Tag: Factoring

Creating Manufacturing Jobs, Hand-in-Hand with Local Government

 

PEI just returned from a trip to Texas that made me feel really good about what we do – helping businesses grow and creating good jobs that help families and communities, through a genuine public-private partnership.

An existing client of ours, a manufacturer of aviation fuel systems, was approached by the economic development board of a small Texas city. The idea was for our client to relocate or at least open an additional facility there. The Texas community was prepared to provide approximately $800,000 from a municipal development fund for our client to buy specialized equipment for a vacant factory that had been identified by the city, and the state was going to provide some job training money.

This company is blessed with a very significant sales backlog, ample purchase orders and account receivables, but even after all of this government aid, the company needed additional funds to help finish the buildout of the factory and pay for various minor immediate needs. In addition, once the operation was ready to start producing, the company needed additional working capital for payroll, raw materials and to otherwise permit it to grow into its order backlog.

Helping a client meet some of these needs would be difficult for most factoring firms and asset-based lenders, because most factoring firms this size are very highly leveraged, which means that they cannot deviate from their own lender’s risk formulas in order to temporarily help out their client. On the other hand, Plus Funding is part of a family office, so we are much better capitalized than many of our competitors, with a deeper reservoir of capital. Therefore, we can be more flexible to help our client meet its immediate needs through over-advance allowances, an incremental term loan and other financial tools. This is what we did in this case, and what we have done for numerous other manufacturing clients, subcontractors, and minority and small business government set-aside program vendors.

In three months this company has already hired twenty employees for their new Texas plant, and we fully expect that number to top one hundred workers by year-end. These are fair-pay industrial manufacturing jobs, and the workers, community and company are all appreciative for their new relationship with one another. And we appreciate the part we are able to play in this story.

During this hyperactive political season it is particularly fashionable for politicians, who have never created a job in their lives, to bash finance people of all stripes, not discriminating between good practices and the bad. Our money is not cheap like a bank’s – we must charge at higher rates in order to compensate us for the risk of dealing with smaller businesses (sales of $3 million to $30 million per year) with less collateral to offer as security, where there are higher default rates than in the broader economy. However, we take these risks on the prospect that, overall, we will make a fair return on our capital. In addition, when we commit capital and “make a bet” on every client relationship like this one,  we go in  with the hope that, someday, companies like this one will grow successfully and will “graduate” from us to a low cost bank facility. We will lose a good client that we liked working with, but we will be left with the happy memory that through our participation, we made a difference in the lives of a community.

 

Invoice Factoring 101

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Accounts receivable issues can be difficult for many companies to bear, especially smaller firms and startups.  In these trying financial times, chasing invoices can quickly become the full-time job for many business owners. When times are tough, payments can dry up, leaving your company without the vital lifeblood it needs to grow and thrive. Invoice factoring allows ambitious businesses to release cash flow still tied up in unpaid invoices – helping you to grow, even when cash-strapped clients have you waiting for payment.

What is invoice factoring?

Simply put, invoice factoring is a way for any business that sells products or services to other commercial vendors and then waits for payment to leverage their accounts receivables to work for them, not against them.  Rather than waiting for slow paying vendors, you can convert account receivables quickly by selling invoices to a factoring company for a nominal discount.

Invoice factoring is quite different from the traditional loan-based programs offered by banks.  Most banks base loans on credit history which can be difficult for small companies and startups.  With the Plus Funding programs, we focus on the credibility of your clients.

As opposed to a financial institution that can take several months to approve your loan, in most instances, Plus Funding can approve your company in a matter of days.  Additionally, a key benefit is that because invoice factoring programs are not loans, there will be no debt on your company’s balance sheet.

How can my company get started right away?

The steps involved in invoice factoring with Plus Funding are simple and clear:

  • Your customer (XYZ Co) requests goods/services from you.
  • You deliver these goods/services to XYZ Co.
  • You issue an invoice to XYZ Co.
  • You sell this invoice to Plus Funding.
  • Upon verification of the invoice (typically 1-2 days with a preexisting facility in place), Plus Funding will advance cash (typically 70-85%)
  • XYZ Co pays Plus Funding.
  • Upon receipt of the payment, Plus Funding releases the difference (reserve) between the collected amount and the advance, minus the factor’s discount fee.

For more detailed process, please visit Our Process page.

Our services are custom designed to fit each client’s specific needs.  Our fee structure is efficient and effective, many times as affordable as “early bird” or pre-pay discounts offered by many companies.  Our knowledgeable staff is friendly and courteous, helping you to enhance and maintain your working relationships with clients.

Invoice factoring can be a benefit to virtually and company.  Contact Plus Funding today and start leveraging your accounts receivable for growth and stability right away.

New Year’s Resolutions for Business Owners

We have all been told year-in-year about making New Year’s Resolutions. Giving up smoking, losing weight, eating your vegetables…all good stuff! But what about making some New Year’s Resolutions to better your business?

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What’s on your list of business resolutions for 2014?

Resolutions, if carefully thought over and properly planned, can be a powerful tool to boost your business in 2014. Let’s have a look at just a few resolutions you can make to get your business off to a flying start this year.

Get New Customers

Sometimes, we spend too much time looking after our existing customers; we look after their needs; we ensure that they are consistently happy and we are always looking for the next sale. However, we also sometimes forget that a percentage of customers will always drop off and before you know it, your customer numbers and sales are down.

Never forget that there is a new batch of clients out there who are desperate for your products, and all you have to do is ask for their business. So, to gear yourself up for a renewed campaign, think about these aspects of your business.

 

Take a fresh look at your advertising material. Does it look dated? Is it designed to attract new business? Do you do enough advertising?

Could you improve your networking skills? Find out if there is a business club or organization near you, and join! If there isn’t one nearby, form one on your own. It’s almost guaranteed that there are a great deal of like-minded business professionals near you who are seeking the same type of networking connection, and would happily participate. Get your business colleagues to a local meeting place and ask that they bring along one other business person from another organization to increase your networking diversity pool.

Ask your customers for referrals. If they’re satisfied with your service, then they should be more than happy to provide you with some introductions.

To help get started and give you direction, set a clear, achievable goal on how many new customers you are going to get each month.

Keep Your Existing Ones

In your quest to get more customers, don’t forget your existing ones. Yes, we did stress the importance of cooling off them and searching for new clients, but the key to success is balance. Resolve to call all your key customers at least once a quarter. You don’t have to try and get an order, just show that you have not forgotten them.

If you have recently launched a new product or service, have you told your existing customers? Are they totally up to date with your product range?

Think about introducing a loyalty bonus or gift. Reward those customers who have been with you for many years or have placed significant orders over the last year. Just say thank you for doing business with you.

Look at Your Expenses

2014 is looking to be a challenging year for businesses and a keen eye on your outgoings could help you. When did you last review your monthly expenses? Set a resolution to look at your overheads every month. Can you reduce your electricity bill or phone by either being more efficient or changing suppliers?

If you have a range of suppliers, have you recently re-negotiated terms? Are you still getting a good deal, or could you do better?

Resolve to look at your bank charges at least once a year. Does your bank offer you a competitive deal? What are their competitors offering? Also, check whether you are getting the best deal on all your insurance requirements. Go and see a broker, or spend some time online getting some quotes to compare.

Keep an Eye on the Cash

This year, resolve to keep a meticulous watch your cash flow. With a generally tightening of available credit in the market, you may find your larger customers squeezing you on payment dates. Make sure you get your invoices out on time and that overdue payments are promptly chased; the more latitude you give means less profits for you. If money is tight, consider purchase order financing, which is a short-term commercial finance option that provides capital to pay suppliers upfront so your company can avoid depleting your cash reserves. Growing your business should not be limited simply because of a few late-paying customers.

If you are facing a liquidity crisis, make sure you are making full use of credit terms offered by suppliers. Could you negotiate even more favorable terms? Even stretching the payments you have to make by two or three days could make a huge difference.

Remember, it’s cash, not just profit, that keeps your business going.

Have a Radical Re-Think

Are you hanging onto a slow-moving product from your business in hopes that it will “take off” next year? Rather than relying on a possible surge in sales, take the time to reassess your product and determine whether or not it’s worth the continuous effort to spend money on production despite seeing little return. Do you have suppliers who are constantly delivering late or have quality problems with their goods? If that’s the case, resolve to search for new suppliers to can deliver quality products on time.

Over the past year, have you been spending a lot of time chasing a potential new customer? You’ve paid for the lunches, paid for a night to the theatre, even nominated him to join your favorite club, but still no business. Is this year the time to accept that they may not do business just yet? Resolve not to waste your precious time and effort chasing no-hopers.

Focus on Growth

Business growth is at the top of the list for many, and invoice factoring is one of the easiest and quickest ways to do so without the need for a bank loan, since your own invoice accounts receivable are turned into cash. By accelerating your business’ cash flow, you provide your business with access to funds that would otherwise not be available during a “normal” billing cycle. Financing should never be a bottleneck to the growth and expansion of your business.

Commit to a Plan

If you have decided to take on one (or all)! Of these New Years resolutions, to give you focus and a goal to aim for, write them down. Prepare a plan listing all your resolutions and detailing the actions you have to take to achieve them all. Then, resolve to review your plan at least once a month.

PFG is here to help make 2014 your best year for business growth yet. Contact us to get started!

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Your Growth Should Not be Constrained by Lack of Funding

A customer approaches you about placing a big purchase order. It’s the break you’ve been waiting for; but, it creates a major dilemma because the customer pays 30 days after the delivery of the product. It will be a while before you actually receive payment, yet you need the money now to pay for supplies, manufacturing and even freight. alternative business funding tips from plus funding groupThis problem is very common in start-up businesses and many fail to capitalize on opportunities due to a lack of capital. Never turn a customer or a purchase order away due to lack of financing.

Plus Funding Group offers an option that could help fund these large purchase orders. We provide purchase order financing in conjunction with our receivables funding program. By leveraging our financing programs, you can fund your production costs and fulfill your POs. Depending on your margins, you might even be eligible to fund up to 100% of the costs associated with these POs.

Purchase Order Financing Gives Your Business the Boost it Needs

Purchase order financing allows you to produce the goods required to fulfill a purchase order without worrying about the initial capital outlay. When a customer supplies you with a PO and you have identified the suppliers along with their costs, Plus Funding can step in and help fund these costs. Once the goods have been delivered, you can invoice them as you normally would. Plus Funding will help manage this invoice and will collect the remittance. Once the payment is received, Plus Funding will deduct their fee and remit the profits to you! With this funding ability, companies can focus on obtaining orders and leave the funding worries to Plus Funding.

The Simple Process of Purchase Order Financing 

Here’s how the purchase order funding process works:

1. Your customer places an order and sends you a purchase order.

2. Plus Funding Group pays your supplier so you have the products you need to fill the order.

3. Your supplier delivers everything you need to fill the order.

4. Once your customer accepts delivery of your product, you will invoice them; the customer will then remit payment to Plus Funding Group.

5. We collect a fee and send your profit right back to you.

Funding with Plus Funding Group enables you to focus on what matters most to you – your business.

Photo Credit: danielmoyle via Photopin cc

How is Your Small Business Affected by the Sequester?

The word of the year for 2013 is “sequester” (or the more formal and ominous-sounding “sequestration”).   As you have probably learned, the sequester is the term being used for the mandatory automatic federal budget cuts that took effect as of March 1, 2013.

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Will your private sector small business feel the cuts?

The sequester calls for $85 billion in federal spending cuts to defense and domestic programs that will occur in 2013, and $109 billion in cuts annually from 2014 to 2021.

 

Where are sequester cuts being made?

Cuts are being made to the discretionary spending within both military and domestic programs across the board. Although whole programs will not be cut, existing government contracts may not be extended, and new contracts may not be funded. This will affect directly the estimated 35% of suppliers to the US Defense Department that are bona fide small businesses. In addition to these direct suppliers, there are untold numbers of small business vendors that supply prime federal defense contractors. In some cases, these small businesses are so far down the food chain that they may not even be aware of the extent to which that their goods and services ultimately support the US Defense Department.

 

 

On the domestic side, as the number of government contracts shrinks and the scope of existing work goes down, both direct and indirect small government contractors may need to reduce headcount and operations. To make matters more difficult, the US Government will no longer extend $902 million in small business loans via the Small Business Administration (SBA), making funds tighter for small businesses.

 

Will your private sector small business feel the cuts?

Experts vary on their assessments of the impact. Some, such as Professor Stephen Fuller of George Mason University see significant impacts. A recent New York Times article quoted Fuller as saying that 1.4 million private sector jobs will be lost and that half of those will be from small businesses[1]. Other experts feel differently. In that same article, Holly Wade, senior policy analyst at the National Federation of Independent Business (NFIB), was much less pessimistic, stating that “few small businesses have contracts with the federal government, and few small businesses get loans from the S.B.A.” According to Wade, if credit is a problem for Main Street, it will be due to a downturn in the economy more than a drop in federal programs under a sequester budget.

 

A downturn in the economy cannot be treated lightly, however. Even if you don’t do business with the federal government directly or indirectly, your customers may be affected, and these effects could trickle down. People will lose jobs. Some full-time workers will become part-time. Agencies will shift to bring overhead down, and as they reduce operations, suppliers will cut staff and investment. That means pink slips, lower travel budgets, perhaps fewer conferences, and leaner service offerings. Consumers will have less money to spend and therefore, will shop less. If this is the case, it will be harder for the private sector to grow, or even to hold on to what they’ve got. Small businesses, even more than the Lockheed Martins of the world, have little leeway to maneuver to stem the pain. Do you agree? What’s your prediction? Has your business been affected by the sequestration?