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.


Keith Mabe is Vice President of Operations at Charter Capital, a leading invoice factoring company for small to mid-sized businesses. Headquartered in Houston, Texas, Charter Capital provides accounts receivable financing and asset-based lending for major industries including freight and transportation, consulting firms, service providers, staffing firms, distributors and manufacturers, an oil and gas service companies.

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