  The factor assumes a host of responsibilities that are inherent and unique to this variety of financing.

So you finally got your start-up off the ground. Congratulations. Business has been good and now you see an opportunity to expand. Congratulations again. However, expanding generally means financing, and financing means credit. Having good business credit can be the difference from capitalizing on this opportunity to expand or watching on the sidelines as it passes you by. This is why establishing the ground work for financing is so important.

The first (obvious) step is to

A line of credit is a convenient way to manage finances in a business. The money is available to use, but it is not racking up interest when it is not being tapped into. This is a good way to …

Net 30 days terms are great for retailers, especially if they can move inventory quickly. How does selling something and counting your profit BEFORE you pay for it sound? For businesses with this blessing, it means low capital requirements. However this good financial situation is at the expense of their suppliers who end up carrying higher capital requirements because of these payment terms.

For larger more established businesses, these capital requirements are not much of a financial burden. They usually have enough cash on hand to manage the float time, and have avenues for financing if things get tight. On the other hand, upstarts tend to be scarce on capital thus making 30 day payment terms much more of a burden. The fact that upstarts usually cannot qualify for any traditional forms of financing exacerbates this problem. However savvy entrepreneurs have a tool to help manage this problem.