Bad Credit Loans - Factoring

WHY AREN'T YOU FACTORING by Eric Barnes


Put simply, FACTORING IS THE LEAST EXPENSIVE MONEY YOU CAN GET TO RUN YOUR BUSINESS!

This is a situation which boggles my mind. Literally hundreds of thousands of businesses in the U.S. alone could - and should - use factoring to extensively reduce their costs of money and operation, and still they don't do it. I have watched companies go into bankruptcy rather than factor. Why aren't they factoring? Getting more personal, why aren't YOU factoring?

And the answer I get, more than any other, is: "We can't afford it." (But you can afford to go out of business? Or struggle constantly with cash flow shortages?)

Now if that doesn't indicate a total misunderstanding of what factoring is and what it does...and what it costs, I can't think of anything that would do so more.

So I'll say it again: FACTORING IS THE LEAST EXPENSIVE MONEY YOU CAN GET TO RUN YOUR BUSINESS!

FACTORING PROOF

Now I'll prove it.

What is factoring? Actually, most business people are involved in factoring almost every day. They use credit cards. Visa® and Mastercard® are the world's largest factors. However, they factor retail business. When you purchase something, using their card, the merchant immediately discounts the sales slip (invoice) to them by anywhere from 2-5% and immediately receives his money.

How would YOU factor? You sell wholesale goods or services, deliver them, then send an invoice to your customer, also sending a copy to the factor with whom you have an account.

The factor checks with your customer to ensure the invoiced goods or services have been delivered. As soon as he does that, he deducts a "reserve," (in case anything goes awry with your delivered goods/services), then forwards the remainder to you immediately. Just as with Visa® and Mastercard®, the factor has bought your invoice at a discount. When the invoice is collected by the factor, he deducts the agreed discount, then forwards the remainder of the reserve on that invoice to you. So you'll get anywhere from 75 to 95% of your funds immediately, the remainder, minus the discount, in 30 days or so when the invoice has been collected.

THE COST OF FACTORING

So, what is your cost of money? (Here's where it gets interesting and where the major misunderstanding lies.)

Let's set up an example. You're selling $100,000 worth of widgets to General Motors every month. You ship them, then invoice GM for the parts. Let's say you've arranged 30 day terms. You also have terms of 2.5% for 30 days with your factor, with an advance of 85%.

You send the factor a copy of the invoice at the same time you invoice GM. The factor checks with GM to ensure the widgets were delivered in good condition. He then transfers $85,000 to your account by check or wire transfer. This is usually within two days of receiving the invoice. You've got operating money!

Thirty days later, GM pays the factor $100,000. The factor deducts $2500, then pays you $12,500. You do this 12 months out of the year.

What's your cost of money?

In almost all cases, my prospective clients, incorrectly thinking in terms of loans, multiply the 2.5% by a factor of 12 and say, "Thirty percent! That's way too expensive."

The correct answer is, of course, 2.5% if each invoice is paid within the first 30 days. (This percentage will go up incrementally with any invoices which are over, but it's still FAR BELOW the current cost of borrowing from banks or getting lines of credit.)

To prove my statement, multiply your monthly sales to GM by 12. That answer is $1.2 million. Now multiply the amount you paid for each invoice by 12. That answer is $30,000. And $30,000 is 2.5% of $1.2 million.

Please tell me where, in the banking system, you can get money at 2.5%? That is, if you can get a bank loan at all in today's uncertain times.

STILL MORE FACTORING PERKS

Want more savings?

Whoever is doing your accounts receivable is costing you about $30,000 annually in salary. It's commonly accepted that in today's market, you have to double that amount to include the P&W, medical insurance, taxes and other costs. That's $60,000, Mr. or Ms. Business Person. If you factor your accounts receivables, that cost goes away because the factor is collecting your invoices.

How about losses due to poor credit checking by your company employees who are not professionals in the field? Your factor will credit check any new customers, at no cost to you, thus radically reducing your chances of bad credit performance.

Other benefits include continuous cash flow, increased production and sales, cash for marketing plans, new equipment purchases, plant expansion, handling payroll or tax shortfalls and lowered overhead.

Next to the instant liquidity provided by factoring, the most valuable benefit is ridding your business of credit and collections (non-income producing activities) releasing you and your employees to focus full attention, energy and assets on production, marketing, sales and service.

WHY A FACTORING SPECIALIST?

Why do you need someone like CFG to assist in setting up your factoring? Simple. You want to ensure that you get the LOWEST RATES. If you go directly to a bank or factoring company, you are at their mercy. They have you over a barrel. A good factoring specialist is connected to dozens of sources for factoring. Those sources know and trust the specialist to bring them good business for which THEY pay the specialist, you don't.

Once you've proven yourself (good invoices from good companies who pay their bills promptly) a specialist can then go back in to negotiate even LOWER rates for you. Yes, this means OUR commission from the Factor is lower, but we think it's good business practice. Once you see how well this works, you'll be sending your friends and business contacts to that specialist. And your friends and business contacts will thank you profusely.

So I will say one last time, FACTORING IS THE LEAST EXPENSIVE MONEY YOU CAN GET TO RUN YOUR BUSINESS!

And I'll once more ask the question I began with: Why Aren't YOU Factoring?

Mr. Barnes is President & General Manager of Capital Funds Group Ltd., a Canadian based consulting firm specializing in Putting Companies and Money Together. They also work with non-US companies to take them public rapidly and inexpensively, then getting them funded. Visit our Web Site at http://www.capitalfundsgroup.com/

A Brief Guide When Shopping For Personal Loans
by Paul Heath

Sometimes you need extra money for unexpected expenses like car repairs, unexpected bills, health expenses, school expenses, or a myriad of other reasons. Where do you go to get money for these unplanned expenses? Personal loans are available from many different companies and lenders for consumers today whether you have good or bad credit.

Your first place to try to get a personal loan is from a bank or credit union. Many times, they can offer you a loan based on your credit record. Personal loans from a bank or credit union usually do not have collateral attached to them and they are loans based on your name and credit record. Banks and credit unions are a great place to go for a personal loan if you have comparatively good credit.

Another place that you can get a personal loan is from a personal loan company. There are many of these places that will give you a loan. They usually need you to list some sort of collateral, but if you have a job and a consistent home, then they will normally approve you. This is a good option if you cannot get a loan at a bank or credit union but you need to be a smart consumer and ask questions before signing any loan papers. You need to know the interest rate, the length of the loan, and the monthly or weekly payment amount. Make sure that you can meet the requirements of the loan or you will end up in a worsened financial situation.

There are other options available if the above two choice do not work out. You can take items from your home to a pawnshop to get a loan. This will be a higher interest rate, but if you do not have any other options, this is a good choice. A car title loan is an option, but you need to keep in mind that you will lose your car if you do not make timely payments. A payday loan company is also an option but you need to be sure that you understand the terms of the loan. You need to understand the terms of any loan that you take out to make sure that you can make the payments and pay the loan off. Some of these options are a last resort, but if you need the money for a necessity, it may be your only choice. Just be sure that you go into the loan process knowledgeable about the details of the loan.

There are times in your life that you will need extra money for unexpected or unplanned expenses. It is always best to plan ahead and have a savings account for these expenses, but sometimes it is just not possible. If you do not have any other options, then you may have to take out a loan to cover these expenses. Getting a personal loan can be stressful and difficult at times, but if you do your research and know what you are getting into, then you are sure to be satisfied with the result!

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