Tag: Small Business

Extending Credit to Customers

June 2014

Many firms face challenges when planning for growth. Researching finance opportunities that leverage invoicing and credit can help provide higher return on investment and free up valuable time. At some point, nearly every business finds themselves in a position with limited funds on hand. This situation can be difficult when facing unanticipated expenses and liabilities. Ensuring access to capital now, and putting better practices and processes in place, can mean success today and improved financial stability long term. At Plus Funding Group, our goal is to guide business owners towards success through invoice factoring and other methods to leverage revenue.

Extending credit through invoices is common, but may not be practical for every business. To decide if extending credit is right for your business, you must weigh the associated rewards and risks.

  • The option of credit enables customers to focus less on prices, enhances customer relations, and has the potential to generate more sales.
  • Extending credit costs money.
  • Selling on credit means the payment is not in hand and will need to temporarily recoup the cost from other areas of your operating capital.
  • If customers don’t pay, you could be in for a long settlement process.
  • Extending credit could be the factor that keeps your business afloat if it makes it easier for your customers to buy from you. Nevertheless, if it isn’t necessary it may not be worth the extra time and paperwork.

At Plus Funding Group, we understand the risks associated with extending credit to new customers. Our team is well versed in performing the due diligence to determine credit worthiness that can eliminate credit write offs and slow payment before it happens. Partnering with us gives you access to the tools and background data you need to make intelligent business decisions and carefully assess risk.

The Plus Funding Group offers quick, efficient, and professional services. Learn how our services can enhance your bottom line today.

 

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.

Five Tips to Getting a Government Grant

A free government grant may sound like a dream come true. You apply. You get money. You don’t have to pay it back. Unfortunately, government grants are difficult to obtain and generally have stringent application requirements. Advice from business financing experts on obtaining a government grantThey are out there though, and for those businesses that meet the specific needs of the agency awarding a grant and can demonstrate their worth, a government grant may provide a significant infusion of funding. Note that government grants are not available to individuals, and they are not used for personal financial assistance, general ongoing operations or business launches. With these caveats in mind, here are five tips to help you get a government grant.

1. Find the Grant That’s Right for You.
The federal government has two programs that provide technology research grants, the Small Business Innovation Research (SBIR) program and the Small Business Technology Transfer (STTR) program. These programs look for small businesses to undertake Research and Development (R&D) projects that meet federal R&D objectives and have high potential for commercialization. The SBIR program encourages domestic small businesses to engage in R&D themselves; in the STTR program, small businesses work in partnership with research institutions.

You can find a list of open grants of all types at Grants.gov. Agencies that have participated include: National Institutes of Health (NIH); Centers for Disease Control and Prevention (CDC); National Park Service (NPS); National Science Foundation (NSF); Environmental Protection Agency (EPA); Fish and Wildlife Service (FWS); Bureau of Land Management (BLM); Department of Education (ED); Health Resources and Services Administration (HRSA); Administration for Children and Families (ACF);National Aeronautics and Space Administration (NASA); Dept of the Army (USAMRAA);Geological -Survey; Department of the Interior (DOI). Many, but not all, of the grants are for 501c-3 non-profit organizations. Use the helpful filters on the left side of the grant search page to narrow down your search.

2. Go Local.
Local government grants are usually intended to provide a boost to the regional economy or to promote an important cause. This might include areas such as energy efficiency, child care, tourism, local technology, education, or the arts. The best place to begin looking for local grants is the local economic development agency for the area where you intend to provide products and services.

3. Follow the Guidelines.
Granting agencies can be very particular about how grant applications are completed. Read the application carefully. Underline or circle every question, component, or requirement that needs to be addressed, and pull together your responses for each. Too often, proposals are rejected is because they don’t address what is being asked of them. Be specific and honest about your project budget, and remember to include your qualifications and references.

4. Give Yourself Time.
Make sure you have allotted enough time to put together a polished proposal before the deadline. It is essential that your grant proposal be well-written, with concise and professional language, careful organization, and required content. You want to leave yourself time to gather information and estimates from sub-contractors, if necessary, and go through careful editing and rewrites. Build in time to have at least one other reviewer besides the grant proposal writer review the proposal.

5. Watch Out for Scammers.

There are many companies out there who will offer to give you access to grants or provide you with grant proposals, and many are happy to take your money without delivering anything that is already available freely from the grant-issuing organization. Beware of scammers. Carefully check references for people you are considering hiring to help you with this process.

If you think your small business is a good candidate for a government grant, don’t be afraid to go after it. Do your research, plan and prepare your proposal carefully, send it before the deadline, and confirm its receipt. Then, cross your fingers and hope for the best!

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Are You Managing Your Cash Flow Effectively?

Healthy cash flow is the lifeblood of any business. Too often, small businesses find themselves so cash-strapped that interferes with their growth as well as day-to-day operations. Small business financing cash flow managementFortunately, there are steps you can take to improve your cash flow management. Here are five strategies to help you manage cash effectively:

1) Keep Track

The first step in getting control of your cash flow is to understand your cash flow cycles. Track your cash flow projections by establishing your starting balance and then plotting out, month by month, when you expect to receive cash in and when you expect to pay cash out. You can find inexpensive software or free templates online that make the process easier for you. By doing this, you may foresee future cash-flow bottlenecks and you may be able to manage it better.

2) Collect Receivables

A cash flow projection is not factual document. It is a set of guesses, based on assumptions that your customers will actually pay on time. One of your biggest challenges may be to collect in a timely manner. The first step is to make sure you are invoicing customers regularly, predictably, and with clear terms. You can make it easier to get your receivables into your bank account by using a service that provides online invoicing and payments. Many of these services, such as WePay, FreshBooks, or PaySimple, offer automatic invoicing and invoicing reminders. Another way to collect is to set up a lockbox service with your bank for those people who pay by check. A friendly phone call to your customers sometimes goes a long way in getting paid on time. If you are a service provider, consider taking deposits and payments up front before you start the work.

3) Establish Discounts and Penalties

Offer discounts to people who pay early. Some of your customers will find this valuable. If you have chronically late-paying customers, try to offer them an incentive to pay sooner. If they are more than 90 days past due, offer them a discount to settle immediately. This may be less expensive or more effective than hiring a collection agency, and getting some cash from the delinquent customers is better than not collecting at all. You can also attach a penalty for late payments as long as you are explicit up front about your terms. Customers may be incentivized to pay on time just to avoid the penalty.

4) Control Payables

When people think about cash flow, they tend to think about receivables first. It is important to manage payables as well. Take full advantage of payment terms that your creditors offer. Pay your bills when they are due. If your creditor is offering an early payment discount, calculate whether or not it makes sense to pay early. It may be more valuable to you to have the cash in your account until due date than it is to get the discount. Make sure you pay your employees first—they are your most important asset. And if you can’t pay others, let them know as soon as possible and negotiate alternate terms up front.

5) Manage Your Shortfall

Even the best businesses run into occasional cash shortfalls. As a matter of fact, growing businesses are especially prone to gaps as they invest in new property, supplies, infrastructure or services in order to grow. If you have taken all the steps above, not only do you have a far better chance of predicting a potential shortfall, you are also in the best possible shape to obtain funding. You can approach bankers or suppliers to extend credit to you. Or, a creative approach to funding your current operations without borrowing by using alternative lending solutions like factoring & purchase order financing.

Does cash flow management take a lot of discipline and effort? Absolutely. But these techniques will help you obtain healthy and long-lasting business success.

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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.

Westchester Business Financing
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?