BUSINESS WEEK

A recent Business Week article has some excellent tips for small businesses about managing cash flow. One of the suggestions it makes: try invoice factoring. It features the following interesting case study about a small Florida business explaining how a factoring company kept them independent:

Broward Aviation Services of Pompano Beach, Fla., buys and sells commercial airplane parts. So it needs plenty of ready cash to buy before competitors do. That lets it get a better price, too. “If you have cash, the deals come to you,” says Timothy Pine, vice-president and partner in the nine-employee, $7.5 million company. When Pine co-founded the company in 1999, cash was tight and banks turned down his requests for credit. Broward sold its receivables to a factor, GE Capital, immediately receiving about 80% of their value and the rest as GE collected from Broward’s customers. Then Broward could forge ahead without taking on venture capital. Plus, says Pine, “The banks won’t lend to you until you’ve built up a cash record. Factoring allowed us to stay independent.”

THE WALL STREET JOURNAL

A recent Wall Street Journal article has some excellent tips for small businesses about managing cash flow through accounts receivable factoring:

Factoring isn’t for everybody. But for companies that need cash quickly – or don’t want to hassle with banks – it’s one way to go., writes Richard Gibson of The Wall Street Journal.

The article concedes that invoice factoring is a great way for some businesses to get started, because companies with little or no credit history can acquire cash. What most concerns factoring companies is the credit worthiness of the end customer, not the business or its owners.