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Economy Recovering – Bank Loans Still Scarce

With FDIC reserves plunging to $10.4 billion from $45 billion last fall and the number of troubled banks rising to 416 from 305 in the first quarter, more pressure is being put on banks to “shape up”.

Although the economy is showing clear signs of recovery, the banking sector may not rebound any time soon. It’s possible that the continued problems in the banking industry will substantially outlast the recession, resulting in a significantly suppressed availability of credit in a recovering economy.

With many banks struggling to keep their doors open, small business owners seeking financing, who are already finding limited options, are faced with desperate cash flow issues. As businesses attempt to recover along with the economy, they need financing solutions now.  It is critical that businesses acquire a funding source that is readily available and dependable.

Accounts Receivable Financing is an often overlooked choice for growing businesses. This form of financing (also known as Factoring), is a financial tool that allows businesses to capitalize on the power of their outstanding invoices. Factoring is a valuable mechanism to turn a business’ invoices into immediate cash, enabling them to fund business operations.

It is not widely understood, but a factoring firm provides funds to its clients based upon its clients’ accounts receivable. Most invoices billed to credit worthy customers can qualify. Banks, on the other hand, must consider more stringent criteria before qualifying a borrower for any type of funding. In most cases, when considering assisting a business based strictly upon its accounts receivable, factoring companies can provide funds when a commercial bank cannot.

 

The Credit Crunch Is Still On

Just as lenders were starting to ease up a bit after some earnings surprises among companies and economic data that wasn’t as bad as it was earlier this year, an S&P report has indicated that $695 billion in debt will come due between now and 2014. This is sure to curtail lending while companies with upcoming principal payments face a difficult problem or the possibility of default.

In a cruel way, the credit crunch has been pummeling those that are least able to cope with its effects. Small businesses have been hit incredibly hard by the lack of readily available funds from banks in order to stay operational. While many large companies have squeezed their suppliers by paying their invoices later in order to stretch their cash flow, companies providing goods on credit have no come back if the company they are supplying goes under.

Even in a credit crunch economy, there are many ways to maintain a positive cash flow when dealing with Accounts Receivable issues. One increasingly popular way is called Accounts Receivable Financing (also known as Invoice Factoring). This financial tool allows businesses to capitalize on the power of their outstanding invoices. This form of financing is a valuable mechanism to turn accounts receivable into immediate cash, enabling businesses to fund their operations.

It’s not widely known, but most businesses can rise immediate funds for their accounts receivable by simply engaging the factoring services of firms such as Charter Capital. Commercial banks do not consider loans based solely on a borrower’s accounts receivable, but invoice factoring companies mainly consider the accuracy of the accounts receivable when deciding whether or not to fund its clients. In most cases, a factoring provider can provide funds when a commercial bank cannot.

Dealing with an uncertain economy is never easy, especially for small businesses. Unlike their larger counterparts, small businesses rarely have the resources to monitor and take corrective action for every trend and issue. Even those owners who have weathered numerous business cycles may be faced with new circumstances that confound their otherwise successful instincts and knowledge. But a predictable funding source like factoring can certainly ease the pain associated with an uncertain economy.

 

Big Companies Are Slowing Supplier Payments

As the credit crunch continues to intensify, large companies are employing strategies to shore up their cash flow constraints by delaying payments to their suppliers.

In a recent article from the Wall Street Journal, “Big Firms Are Quick To Collect, Slow To Pay”, corporations are attempting to beef-up their collections all while slowing down their accounts payable to 60 days or more. As revenues for large corporations continue to slow in an already weak economy, they are putting the cash flow burden on their suppliers.

Since many of the suppliers of larger companies are small to mid-market businesses, they may carry an additional burden due to the ever dwindling availability of bank loans or lines of credit. Also, small to mid-sized businesses have little bargaining power when dealing with their larger customers and are forced to accept more lengthy terms. This can have a devastating impact on suppliers that are already strapped for cash.

As business owners are already struggling with cash flow in today’s economic environment, financial relief seems to be scarce. However, Accounts Receivable Financing is an often overlooked choice for businesses to manage their cash flow. This form of financing (also known as Factoring), is a financial tool that allows businesses to capitalize on the power of their outstanding invoices. Factoring is a valuable mechanism to turn a business’ invoices into immediate cash, enabling them to fund business operations.

It is not widely understood, but a factoring firm provides funds to its clients based upon its clients’ accounts receivable. Most invoices billed to credit worthy customers can qualify. Banks, on the other hand, must consider more stringent criteria before qualifying a borrower for any type of funding. In most cases, when considering assisting a business based strictly upon its accounts receivable, factoring companies can provide funds when a commercial bank cannot.

An Optimistic Future for Small Business

Recent economic reports have indicated that we may pull through the current economic crisis reasonably soon. Many economists believe that the economy is beginning to show signs of recovery.

However, the fact remains that any rebound from the current recession may be muted and difficult see in real terms. Even if economists see recovery, it is still too far off to have any positive effect on small business. A concrete example of this slow road to recovery is the average bank.

Most banks are still not lending to small business nearly as much as they once were. Even in the wake of positive economic reports, these lenders are still tightly holding onto their funds. So it seems, for small business, the economy has not yet begun to stir. With more and more businesses seeking out the necessary funds to drive their business out of this recession, it’s clear that traditional lending is not meeting this need.

Those that are seeking some form traditional bank financing are currently better off looking for private asset-based funding. During troubled times like these, asset-based financing (such as invoice factoring) has come to the aid of businesses many times by providing the necessary financing that traditional lenders are unable to consider.

While banks continue to recover, more business owners are discovering the benefits of a lending alternative like asset-based financing (invoice factoring). With the funds they need, businesses can continue to operate and eventually grow once the recession ended.

While economic optimism is contagious, it may not truly reflect the current conditions and address the needs of businesses today. The truth: The outlook for the economy remains uncertain, but there is light at the end of the tunnel.

In Tough Times, Innovation Can Fuel Small Businesses Growth

Small businesses need an abundance of innovative ideas in order to succeed in this difficult economy. It’s all too easy to blame the economy, but there are many ways small businesses can succeed through customer focused innovation.

The good news is: Periods of economic stress are usually followed by new innovative ideas, especially in small business. This stems from a basic business need to retain and attract customers with what the customer perceives as value. Small businesses understand this and are able to fare better in an economic downturn because they think fast. They are in a better position to move very quickly in terms of how they align their resources and address customer needs. That’s just the way they’re used to doing it, in good times and bad. It all stems from the passion they have for their business and their customers.

Innovation does not come without cost. In these times, small businesses must focus on the customer, costs and cash flow. To fuel innovation, small businesses need to re-evaluate their priorities, and their business model, in order to pinpoint problems and goals to provide innovations to products and service offerings. A Cash flow crunch can sneak up on a business if they are not prepared. It can adversely affect a company experiencing a slowdown as well as one that is rapidly expanding.

In order to stem cash flow, businesses should be sure to have cash reserves or arrange backup financing. Lines of credit, equity financing, or Invoice Factoring (also known as Accounts Receivable Financing) can provide a boost to cash flow that can fuel the innovations necessary to succeed.

Now is the time for business owners to innovate and make an investment in their business. To build up a customer base that can support their efforts in an economic downturn. What may matter most is the commitment to innovative change, the tolerance for taking risks, a sharp eye on cash flow, and management’s ability to lead smart.

Finance Growth without a Loan

Invoice Factoring for Small BusinessSmall to mid-size businesses are continually faced with waiting 30 to 60 days to get paid on their invoices, which really puts a strain on their cash flow.

Where large companies can usually afford to wait it out, small and mid-size businesses can’t. This can have a serious affect on managements’ ability to pay the company bill or meet payroll. A cash flow shortfall can also affect the business’ ability to fulfill orders because the cash is tied up in unpaid invoices.

How can you get business cash without a loan?

Invoice factoring, also known as accounts receivable factoring, is a financial tool that allows businesses to capitalize on the power of their outstanding invoices. This form of financing is a valuable mechanism to turn your invoices into immediate cash, enabling you to fund your business operations. It is not very well known, but invoices from strong credit worthy commercial clients are excellent collateral, especially for factors. Most banks will not accept accounts receivable as collateral, but invoice factoring companies are more than willing to provide you with financing based on them. In most cases, a factoring provider can provide funds when a commercial bank cannot.

Why use Invoice Factoring?

The reason many businesses make this move is to ensure the continuous flow of cash to the business without sacrificing equity or incurring debt. Essentially, businesses that use factoring are focusing on having most of the money now rather than all of it later. It takes time and effort to collect on an invoice, so when a company finances its accounts receivable, they are getting their money faster and without the hassle of the collection process.

In today’s struggling economy, freeing up working capital through factoring can prove to be vital. Access to immediate cash can be invested into new equipment, used to pay bills, or used toward payroll. Of course, the alternative is to chase the customer for the invoice payment and defer everything else while the money is tied up in the collection process.

Sales Down? Stop Blaming the Economy and Increase Profits

Given the current conditions, it’s easy to blame the economy when sales stagnate. However, the economy may be only partly to blame.

The fact of the matter is that the holes in the sales process are hidden when the economy is good. Whether the economy is up or down shouldn’t matter as much as how your sales team adjusts to the slowdown.

When organizations encounter a sales slowdown, they should adjust their game plan accordingly and not get trapped into doing more of whatever activity is not working. Management should be willing to make an investment to change their approach faster than their industry changes in order to avoid a more severe downturn.

There are no guarantees that your business will never face a sales slump, but there are things you can do to ensure your sales team has a better chance of success.

Change is Good

Change can be hard for a lot of people. However, your sales team must learn to love change as a part of your sales culture.

“Change is the law of life. And those who look only to the past or present are certain to miss the future.” – John F. Kennedy

Try to view change as an opportunity to try something new and to adapt new ideas to the current circumstances. Encourage change by challenging your sales staff to be creative with sales techniques and reward successful new ideas. If something doesn’t work, encourage them to learn from the mistakes and keep the new ideas flowing.

Take Risks

If you want to be remembered, do something that makes you stand out from the pack. Although a giant purple inflatable gorilla may not fit with your company image, it is an excellent example of an “attention getter”. Remember, when you’re average, you’re just as close to the bottom as you are to the top.

Training and Education

Encourage a passion for learning and foster an environment of self-improvement. Your sales team has talent, or else you would not have hired them. Augment your current sales program with access to self-improvement opportunities, giving your sales team the ability to become more talented than the competition.

Lead by Example

Business owners and sales managers need to approach the sales effort with the mindset that they have an obligation to continually demonstrate the kind of sales behavior, attitude, and philosophy that they want their team to employ. They should also demonstrate the principles of creativity and respect, and encourage an open and fun work environment.

Now is the time to make an investment in your sales effort. To build up your sales team that can produce in an economic downturn. What may matter most is the commitment to initiating change, the tolerance for taking risks, dedication to employee training, and management’s ability to lead smart.

Improving Cash Flow in Tough Times

A common challenge for many small businesses is the feast-or-famine nature of managing cash flow.  Poor cash flow can mean certain doom of an otherwise healthy business.

Beware, a cash flow crunch can sneak up on you if you aren’t prepared.  It can affect a company experiencing a slowdown or one that is rapidly expanding.

Here’s a list of a few simple ways to improve your cash flow position:

Accept Responsibility For Minding Your Company’s Cash Flow – Even if you hire an accountant to help keep the books, don’t expect them to tell you everything you need to know.  Stay informed and educate yourself on how best to manage your business finances.

Bill Promptly and Accurately – Billing right away for your products or services will only help to facilitate a prompt payment. Also, avoiding billing errors and mistakes will not only increase payment turnaround, but will help to build trust with your customer.  There’s nothing like regular billing errors to strain a business relationship.

Actively Monitor Your Cash Flow – You should always know the financial status of your business (monthly sales, expenses for the month, how quickly clients are paying, etc.).

Avoid Slow Pay/No Pay Customers – Don’t be shy about checking credit references or even paying for a credit check if the client is significant enough.

Regularly Analyze Your Finances and Adjust Your Strategy Accordingly – Actively monitoring your cash flow helps catch small problems before they become unmanageable.  If something is off, start asking questions until you get answers.  The answers will help to define your business strategy.

Organize Backup Financing or Cash Reserves – Invoice Factoring, lines of credit or even equity financing can help get you through a cash flow crunch.

Lease Instead of Purchase – Although leasing costs more in the long run, buying on an installment basis means less cash up front and can be a boon to your cash flow.

Control Spending – Look over your expenses and see where you can trim the fat without causing the business to suffer. Add employees slowly and cautiously. Watch inventory and be careful not to over stock (this can easily bleed your company of cash).

Accelerate Receivables – Don’t be shy about asking customers for advance payments and reward early payers with a discount. Just putting out friendly reminder calls (“Did you get my bill, when can I expect payment?”) can significantly augment your cash flow.

Forbes.com Article Endorses Factoring

A recent Forbes.com article has some excellent tips for small businesses about managing cash flow through factoring.

URL: https://www.forbes.com/2009/01/29/finance-factoring-debt-entrepreneurs-finance_0129_finance.html

The article concedes that factoring is a great way for some businesses to get immediate cash without going into debt. What most concerns factors is the credit worthiness of the end customer, not the business or its owners.

The reason many businesses make this move is to ensure the continuous flow of cash to the business. Essentially, businesses who use factoring are focusing on having most of the money now rather than all of it later. It can take time to collect on an invoice, so when a company finances its accounts receivable, they are getting their money faster and without the hassle of the collection process.

It’s even more important for small businesses to free up working capital through factoring. The money can be invested into new equipment, used to pay bills, or used toward payroll. Of course, the alternative is to chase the customer for the invoice payment and defer everything else while the money is tied up in the collection process.

Charter Capital Develops Strategic Alliance with Profit Tools, Inc. to Provide Software Service With Accounts Receivable Financing

Trucking companies benefit from increased cash flow with invoice factoring from Charter plus the added benefit of trucking software by Profit Tools, Inc.

Houston, TX, November 14, 2008 — Charter Capital, recognized as one of the hardest working independent providers of asset based financial services for small to mid-sized businesses, and Profit Tools, Inc, a leading provider of business automation software for the trucking industry, have teamed together to offer their respective services to the trucking industry. When Profit Tools refers a trucking company Charter Capital for factoring services, then the trucking company gains the opportunity to automate its trucking business by acquiring fleet management software at little or no additional cost.

This strategic alliance gives trucking companies the tools they need to strengthen their business and weather tough economic times. Factoring with Charter Capital turns accounts receivable into immediate cash flow to accelerate business growth and insulate operations from lengthening customer payment cycles. Profit Tools trucking software provides business automation solutions to further increase cash flow, speed billing and dispatch processes, and improve overall efficiency. Profit Tools has modules that give trucking companies the ability to automate almost every part of their business, including mobile communications, document imaging, EDI Direct and container tracking and tracing.

“Together with Profit Tools, Charter Capital is poised to assist every size trucking business with the tools they need for success” said Keith Mabe, Director of Operations at Charter Capital.

“Trucking companies we refer to Charter Capital can get the benefits of a market competitive factoring rate and the use of the Profit Tools system,” said Brian Widell, President of Profit Tools, Inc.

Join us at the National Industrial Transportation League (NITL) TransComp Exhibition. This important freight transportation event is being held at the Greater Ft. Lauderdale / Broward County Convention Center in Ft. Lauderdale (Florida) between November 16-18, 2008. Come and talk to ProfitTools and Charter Capital’s transportation experts!

A major part of the program is the trade show, the TransComp Exhibition, which is co-located with the Intermodal Association of North America’s (IANA’s) Intermodal Expo. No other freight transportation event offers you more.

About Charter Capital.
Charter Capital is a specialized finance company structured to provide funding and accounts receivable management that is an alternative to conventional bank lending of working capital funds. Charter capital turns accounts receivable into immediate cash flow for companies to run their business. For more information please visit https://www.chartercapitalusa.com.

About Profit Tools, Inc.
Profit Tools, Inc. is a leading provider of software and business automation for small- and medium-sized Intermodal and Multimode trucking companies. Profit Tools solves key issues of growing companies, using industry-leading software and backed by a superior and reliable training and implementation team. Profit Tools is headquartered in Lee, New Hampshire, and can be found online at www.ProfitTools.NET.

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