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29 Mar
Who’s Your Lender?

Who’s Your Lender?

Online lenders have grown dramatically over the last few years lending to consumers who can instantly get large sums of money by simply filling out a few online forms. These firms aren’t regulated like banks so state and federal officials are looking to take steps toward changing that.

These firms primarily offer term loans, lines of credit, and receivable based financing. Although it sounds like business lending, these firms aren’t really lending to your business they’re lending to you individually.  You personally guarantee the agreement.

The Consumer Financial Protection Bureau has asked borrowers to alert the federal agency of any complaints they have about these firms and act as a consumer watchdog.  While many of these firms are legitimate company’s offering a much needed product and service,  some are not.

Always read the fine print.    Some clients obtain funds without fully realizing the interest rate they are paying or the scope and term of the agreement.  Some agreements require monthly payments, or payments based on daily or weekly revenues.  Some firms even required access to your business bank account to sweep funds on a scheduled basis.

Before you sign on the dotted line research the lender thoroughly.  And remember….  if it sounds too good to be true, it probably is.
By Jack Stieber –  President – American Receivable

14 Mar
Don’t Be Cash Flow Poor

Should Cash Flow Really Affect Your Business?

Experts believe that managing and maintaining cash flow is the key to surviving as a small business.  This can be a challenge, especially in the early years.  Many businesses therefore, must rely on alternative financing resources to survive.

The early years in business can be tough in in the best of times.  Most small businesses however, are unable to secure a traditional bank line of credit early on for a number of reasons;

First and foremost small businesses may have insufficient time in business to produce profitable financial data.  Banks are reluctant to lend to businesses who lack the financial wherewithal for repayment.

Secondly, banks have become ultra- conservative in their lending practices making it even more difficult to obtain a loan.  Banks are now looking for secondary sources for the re-payment such as a certificate of deposit for collateral to secure the indebtedness.

Thirdly, banks are not likely to lend to small businesses who have experienced a down-turn or who have a decline in business.  Even though it’s impossible to predict the future banks rely heavily on trends and projections.

So, what’s a small business to do when they are in desperate need of cash flow?  Many seek the tried and true alternative means of financing called factoring.

Factoring, the process in which a business sells its credit worthy, business to business invoices has been around since biblical times.  Over the last decade factoring has made a resurgence and has become a somewhat popular financing alternative.  Banks have even gotten in the game offering factoring programs of their own.

Factoring is a suitable financing alternative for a number of reasons:

  • Factoring provides an unlimited source of working capital,  limited only by the amount of business you can generate
  • Advances are based on the account debtors creditworthiness not the businesses
  • Factoring can help improve a businesses’ credit rating
  • Factoring can help increase sales
  • Factoring may make purchasing new equipment possible
  • Factoring may allow for the addition of new staff

Managing cash flow should always be a small business owner’s highest priority.

By Jack Stieber –  President – American Receivable

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