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Factoring is has always been a reliable way for businesses to gain access to capital. However this is particularly true with businesses that have financially strong clients.

Here are a few examples of businesses that would likely be turned down by …

A financing decision that the State of California is in the process of making is the perfect model of how asset based lending can be used. The State of California needs money to run their organization (sound familiar business owners?). However the State is not in a good position to take on more debt. In their case it is because they already have a great deal of debt but in the case of business owners, they may be too small, too young or perceived as “too risky” to borrow. However the State of California has an asset, in their case office buildings, that they are considering using as collateral in a ‘sale lease-back’ arrangement so that they can make use of the cash value of the asset while still maintaining use of the property. This is the prototypical model for asset based lending. Let me break it down further.

Picking the right factoring company is very important.  Unlike most other forms of financing, a factor has a day-in day-out relationship with their clients which means that first and foremost you need to like the people you will be dealing with. As well you will need to trust that they will act in your best interest and provide a quality service to your business. Here are 8 items to consider when deciding if a factoring company is right for you.

Factoring can be a perfect way to finance business growth for a number of reasons. It can solve cash flow issues, the funding grows with your sales, the funding is flexible, it doesn’t add to your overhead, etc. However, a …

Great break down of factoring. Informative, concise, and easy to understand. If you are not familiar with factoring, this is a great introduction.

Trust is a key component of any lending arrangement. The lender needs to have trust that the borrower will pay them back. The borrower needs to have trust that they are getting a fair deal that is in the best interest of their company; not a deal that only suits the lender.

However business owners can be desperate for money, and there are profiteer’s looking to capitalize on this desperation. The Wall Street Journal wrote and article about such a man by the name of Surinder Multani.. This loan broker charged steep fees to small businesses owners on the basis that he could secure a SBA loan for them. He did deliver on this promise, brokering almost fifty deals totaling $44.3 million dollars. However these loans were not of benefit to either the borrower or the lender as roughly half of the loans he brokered ended in default.

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.

All B2B companies deal with waiting 30 to 60 days to get paid on their invoices. Providing credit to buyers is ‘par for the course’ in most markets. This is fine for larger companies that can afford to wait it out, but small and mid-sized companies can be hurt by waiting so long for payment. Worse yet, smaller businesses usually have limited or no access to traditional bank loans to help make ends meet.

Why should a business with tight cash flow be extending credit? It makes no sense. The secret is: you don’t have 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 …