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If you ever go to the hospital or even for a check-up at the doctor’s office, one of the first things the nurses do is check your vital signs. These are the critical factors that are used to determine the state of your overall body function such as pulse rate, temperature, and blood pressure. Though we don’t always like it, measuring these factors is important because it gives the doctor, and us, a clearer picture of how healthy we are or where we may have problems.

Just as doctors and nurses must check our vital signs, we have to check our business’s financial vital signs to determine the relative health of our ventures.

• Gross Profit | This is the difference between your sales revenue and your cost of goods sold. The larger the difference the better. A higher gross profit indicates stability and sustainability of the business.
• Expenses | Expenses in business are separated into two categories – fixed and variable. While fixed expenses tend to remain constant, it’s important to regularly review variable expenses due to their more volatile nature. Small changes in prices of supplies or materials can have a large effect on your bottom line. Look for areas where prices have increased and adjust your pricing or lower your overall expenses.
• Cash Flow | Cash is like the blood that runs through your veins. It is pumped throughout your entire business and keeps everything functioning properly. Low cash flow can be a serious issue for businesses, especially if unexpected costs arise. Fortunately, there are options such as invoice factoring financing and accounts receivable financing to help your business speed up cash flow.
• Growth | Growth is typically a strong signifier of a healthy business. If your business is experiencing stable, consistent growth, you are likely doing well. However when growth begins to slow, you should act sooner rather than later before it plateaus, and eventually may even decrease. You should be cautious of rapid growth as well. While it may be a blessing, it can also create some serious operational and financial strains for your business.
• Budget Deviation | An important part of running a business is tracking your progress. Your budget deviation analysis allows you to compare predicted performance against actual results. This tells you if your business is on track for meeting sales goals and helps you keep spending under control.

Just as with your own personal health, you want to check these business vital signs regularly to ensure that your company is healthy and functioning well. Luckily there are no cold waiting rooms or paper shirts required to measure these factors, just good business practices and financial data.

It happens that, to penetrate into market and extend their customer base, companies extend credit to their customers, and in due course suffer cash crunch. Late payments only exaggerate the already existing financial problems.

Small businesses need steady cash flows to thrive. To meet growing expenditures and comply with customer demands, a small business is always in need of consistent cash flow. Getting new assignments, completing jobs on time, hiring workforce, and maintaining a good supply chain of inventory –  all these tasks increase the overheads and strain on capital.

How does this affect them–

With a cash deficit situation, business performance often slips down. This affects the credibility of businesses adversely. Stringent bank rules make it difficult for them to avail traditional business loans. Small businesses with poor trading performance will either get loans against securities or will have to approach other merchants that lend at higher rates of interest. A business with already difficult situation is now burdened with more debts, though temporary ones are managed by the loan amount.

No More Relying on Banks

When your needs are short-term, why go for bank loans and add liabilities to your balance sheet when you have other easy financing sources. Many manufacturers and small businesses in Miami are opting for invoice factoring for instant cash flow. Get your receivables financed by a trustworthy and reputed invoice factoring company in Miami, Florida to get funds back into your business.

No more waiting for your customers to pay you. Get your receivables cashed for a nominal amounts of fees, and voila, your problem is solved in a day or two. Since you know the amount you want, you can choose an invoice that can meet your needs, and get it paid in advance by a factoring company.

Benefits

A secured source of income, there are many plus points of this alternative.

• Get instant funds into your system.
• The amount of funds is decided by you and your needs unlike traditional loans where limits are decided by banks.
• Your poor performance, financial state or credit score has nothing to do here. Factoring company looks into creditworthiness of your customer.
• No debt is added to your balance sheet. You get your receivables paid in advance, not a loan.

Invoice factoring is best strategy to assist a small business from financially difficult situations to get immediate funds to pay off your debts and meet daily expenses.

It is quite an unbeatable fact that for every kind of business you need cash. It is like a king that rules the market. One cannot deny the paramount importance of cash and its contribution toward the growth of any small, medium or large business. You may say that profit, market share or your business turnover indicates your business growth, but can all this become plausible without cash? This clearly defines the fact that cash has never, and will ever find a replacement to define the ongoing success of a business. Absence of cash can make a business succumb to the pressure of market and of course, crunch. Unfortunately, a lot of small scale companies have already given up due to lack of cash. This is where the invoice factoring enters.

Let us suppose that you started your own electronic company in Los Angeles around six months ago. You have been chasing a really good deal for quite some time, but it seems like letting it forgo shall be the only option sans cash. Really? Think harder! Factoring can prove to be a blessing in disguise for all such companies that are looking for immediately financial solutions in crisis based situations.

In layman’s terms, invoice factoring is nothing but the purchase of AR or accounts receivable without a resort. It can be considered as one of the antique, yet effective forms of sourcing commercial finance. You shall be surprised to know that the roots of invoice factoring can be traced back to 1600s when the colonists made extensive use of this concept in North America.

Invoice factoring is a kind of loan that you borrow on a short term. Under this concept, your business (suppose the electronic company in LA) shall transfer a part or all of the account receivables to the lender (called factor). So, when you need to grab on that massive opportunity for your electronic company in LA, you can look up to a ‘factor’ like PMF Bancorp, which in turn, enables you to focus on your business plans rather than cash requirement.

When you receive the percentage of your account receivables, the business owners can fund their present business operations and in turn, generate the new ARs. Invoice factoring is therefore, considered extremely beneficial for those companies that are looking forward to faster growth or seizure of a market share with new opportunities. Getting those new opportunities is really simple now!

Everyone has a dream of becoming their own boss. No one in this world likes to work under someone. But, most of

them are working under their bosses because of two reasons, either they do not have a dream to establish their own business or if they have a dream then they do not have sufficient funds to embrace that.

In such a case, is there any solution for the funding issue?

Absolutely yes. Invoice factoring company is trending these days. If you are a wholesaler or an entrepreneur, then these factoring companies can be of your great help.

To eradicate the confusion let’s understand the implementation plan of the Invoice factoring company

An electronics company in Miami is looking for instant cash in order to expand its business. The company doesn’t approach to a traditional bank, rather it decides to approach to the factoring company from where it can receive instant cash. The procedure is known as Accounts Receivable Lending.

Now, the electronics company sold some of its products to a customer and the invoice time period for the customer was 30 days. But, in those 30 days, they plan to expand their business and get new products that can be sold to the customers. So, the company decides to take cash from a factoring company. The cash that is given through the Accounts Receivable lending procedure is approximately 70-85% of the invoice bill that is due.

The moment the customer will pay the pending invoice (say in 30 days), the electronics company would receive a rebate. This rebate will be given by the factoring company plus a fee would be charged by the factoring company which would be just 1-2% of the invoice bill.

There is a benefit for both the electronics company as well as the factoring company.

Why the wholesalers do not prefer traditional banks?

Traditional banks are definitely an option to get cash. But, there are immense drawbacks. Let’s see:

1. The banks do not offer instant cash
2. Their verification process takes several days
3. Even if the verification process is cleared, it is not necessary that the company will get loan from the bank
4. The startup companies are generally rejected by the traditional banks

Factoring companies are the best solution if you are looking for instant cash. These companies are reliable and also there is a guarantee that through this solution you will be able to expand your business.

Do you know that most of the start-ups succumb to cash flow pressure in just 2 years of their tenure? Do you think

there isn’t any way out? Well, a smart business owner knows that when his enterprise is changing gear and making a paradigm shift towards growth, there is a need for faster cash/ capital, which can be achieved through A/R factoring. Software companies have oftenfound themselves in a cash crunch situation despite oozing talent and ability to make it large in the marketplace. A/R factoring can definitely be a reprise to these software companies that have the potential of immense growth.

Factoring basically means purchase of all outstanding invoices of the client by applying the  base charge. For example, if you have software company in Miami and are looking for factoring from PMF Bancorp, you shall be selling your invoice in return of 70 – 85% on each invoice in the form of immediate cash. When we talk about A/R Factoring in particular, there is a little bit of difference in the entire scenario. PMF Bancorp, for instance, shall provide your software company with a weekly borrowing base and this shall be charged only on those invoices which have been advanced by AR financing.

When a business that has matured over the time comes to a point of rapid growth, it is most likely possible that the expenses become more than revenue. Suppliers’ payments and payroll cannot be put on hold and customer payment for products or services are put on a second pedestal of preference. This is when the balance sheets and other financial statements start indicating negative numbers.

With such red marks, debt financing can become too intimidating and also extremely risky. Equity financiers start seeing such a company as the one under much stress. Also, they start taking it for granted that the business owner might be ready to give up more equity (ownership) for additional funds.

Such situations prove to be a nightmare for a company that is definitely on the path of growth, but is hindered due to cash constraint. A/R factoring therefore comes to the rescue because it understands the needs and potential of a small-scale or medium-sized company.

Summary

In a nutshell, A/R factoring can help a software company in Miami put the negative consequences at  bay. For a rapidly growing younger business, A/R factoring proves to be an instant cash flow solution to a time of need where cash is in short supply, even if sales are bountiful.

That is why, A/R factoring is a great tool to stabile and to assist fast growing software companies keep pace with their sales.

Invoice factoring gives a company enjoy the freedom of gaining financial stability without adding any debts to its balance sheet. It is the best way to improve your credit rating and sustaining through tight cash flow. With banks tightening their norms and dictating their ways to get back their funds, a reliable invoice factoring company in Miami, Florida is what most manufacturers and other commercial setups are preferring in this region.

Meeting ongoing operational expenses is necessary for any business to carry its activities smoothly. But, delayed payments from clients can sever funds into your system. Resorting to  business receivable factoring is the best recourse available to get immediate funding  without any hassle.

However, it happens there are still some myths surrounding this method of money lending. There are some misconceptions that keep businesses away from this easy source of funds. We are here attempting to debunk some delusions.

#1 Myth – Only financially unstable businesses opt for a/r factoring.

Truth – We all know that every business is in need of a regular flow of capital whether it is financially weak or is successful and growing. Operations can never be paused citing the reason like limitation of funds and late payments from clients, and factoring can be the best strategy to bail out businesses from cash-crunch situations.

#2 Myth – Invoice factoring is too expensive.

Truth – As compared to other sources of funds like loans, accounts receivable funding is least expensive. Well, at least a fee of less than 2% can be termed as inexpensive in contrast to huge amounts of interest paid on loans.

#3 Myth – Your customers find out about your accounts receivable loan.

Truth – You can choose to or not to disclose about your receivables funding part to your customers. All you need to do is inform them that a third party would be collecting payments instead of you. And, who would care about your funding sources until their services are not affected.

#4 Myth – It is a burden and needs security

Truth – Unlike bank loans factoring doesn’t add any liability to your system. You get funds against your accounts receivable and not by mortgaging any assets. The best part of factoring is you do not have to worry about your receivables turning to bad debts.

Now, you can look forward to factoring your receivables to get access to funds immediately without any debts. Look out for a reliable invoice factoring company in Miami, Florida to not only support your system but also evaluate the creditworthiness of your clients to secure your business.

In the first three posts of this series, I covered what you need to know about small business financing, how to align your funding sources with your funding needs and alternative sources for working capital. One of the important alternatives by which you can increase your working capital is through accounts receivable factoring. In this post, I will focus on some myths and realities surrounding invoice factoring.

What Is Factoring?

Accounts receivable (A/R) factoring, also known as “accounts receivable discounting” involves “selling” the A/R to a third party known as a “factor.” Factoring is customer and invoice specific. The factor may or may not be willing to fund (“buy”) all of your A/R invoices. There is a cost to factoring, which is typically 2 to 4 percent of the invoice’s face value. The purpose of factoring is to accelerate cash receipts due from sales made on credit.

Full-service factoring involves selling all outstanding receivables on an ongoing basis to a commercial finance company (factor). The factor pays for each invoice, withholding 2 to 4 percent as its fee, and manages the receivable until it’s paid. Under spot factoring, you would sell a specific invoice to the factor without any commitment to selling any additional invoices. Spot factoring is more expensive than full-service factoring, typically 5 to 8 percent of the receivable. Receivables may be sold with or without recourse. With recourse, if the customer defaults, you would have to attempt collection yourself. Without recourse, the factor would assume full collection responsibility. Factoring without recourse is more expensive because it carries a greater risk.

Myths and Realities

Even though factoring has literally been a source of small business financing for centuries, it’s still a frequently misunderstood option. Unfortunately, these misunderstandings, or myths, may prevent companies from utilizing what could be a very valuable resource for them. Here are some of the most common invoice factoring myths:

1. Factoring Is Bad for Your Reputation
   The concern is that your customers may see your use of factoring as a sign that you’re in financial trouble. While factoring is a viable tool for startup companies, or those who are otherwise un-creditworthy, it’s also a very important tool for successful companies that want to rapidly accelerate their growth and need access to the working capital tied up in the receivables.
2. Factoring Is Too Expensive
   While factoring is certainly more expensive than a traditional bank loan, it may be the only viable option for a business that doesn’t qualify for a bank loan to secure the funding needed to support their growth. Additionally, under full-service factoring, the factor may provide valuable additional services such as credit checks on potential customers, invoice account flow tracking and engagement in collections or related services as needed. A second important consideration is the time value of money. Can you earn more by having immediate access to the funds than the cost represented by selling the receivables? If factoring frees up the working capital necessary to support your growth, for example, and the profitability of the additional business available is greater than the cost of the factoring, then it represents a smart choice from a ROI perspective.
3. Factoring Is Only for Small Companies/Factoring Is Only for Large Companies
   Factoring has nothing to do with the size of the company that desires to accelerate payment on their A/Rs. Certainly for small companies, especially startups without a credit track record, factoring may be the primary tool available to them to build working capital. Further, support from a full-service factor may actually represent an effective way to outsource the A/R management function. Many larger, established and profitable companies use factoring as a routine component of their cash flow management strategy.
4. Factoring May Upset Your Customers
   Some customers may prefer dealing directly with you rather than with a third-party factor. This may be for the good reason that they appreciate the collaboration between companies. It may also be for the not-so-great reason that they feel it may be easier to delay payments if they’re dealing directly with you rather than with a commercial finance company that may be more assertive in collection activities and in reporting delinquent accounts to credit monitoring agencies.
5. Factors Have Inflexible Rules and Are Difficult to Deal With
   Factors come in all types and sizes, and represent a wide range of business. For this reason, it’s important to investigate different factoring agencies to find an organization that suits your purposes at a price that you feel is a fair value for the services provided.

As with all aspects of business management, factoring represents a tool that may be right for you. Don’t be misled by invoice factoring myths. Understand your goals, investigate your alternatives and look for a strong business relationship.

In my next article in this series, I’ll take a look at public sector funding resources: what you need to know and how to proceed.

Thinking about your business financing, factoring financing, and po financing are all key parts of planning for a growing business…the product is important but not as important as the finance that will make it a reality. According to the U.S. Small Business Administration, about 50% of all small businesses close within their first year of operation.One of the largest contributing factors for many of these businesses shutting down is cash flow issues. Many individuals start their own business because they have a great idea and want financial independence. The problem is, they often have little to no experience managing cash flow in a business, something that we, as factoring financing experts, know to be one of the most important aspects to creating a sustainable business. If you want to be one of the two businesses to make it past your first year, consider keeping these four financial tools in your back pocket:

1. Budget | The best way to control your spending is to limit it. At the beginning of each period, create a plan for how much revenue you should bring in, and how much of that revenue you will likely spend. This forecasted budget gives you something to measure and track as your business progresses. If your spending exceeds what you budgeted, either find a way to increase your sales or cut your expenses.
2. Bookkeeping Software | As a business owner, it’s vital that you know exactly how much money you have available at any point in time and what that money is being spent on. A bookkeeping system increases your financial visibility by organizing all of your account information in one place. You can track invoices, accounts payable, and cash flow easily using one tool. This gives you a clear view of your financial situation.
3. Merchant Services System | The easier you make it for customers to pay the better. An efficient purchase order system does this as well as tracks purchasing trends. This gives you more insight into customer interests and allows you to improve your inventory management – one of the more common places cash flow gets tied up and wasted.
4. Invoice Factoring Financing |For most business owners, there will be times when cash flow gets tight. However, bills still need to be paid. Invoice factoring financing gives you immediate access to cash flow from unpaid invoices, allowing you to pay all your bills on time and keep cash flow balanced.

Keep these financial tools on hand as you open or grow your business. Cash flow can be a tricky area, but as long you track and monitor your finances, it should be easy to spot problems early on and find a solution that works for your business.

Learning the 5 C’s are a must for every Entrepreneur

For a while now the stock market has been throwing up red flags to investors of a turbulent future. However, at the same time all three major U.S. stock markets – the Dow, S&P 500, and Nasdaq – reached all-time highs in August 2016. With uncertainties like these in the stock market, many lenders are likely to be more hesitant and careful about who they provide loans to, meaning it may be getting harder to find the business financing you need. PMF Bancorp still has business loan programs, invoice factoring financing, inventory, and trade financing available to small businesses.

Here are tips from PMF to help you land your next loan…understanding the 5 C’s of credit will help you get your next loan approved:

• Character | The first C, Character, refers to your reputation as a borrower. As a business owner, investors measure your character based on a number of factors. This traditionally includes your business credit report, and sometimes your personal credit score, which is measured based on your history of how you handled loans and other credit tools. Other factors that may be considered include your experience in your industry and the impression you made on the lender. All of these are combined to determine if you are to be considered a trustworthy recipient.
• Capacity | Possibly one of the most important factors to a lender, they want to know what your Capacity is to pay back your loan. Financial data plays a crucial role in measuring this factor. Using well-thought out forecasts and previous P&L statements, you need to prove that you will have the cash flow to repay the loan as agreed.
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• Capital | Lenders want to know that you have skin in the game and are committed to successfully running a business. One of the best ways to show this is through your own personal investment in the company. The more money you have contributed to making your operation a success, the more committed you will appear.
• Collateral | Lending money is always a risk. One way lenders protect themselves from non-payment is with collateral. Collateral is an asset that can be taken over by the lender should you be incapable of repaying your loan. While lenders really don’t want your collateral, it represents a further way to tie your commitment to honoring your loan.
• Conditions | The final C, Conditions, refers to how you intend to use the money being loaned. The purposes of the loan helps lenders determine the riskiness and other details of the loan such as interest rates, minimum payments, and repayment date. If the conditions are favorable, you are more likely to receive a lower interest rate.

Before you submit a request for funding with a conventional loan, invoice factoring financing, account receivable financing, or a small business loan may be other options to consider. Tough times may be ahead, and the possibility of more turbulent financial markets will make many lenders more cautious. By reviewing the 5 C’s of credit, you may be able to make yourself appear to be a more attractive to the lender of your choice and be able to secure the business financing you need.

On June 8th, the Canton Fair and PMF Bancorp will be hosting an intimate breakfast event at the City Club in Downtown Los Angeles so that local C-level executives looking to enhance their relations with China will be able to meet with the Canton Fair officials and learn more about their platform.

If large multinational companies like Honeywell, Cannonsafe, Exotica, Caterpillar, Arthur Schuman Inc are attending and showing their products at the Canton Fair on a regular basis to enhance their business, then there is a reason to learn more about this platform….

Please save the date for June 8th for breakfast and networking with the Canton Fair officials as well as other trade officials and associations at the City Club.

All attendees must receive a confirmation email after RSVPing. Space is limited and applicable businesses and trade associations will have priority.

For more information on the Canton Fair and their next show in Guangzhou, China in October, please visit their site.

Look forward to meeting at the City Club.

Please fill out this form to request a reservation and we will get in touch with you shortly.

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