Introduction to Business Accounts Receivable Financing Companies

For as long as there will be businesses who need money, there will always be accounts receivable financing companies competing for the business’ receivables.

Before I get into the three helpful receivable financing companies out there, let me shed some light on why there are so many companies offering factoring services out there. All businesses, no matter what kind or in what industry, need money to sustain day to day operations and grow.

While that will always be the case, it will also always be the case that money will remain the most scarce resource. It doesn’t grow on trees after all. It is because of that scarcity that business accounts receivable financing has become a widely offered practice.

If you want to know more about what is receivable financing, I suggest you read my article on that topic. In this article, I plan on writing about how factoring exactly works from the factoring company’s perspective.

How does the Accounts Receivable Financing process work?

As a business, you first have to put together a list of all the invoices that are owed to you by your customers and clients. Factoring companies typically require that these invoices are signed by the customer, along with some other customer information which depends on the factoring company’s guidelines.

This list is then sent to the factoring company, who conducts their own background checks on your customers to evaluate their risk. In other words, they are interested in the credit worthiness of your clients and customers.

Based on their research, they will either accept or deny your invoices. If they accept to take the invoices, they will decide what rate to charge you and how much money they can advance to you.

The company then goes through the individual invoices and notifies your customers that they have taken over the invoice. The notification informs your customers to pay them directly instead of paying your business.

It can take up to a week to get your advance (money) from the factoring company, although once a relationship is established it can take as less as 24 hours. Payments can be via paper check or direct deposit ACH which is a more common way of doing business now.

How much are you paid by the factoring company?

You will be paid the face amount (receivable balance) minus the discount rate, or the percentage that the company charges you for their services.

The first payment is usually up to 90% of what the company owes you, and once they collect from your customers, you will be paid the rest of the amount net of all the fees and charges. These fees are generally between 1% to 5%, though more commonly in the 3% to 4% range in my experience.

What are some good Receivable Financing Companies?

I can only speak from my experience based on the companies I have researched, tried and tested over the years. I have been an entrepreneur for a few years now, and I resorted to business accounts receivable financing first when I was denied loans by the banks and the SBA.

The following companies provided me with quality accounts receivable financing services when I first started out.

  • – JD Financial
  • – BTB Capital – Greg de Vries over at BTB knows this business inside out
  • – ACA – American Capital Advance

A Marketing Plan For Small Business That Targets Your Customer Base

I believe everyone would agree that repeat customers define that delicate balance between a company that thrives and company that just gets by? How do you design a marketing plan for small business to work for the business? All too often small businesses look for ways to increase customer volume by looking at the traditional ways of advertising or marketing their business. In the context of promoting your business it is imperative that, as a business owner, that you think outside of box.

There has been a huge paradigm shift in the way businesses market to the masses to attract customers. With the advent of smart phones and the popularity of texting, a strategic marketing plan for small business can inflict about the same impact as a corporation with a large marketing budget. The difference is that businesses now are able target customers with pin-point laser accuracy with mobile marketing instead of blasting a message to the masses through some other form of media.

Mobile marketing is relatively new to the advertising scene, but it already has proven itself as an effective, viable low-cost marketing plan for small business. The potential of this medium is basically still in its infancy; however, the proven statistics it has already produced has made it one of the fastest growing industries in recent years. The applications that can be applied using this platform are almost limitless and is only limited by the person who uses it.

This is a fact… of the 97% of the texts that people receive on their phones, 83% of those are opened within one hour. Imagine the potential for a business that can harness this kind of exposure. For example, and I’ll use round numbers for simplicity…If you have a customer base of 1000, and historically Wednesdays are a slow day for your business, inside of a few minutes you can text a special promotion for a Wednesday to your customer base and within one hour nearly 845 of your existing customers will have read that promotion. No other marketing plan for small business advertising platform can perform that quickly when YOU want it too.

I know there are some business owners reading this right now trying calculate in their head what this type of targeted advertising will cost and affect their bottom line. When you implement this marketing plan for small business you can eliminate those mass-mailing coupons, flyers and other promotional activities that “nickel and dime” your business’ bottom line to death. 100% of those materials end up in the landfill anyways. Nationwide, businesses are utilizing this marketing plan for small business that target their customer base with laser accuracy for a lot less than what you would pay for a tank of gas per month.

Information System in Small Businesses

According to “18 Amazing Facts About Small Businesses In America” by Aimee Groth and Kim Bhasin (Business Insider, August 24th 2011), there are 28 million small businesses in the US, which outnumber corporations 1162 to 1. Some say that it is very easy to record business transactions in small businesses. However, since small businesses always run on low budget while tremendous marketing and the planning and implementation are required also, information system in small businesses are not usually given enough attention. Today, even small businesses that need only the owners to run have a lot of information that cannot be relied on manual processes. In order to help small businesses’ owners in making right and quick decisions, they need to adapt proper information system for their businesses.

My cousin has a hair salon with five stylists. She doesn’t work there but she has a manager to take care of the shop. She got a very good soft-ware to record all the transactions at first, but then it got so complicated when her employees quit and she had to hire new people. They just have a high rate of employee turnover in hair salons in general. Plus at her salon, she doesn’t have a receptionist to record transactions but every stylist needs to do it by her/himself when checking out a client. Low budget keeps her from having someone who can do it and save time for the stylists. Now the manager finds that training new employees to use the software is frustrated, my cousin decides to go back to manual recording. With all the data they put on paper, my cousin has to record it to the system by the end of day. It is not only time consuming but also a risk of making mistake since the data got transferred twice.

There is no need to discuss about how helpful the information system is to businesses. However, when consider adapting one for a small business, the owner needs to figure all the costs included. It may seem to be one-time cost, but it actually is not. Small business computer system design begins with a need of assessment of the technology expenditures that will be required to create an effective, reliable and expandable system. This needs of assessment will include hardware, software, upgrades and office staff training. Apparently, upgrades and training don’t sound like one-time cost. Upgrades will be fix-cost since the supplier will notice you when you need one, usually in 3 months or 6 months to keep up with changes in technology. Training may be one-time cost to the supplier when you buy the system, but then you still have to train new employees. Even if you train them yourself or have other staffs to train them, it is still a cost to your business as an opportunity cost since the time for training can be used to make revenue/ profit for the business. Finally, there one other cost that has not been counting yet: using cost. When you have somebody to use the software, there is the cost of hiring them to record information. Back to my cousin’s hair salon. She doesn’t have enough money to hire one more person to record transactions, so she takes the risk of recording data wrongly. Mistakes may be made from her employees by putting the wrong data manually or from herself by recording it again by the end of day. It should not be that way if the cost of training and using the system were considered when she set up the salon’s information system.

In conclusion, in today’s increasingly complex and competitive market place, small businesses often face many of the same information technology challenges as much as larger business enterprises, and getting a proper information system in small businesses should be considered seriously in order to help owners with right and quick decision making.

Small Scale Business: Still Potentially Big Bucks In the Right Hands

There is a small town in a Midwestern state. It is not a busy, bustling metropolis by any stretch of the imagination but there are a few franchises of nationally known companies. And in this town, there are also other businesses, including a few that are mid sized and some that are much smaller. There is a small scale business inside of this town that at first blush would not be all that impressive but a glance at the woman’s books might change your mind. While hers is a much smaller business by size than the others in that immediate area, she is actually making much bigger profits. There are several reasons why this is true.

The People in the Small Scale Business

One of the major reasons that a small scale business might be highly profitable despite its size is the people that are involved. They care more about the customers because every single customer lost can be the last. A huge company can anger and outrage a small percentage of their customers and still turn a profit but a small scale business cannot. Because they are so small, they know each other well and it shows. They know their customers, if not by name right away, by preference. The business from before is that way: the owner is a smiling, pleasant and very knowledgeable person, she knows a little bit about every single item in her lovely shop and she knows what each person has bought in the past and what she might be able to show them now.

The Items that a Small Scale Business Has to Offer

In a huge market, there can be a wide range of items, but not a lot of selection within each category. It is an ironic contradiction in terms that can be very frustrating when you are looking for a certain type of item. On the other hand, the small scale business will not have everything that you could possibly want but may specialize in one or two types of things instead, giving your far more options in that category. In our example company, the main focus is on jewelry and organic spices and fragrances- every scent of incense in pretty jars line the bigger part of one wall and the hand made jewelry sparkles and glistens in design cases. She can tell you about the scents or the stones that she is selling, the perfect working model of what makes a small scale business the perfect reprieve from cookie cutter, bland and boring, big box retail stores.