Tag Archives: factors southwest llc

Coldwell Banker

How to establish trust with your bank

According to a recent survey, financial services and banks were noted as the least-trusted industries in 2012.  Despite the fact that the financial crisis occurred five years ago, people are still concerned about the reliability of banks.

The 2012 Edelman Trust Barometer had more than 30,000 online respondents, in which only 46% of U.S. respondents said they trusted the financial services industry, and only 41% said they trusted banks. Clearly, the last few years tainted the banking industry’s image, and it is taking time for public perception to change.

Despite what the public may think due to the history with the bank crisis and the bad press, banks are not inherently sneaky or dishonest. But like any business, it comes down to building relationships.

To establish trust with your bank, there are a few precautions you can take that will help to set the foundation for a strong relationship.

Don’t put all your eggs in one basket

When you are establishing your business, don’t have all your banking relationships at one bank. For example, many bank documents will cross collateralize loans and bank accounts – both personal and business. Set up your operating business account at one bank and payroll at another. It is also a good idea to open personal accounts and loans at a completely different bank than your business.

Grow the relationship

While it is vital to have a great relationship with your primary banker, you need to move beyond that relationship in the bank. Bankers are transient and move positions within the bank or to another bank quite often. If you only build a relationship with your banker and your banker is promoted or leaves the bank, you will be left with no allies. Get to know your banker’s boss and associates. You never know who will be your banker tomorrow.

Know your bank

The relationship you are trying to establish is really with the bank, so take the time to learn about the banks you do business with. Understand the services they offer. Search the Internet to read blogs and reviews from happy and unhappy business customers. This will help you better understand if this bank is a good fit for you.

Sources and uses of cash

When you talk to a banker about the best loan for your company make sure the banker understands what the money will be used for. Don’t assume the banker knows. For example, if you need money to fund payroll and pay vendors, you need a working capital loan. A working capital loan is based on short-term assets (accounts receivable and inventory) and is used to finance short-term liabilities (payroll, accounts payable).  Don’t let a banker talk you into an SBA term loan to finance working capital. Match assets and liabilities – short term loans fund short-term liabilities and long term loans fund equipment and real estate.

Read the loan documents

So many smart business people are more concerned with the terms on their cell phone contract, but never bother to read or understand the details on a commercial bank loan. While most bank loan documents are standard and the bank may not make any changes, a business owner should still have an attorney review all the documents. The attorney’s role would be to advise you on what is in the documents – what are events of default?  What are cure periods? What should the business owner make sure they do in terms of financial reporting, notice of management or ownership change?  If you understand your loan documents, you will be better protected against surprises.

The public’s perception of the banking industry is clearly still hindered by the scandals, government accusations and lawsuits brought on by the financial crisis. Fortunately, the reality of the situation is better than it is perceived.

Regardless of the industry’s image, it is always best for business owners to take a proactive approach. Taking the time to get to know your bank is the key to building a long term successful relationship; one that you can feel confident in, where you can trust your financial service provider.

 

Robyn Barrett is founder and managing member of FSW Funding, formerly Factors Southwest LLC, specializing in factor financing for small to mid-size companies. For more information visit: www.fswfunding.com

 

internet

Research potential clients online to protect against fraud

While many business-to-business companies use the internet as a way to gather information on the individuals and organizations they interact with, the web can reveal much more than an  address, phone and basic facts on the products or services offered. Before getting into business with a company, it is important to do your research—and the internet makes that easier than ever.

Search engines such as Google are now a valuable vetting tool to gauge the risk of doing business with a new customer. Aside from the information you may uncover from a search engine’s results, social media sites such as Facebook, Twitter, LinkedIn and Yelp can also be used to cross-check information and determine the legitimacy of an organization.

Learn the basics

Begin by finding out how long the company has been in operation, who the leader is, and what sort of goods and services they provide. Verify that the information is up-to-date and check to make sure it is consistent on each site.

Start with the company’s website and determine if it appears professional and informational. Then, consider checking reviews of the company. People that interact with that company are likely to post their positive and negative experiences, which can allow you to see how they are perceived by others. If you are unable to find out any information online, it could be a sign the business doesn’t exist, hasn’t been operational for very long or has recently changed names.

Find out who you are dealing with

If you receive a large order online or over the phone, check out the address on Google maps. Does the address indicate a real office or is it in the middle of a parking lot? When dealing with international clients, it is important to know that some countries are a higher risk than others. High-risk countries can be determined by checking the Corruption Perception Index, which measures the perceived levels of public sector corruption in 176 countries and territories.

Aside from looking into the business and its location, consider running a search on your contact at the organization and/or the person who is ordering the goods or services. If the Facebook profile or LinkedIn account says the person is younger than 18 then it is safe to say this is not a prospect. If their profile says they are in a different location or with a different company, it can be a red flag or a simply a sign that they don’t update their information regularly.

Connect online

Many businesses of all sizes are creating Facebook pages to stay in touch with their customers and connections. It can be valuable for you both as an individual and as a business to “like” the pages of the companies you are interacting with on a regular basis.

Not only will “liking” the Facebook pages of your clients show them you are interested in their businesses, it will also keep you informed of any news, events or promotions that are taking place at the company. Although these updates are often good natured, they can also alert you to any red flags you should be aware of such as a sudden clearance sale or sudden move. Doing a big clearance sale on Facebook can be a red flag for credit managers and collection people that the client may be having cash flow issues. Also, if you have a client that suddenly closes the company’s doors and moves to another city, their Facebook page will often show where they moved to so that you can collect any debt owed.

Ask detailed questions

Although internet research can provide a wealth of knowledge, sometimes it can be just as valuable to ask your potential client questions about your concerns. It is important to know who you are dealing with to protect your own business from the hassles of non-payment, fraud and other undesirable situations.

 

Robyn Barrett is founder and managing member of FSW Funding, formerly Factors Southwest LLC, specializing in factor financing for small to mid-size companies. For more information, visit www.fswfunding.com.

Small Business Association, SBA Loans

SBA Loans 101: Funding Small Business Expansion

Funding expansion of small business creates new jobs: SBA Loans 101

All the talk about the American Job Act has many thinking about how crucial the creation of jobs is to an economic turnaround. The reality is a majority of new jobs will not be a result of hiring by large corporations or government; new jobs are going to come from the growth of small business.

According to the U.S. Census Bureau, 95 percent of all businesses in Arizona are small businesses with less than 100 employees. These businesses employ 32 percent of the state’s workforce.

In most cases, small businesses must expand in order to create more jobs. For small business owners, expansion requires funding. While bank loans can be difficult for a small business to secure, a loan may be a more appealing option than finding investors or financial partners that may want a percentage of the company and input on how decisions are made.

A Small Business Association (SBA) loan or SBA loan is an option to consider. SBA loans are issued through banks to specifically help small businesses with their growth, including hiring new employees, adding more equipment and making other necessary changes. The questions then are how much cash SBA loans provide, and what does it take to qualify?

While the government-backed guarantee portion of SBA loans increased from $2 million to $5 million in 2010, protecting banks even more in the event that the borrower defaults, it is still difficult for small businesses to receive an SBA loan.

In order to qualify for an SBA loan from your bank, your business must be a for-profit business, have a sufficient amount of owner equity invested in the business and have already used other financial resources first, including personal assets.

You may also need to determine what type of SBA loan you may need. There are three specific categories:

•    The 7(a) Loan Program includes financial help for businesses with special requirements. For example, funds are available for loans to businesses that handle exports to foreign countries, businesses that operate in rural areas, and for other very specific purposes.

•    The Microloan Program provides small, short-term loans to small business concerns and certain types of not-for-profit child-care centers. The maximum loan amount is $50,000, but the average microloan is about $13,000.

•    The CDC/504 loan program is a long-term financing tool, designed to encourage economic development within a community. The 504 program accomplishes this by providing small businesses with long-term, fixed-rate financing to acquire major fixed assets for expansion or modernization.

When applying for an SBA loan, it is important to remember that bankers, now more than ever, will be looking closely at the documents submitted. When you are preparing your loan application for your banker, you typically have to include:

•    An overview of the business
•    A description on the purpose of the loan request, and how it will be used
•    A plan to repay the loan
•    Collateral in the event that you cannot repay the loan
•    Personal financial statements for the last three years
•    Business financial statements for the last three years

Understanding what lenders are looking for is important regardless of what solution you may seek to finance the expansion of your small business. Working closely with the lender to make sure you are supplying the correct materials will save both parties time and energy in the process and hopefully help to secure the funding needed.

For more information about SBA loans, visit sba.gov.

[stextbox id="grey"]Robyn Barrett is founder and managing member of FSW Funding, formerly Factors Southwest LLC, specializing in factoring financing for small to mid-size companies. For more information, visit www.fswfunding.com.[/stextbox]

Factor Financing

Considering Factor Financing Helps Companies Protect And Grow

Considering Factor Financing Helps Companies Protect And Grow

Companies faced with a cash-flow squeeze and slow-paying customers can quickly find their own credit ratings at risk and face difficulty securing a credit line or loan.

When you don’t quite qualify for a traditional loan, receiving an advance against invoices or accounts receivable from asset-based lenders called factors can be an optimal solution for securing cash needed to grow.

Many business owners don’t realize that factor financing can be a good source of capital for high growth or start-up companies. The factor advances most of the invoice amount, usually 70-90 percent, after reviewing the credit-worthiness of the billed customer. When the bill is paid, the factor remits the balance, minus a transaction – or factoring) – fee.

If you are going to consider factor financing, it is important to understand the different options. In non-recourse factoring, the factor accepts specified risks around the debtor’s failure to pay. In other words, the credit risk has shifted to the factor and if the debtor (your client) does not pay, you are not required to pay back the factor for the advance against the factored invoice. While this might sound like a great option, non-recourse factoring is very expensive and the factor becomes the aggressive collection company pursuing your clients. The factor takes over all rights to pursue the customer for payment. This includes the right to take legal action.

In recourse factoring, the factor does not take on the risk of bad debts and the credit risk remains with you. To put it another way, the factor will be able to reclaim their money from you if the customer does not pay. Whether you refund the advance or not, you will still have to pay the fee and interest. Recourse factoring is cheaper than non-recourse factoring and may have fewer requirements concerning your customers and your systems.

When choosing recourse factoring, it is important to protect your company against credit risk, since you retain the credit risk of non-payment. In the event your customer goes bust or just doesn’t pay, you are ultimately responsible for any funds advanced to you by the factoring company. If you sell on open credit to your customers, there will be times when you are concerned about repayment. If you don’t want to be on the hook for all the credit risk, trade credit insurance may be an option.

Trade credit insurance insures manufacturers, traders and providers of services against the risk that their buyer does not pay (after bankruptcy or insolvency) or pays very late. The trade credit insurance premium will be based primarily on the credit profile of the customers you are insuring against. The trade credit insurance policy will pay out a percentage of the outstanding debt. This percentage usually ranges from 75- 95 percent of the invoice amount, but may be higher or lower depending on the type of cover that was purchased.

Before deciding what the best option, is for your organization, including factor financing, do your homework, ask questions and get referrals.

Robyn Barrett is founder and managing member of Factors Southwest LLC, specializing in factoring financing for small to mid-size companies. For more information about factor financing, visit www.factors-southwest.com.

 

Managing Cash Flow, Increasing Cash

Managing Cash Flow And Increasing Cash Balance

The phrase “Cash is King” has never been more true in business than it is today. Unfortunately, while many companies are finding themselves short on cash, lending requirements have become extremely stringent. Moreover, increasing sales don’t always equal increased cash flow ― especially if the sales are credit sales. Managing cash flow effectively requires close attention, just like managing the rest of your business. The good news is that a little attention can go a long way toward increasing cash balance at the bank.

As with all good things, a little work is required so let’s look at how you can improve some of your operating processes and manage cash flow, which will increase cash.

Here are a few tips that can have an almost immediate impact on managing cash flow and cash position:

1.    Set a price and term policy, then stick to it

Make sure all employees understand the importance of discussing pricing and payment terms during the sales process. Often the emphasis is placed on “getting the sale,” not “getting paid.” When customers delay payments, they’re using your cash and costing you money. Basically, you are financing their business. Be diligent about setting payment expectations right from the beginning with your customers.

2.    Send out invoices in a timely manner and follow-up promptly

The quicker you send out the invoice, the sooner the clock starts ticking for a customer to pay. Send out invoices promptly and follow-up immediately with a courtesy call. A courtesy call isn’t a collection call but a call just to check in with the customer and make sure the invoice has been received.

3.    Offer payment options

Do you only accept checks? Offer other options such as electronic transfer, wire payment or credit card. Make it easier for customers to pay you.

4.    Clean up  inventory

When was the last time you took a look at your inventory? Are you still selling Sony Walkmans? The 80/20 rule applies to inventory ― 20 percent of that inventory is turning while 80 percent sits idle, taking up space and costing money to finance. Consider running a clearance sale or re-merchandising product to free up this cash.

5.    Ask vendors and suppliers for a discount

When you purchase goods or services, always ask if there is a discount offered for paying early or with cash. A five percent discount for paying now, versus in 30 days, is like getting a 60 percent discount on an annual basis. Don’t be afraid to ask; the worst they can say is “no.”

6.    Customer deposits

If you’re offering aggressive pricing or giving concessions, don’t be afraid to ask for something in return. This is a great time to ask your customer to pay a deposit at the time of order, or prior to starting a job. This helps cover your up-front costs, and the risk associated with non-payment is decreased when your customer has some investment in the transaction.

7.    Require a minimum order for credit sales

Invoicing, collecting, receiving and depositing checks is a time-consuming and expensive process. Establishing a minimum credit purchase requirement eliminates having to chase small amounts, promotes larger orders and collects payment for smaller ones at time of sales.

Cash flow is the lifeblood of your business. You can sell a million widgets, but if you only get paid for 50 percent of them, your business is destined to fail. Making changes to your operating processes and managing cash flow is a way to keep your business healthy, vibrant and able to meet its obligations.

[stextbox id="grey"]Robyn Barrett is founder and managing member of Factors Southwest LLC, specializing in factoring financing for small to mid-size companies. For more information about managing cash flow and increasing cash balance, visit www.factors-southwest.com.[/stextbox]

Buyers, Choose Your Lender Wisely in Phoenix, Arizona

Buyer Beware: Pick Your Lenders Wisely

A struggling economy and changes in lending practices during recent years made it difficult for many business owners and companies to qualify for traditional bank loans or equity lines of credit. The good news is times are changing. While, the days of securing money easily may never return, banks are beginning to ease up as the economy recovers.  In other words, if you are in need of an infusion of cash, all may not be lost. In fact, you are not necessarily at the mercy of the banks. You have more power than you may think when it comes to finding and selecting a lender.

A strong relationship with the banks or lenders you work with is invaluable to the long term success of your business. But just like any other relationship, you need to make sure it is a good match before agreeing to play or work together. Do your homework. Conduct interviews. Check references. Listen to your gut.Then, choose wisely and structure things carefully.

Remember that this is your business and livelihood, and while it may not always feel like it, you are in the driver’s seat. As the driver, keep in mind a few rules and guidelines to live by:

  1. Communication is key

    Know your lender better than your spouse. Just like a marriage, the lines of communication are key. You lender can, and will, help you out of a tough situation if you communicate. Once you stop communicating, a lender is likely to become defensive and you lose any chance of working out of a bad cash flow situation.

  2. Understand the type of loan you need

    Keep in mind that needs are different than wants. You may want a $1 million dollar line of credit, but it may not be what you need. Don’t take on more debt than your business can handle.

    Match long-term debt with long-term assets. This means don’t buy a piece of equipment or real estate with a line of credit. These are long term assets and should be funded with a long term loan. If you use your line of credit (i.e., short term working capital) inefficiently you won’t have available funds to meet payroll or vendor commitments.

  3. Don’t put all your loans in one place

    If you have more than one loan with a lender, chances are the loan docs have cross default language. Cross default means a lender will tie your loans together. Cross default is a provision in a loan agreement or other debt obligation stating that the borrower defaults if he/she goes into default on any other obligation. For example, a cross-default provision may state that a person defaults on his car lease if he defaults on his mortgage. This provision exists to protect the lender.

    Your job is to protect yourself. Do this by planning smartly. If you have a line of credit at one lender, then make sure to secure a real estate loan at another.

Getting cash to grow your business is like driving down the road. You control the car but you have to make wise decisions to make it to your destination. There will be lots of bumps in the road and you don’t always know what is lying ahead but if you navigate correctly then you arrive safely. Pick your finance partners wisely and navigate the road with your lender as carefully as you would a winding road down the California coast line. Enjoy the ride!

[stextbox id="grey"]Robyn Barrett is founder and managing member of Factors Southwest LLC, specializing in factoring financing for small to mid-size companies. For more information, visit www.factors-southwest.com.[/stextbox]