By Lou Wallace
Start up businesses as well as expanding businesses need working capital. Even established companies occasionally need a source of quick capital. The easiest and quickest way for a company to get this needed working capital is to factor it receivables. All companies are asked by their customers to give them credit or terms. The terms are usually for thirty days to pay. Recently we have seen this being pushed to sixty and ninety days. Everyone is feeling the credit crunch and customers are trying to use their suppliers as their bank by getting terms and stretching out their payments to these suppliers. Businesses only have so much working capital or cash they can use to pay bills and employees. If they use up all of their money to fill contracts and pay payroll they can’t buy raw materials or fill new orders until they collect the money that is due them. If they can’t borrow any money then the business must cease taking orders or buying material until they get paid. This is why factoring works so well with many businesses. The factor or asset based lender is able to advance against the money that is already owed to the business owner and they can keep things running smoothly. If the company has the profits built into its sales they can grow and expand as they obtain new orders or contracts. Businesses growth is not limited. As long as the business has sales and profits they are only limited by their ability to perform. Not by the availability of working capital. Factors and asset based lenders lend against receivables for delivered and accepted merchandise or completed work. The clients they deal with determine how much they can borrow or grow. The factor looks to their clientele as the source of granting credit. Banks limit credit due to age of the business, historical growth, leverage and many other financial ratios. Factors look at the customer base and the company’s ability to deliver the product and service at a profit. Factors don’t limit a company on how fast or large it can grow. About the only restriction you will run into from a factor is if you have a concentration with one particular customer. They may limit how much you can borrow against those receivables. This really isn’t a bad thing as being captive to one particular customer is never good for any business.
Performance Funding Group, LLC is a locally owned and privately funded asset based lender who has been providing several different loan products since 1997. Lou Wallace has been working in commercial loans since 1971. Lou Wallace can be reached at 602-912-0200.
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