Factoring Invoice financing is not always thought of immediately by Los Angeles wholesalers because most businesses look to their local bank for loans. Local banks do not provide factoring because it costs too much to monitor and is not a product that fits their lending profiles.
Most businesses understand factoring as the conversion of invoices into immediate cash. This is correct, but some factoring companies are also commercial lenders so the local wholesaler should know all the lending services before using some other potentially more expensive ways to raise capital such as selling equity.
Here are the ways a business can fund itself….
Factoring Invoices Financing: Selling your business’s invoices can raise cash fast.
PO Financing: Funding suppliers based on credit worthy purchase order (POs) from your customers. Often, a supplier will not release your goods based on credit so having a finance company pay the supplier can be a big benefit to cash flow and timeliness of delivery.
Inventory Financing: Los Angeles wholesalers are often preferred over Chinese supplier by large customers because they keep inventory in the US for quick replenishment and can absorb service issues. However, how does a small or mid-sized wholesaler finance their inventory. With PMF Bancorp’s inventory financing, your business could use its regularly sold inventory items as eligible collateral.
Equipment Financing: Los Angeles wholesalers are constantly picking up goods at the port. They often need vehicle financing or equipment financing. PMF Bancorp has programs to assist with these credit needs as well.
PMF can provide a line credit from $20k-$500k, and an invoice factoring line together for maximum cash flow support.
PMF’s Business Loans typical parameters:
Funding in Week
No Red Tape or Long App Process
No Hidden Broker Fees
Simple Interest
Up to $500,000
Term to repay from 6-36 months
PMF Bancorp offers a real business loan, not a Merchant Cash Advance program like many others, so your business does not have to struggle if you do not have the receivable / invoices to factor or convert to cash. The best solution is to use both products, a small line of credit and a factoring line, so that your business can have the right financial resources to grow when the opportunity presents itself. For example, PMF’s small business loan could help with a business expansion opportunity while a PMF Factoring Line could help with working capital as the sales and receivables grow due to the expansion.
PMF Bancorp can provide small business loans for companies regardless if they have invoices or not. PMF can provide loans from $20,000 to $500,000.
Call PMF Bancorp now for more info at 800-218-9000 or apply using our quick app.
Funding on a factoring transaction can happen as quickly as 1 to 2 days whereas traditional bank loans take months to close
The global economies seem to be conducting a major shift that will continue over the next two to five years with China being a major force in the shift. The China that would have supposedly overtaken the US economy in 10 to 20 years is fading fast and can only be seen as a “Dream” best described the Chinese. With the Chinese GDP at 6.9% or the weakest in a quarter of a century, there are major slowdowns in all sectors. How is your business going to weather the storm?
Asia and the Middle Eastern countries are also reeling from the lower demand for their exported goods to China. Even the BRIC countries as well as Australia are also having major fallout an ocean away as their economies are heavily tied to China based on its previous years of heavy commodity orders. With China slowing and its debt mounting as well, it cannot afford to maintain its own economy in good standing. China is heavily dependent on its real-estate markets to support much of its GDP. The real-estate market in China is also the driver for commodity orders and other goods from abroad.
The Chinese economy is tightly tied to its real-estate market with much of its internal GDP directly related to this sector. Based on my conversations with a leading Chinese real-estate agency conducting business in Shenzhen and Shanghai, the real-estate markets are still strong in the major cities (for now); however, many of the tier two cities are seeing declines in property value due to oversupply and the slowing economy. China’s major banks have loan portfolios with more than 60% real-estate related loans as estimated by the Financial Times sources today. If there is a crash, the bad debt would be crushing and the Chinese government would not have the ability to easily re-capitalize the banks like they did in 2005 when they were preparing them for public offerings.
No other country in the world sets GDP goals so why does China? The reality is that the Chinese government knows that if they do not hit a certain goal in growth that their real worries would start to materialize by losing the “Social Stability”. Social Stability is not only a key term for keeping the peace that is often used in China, but it is also a mandate for the Chinese government’s rule. There is an unsaid pact that is well known in China even though not written anywhere between the people and the government. The informal pact can be best described as the people allow the government to rule as long as the jobs, good economy, reasonable housing and food are accessible…when this stops, the music stops, and it will not be pretty bad for the people left without a seat. The Chinese government knows this and that is why they are working so aggressively to protect currency, housing, stock and other markets, and setting GDP goals.
Knowing this information, the strategy that a US business should take is not one of panic, but to start making backup plans for alternative areas to produce goods. The writing has been on the wall for a long time that China’s labor, materials, and shipping costs have been increasing significantly. I am not recommending to change your production and suppliers right away, but there should be arrangements made in the short terms to have backup plans to maintain supply chains for products and to keep your trade financing, invoice factoring, and /or letters of credit in good standing. The long term strategy for China is hard to see with perfect clarity as it will also depend on your industry as there are many opportunities still left in China. The positive side is that many of China’s licenses are becoming easier to obtain as they continue to find new ways to maintain investment flows. The service industry in China and the online services are the next big wave and will continue to attract investment. Production of any kind due to wage inflationary pressures and limited labor force especially, in port cities will be hard to manage. Reviewing alternate countries such as Vietnam, Cambodia or even the United States may be a better option. The United States can be a very competitive choice with so many redevelopment credits and tax incentives from Federal Agencies and local governments. Producing in the United States also affords better quality control and lower shipping costs, and has to be very carefully evaluated.
PMF Bancorp has long specialized in financing trade and invoice factoring financing for companies in the US with $1 to $50 million in sales. Our head office is in Los Angeles, but we have offices in China and lending licenses in Asia as well so we are a rich source of real time information and would be happy to be helpful with your business finance related questions on conducting business with China.
Savvy business entrepreneurs often feel that financing adds additional cost and try to stay away from the need of financing. It is normal to think of financing as a cost center. However, the very successful entrepreneurs that grow their businesses beyond $10 million typically understand the value of financing. In fact, financing is often used to grow the infrastructure and improve the overall value of a business.
On the other hand, many businesses do not qualify for traditional bank financing because of the bank’s stringent lending requirements and the business principles? own credit standing. Even when the business qualifies, it often does not receive a large enough line of credit to properly grow. Alternative financing such as factoring purchase order of financing, trade financing are often available as short term working capital to businesses whether they qualify at a traditional bank or not. These short term working capital lines of credit for business with strong management and purchase orders from strong clients can make a large difference in the overall sales volume on a yearly basis and the profitability of the business.
PMF Bancorp has financed businesses for over 30 years as a commercial lender and we have seen entrepreneurs decline financing at the expense of their growth many times. PMF Bancorp has observed that there are large costs to not having the right financing in place as well as forgoing financing that albeit, may not be perfect but allows the business to continue its growth momentum.
The following are the cost of not financing when growth is available:
Loss of sales
Inability to service large customers
Inability to take on new customers
Inability to buy new inventory
Inability to hire proper talent
Loss of enterprise value
Small Business Financing
Some of these costs like not having enough working capital or declining financing are obvious but I would like to discuss the damage that number 6 causes which most entrepreneurs do not think about because they are caught up in day-to-day operations, working capital needs, and customer service issues. The dream of many business owners is to eventually build a business that has value and that can be sold for a large profit but few entrepreneurs with fast growing businesses take the time to build the infrastructure or think of the strategy that maximizes the enterprise value or shareholder value. This is often and exercise that corporate America takes because of the rigorous quarter-to-quarter reporting of Wall Street, but small businesses do not have this oversight or push for quarterly reporting. In fact smaller businesses often run emotionally and based on decisions that are made quickly.
Small owners of businesses should realize that the value of their business is often charged by the size of their sales volume even if profitability is not perfect. Businesses that are very profitable but small are of no use to buyers in most cases so understanding enterprise value can only come when the small business owner starts thinking like corporate America. It is important to achieve a critical mass in sales for smaller business so that it can make the cross over to a larger businesses. Only then will you be on the road to creating enterprise value for another buyer.
Savvy business entrepreneurs often feel that financing adds additional cost and try to stay away from the need of financing. It is normal to think of financing as a cost center. However, the very successful entrepreneurs that grow their businesses beyond $10 million typically understand the value of financing. In fact, financing is often used to grow the infrastructure and improve the overall value of a business.
On the other hand, many businesses do not qualify for traditional bank financing because of the bank’s stringent lending requirements and the business principles? own credit standing. Even when the business qualifies, it often does not receive a large enough line of credit to properly grow. Alternative financing such as factoring purchase order of financing, trade financing are often available as short term working capital to businesses whether they qualify at a traditional bank or not. These short term working capital lines of credit for business with strong management and purchase orders from strong clients can make a large difference in the overall sales volume on a yearly basis and the profitability of the business.
PMF Bancorp has financed businesses for over 30 years as a commercial lender and we have seen entrepreneurs decline financing at the expense of their growth many times. PMF Bancorp has observed that there are large costs to not having the right financing in place as well as forgoing financing that albeit, may not be perfect but allows the business to continue its growth momentum.
The following are the cost of not financing when growth is available:
Loss of sales
Inability to service large customers
Inability to take on new customers
Inability to buy new inventory
Inability to hire proper talent
Loss of enterprise value
Small Business Financing
Some of these costs like not having enough working capital or declining financing are obvious but I would like to discuss the damage that number 6 causes which most entrepreneurs do not think about because they are caught up in day-to-day operations, working capital needs, and customer service issues. The dream of many business owners is to eventually build a business that has value and that can be sold for a large profit but few entrepreneurs with fast growing businesses take the time to build the infrastructure or think of the strategy that maximizes the enterprise value or shareholder value. This is often and exercise that corporate America takes because of the rigorous quarter-to-quarter reporting of Wall Street, but small businesses do not have this oversight or push for quarterly reporting. In fact smaller businesses often run emotionally and based on decisions that are made quickly.
Small owners of businesses should realize that the value of their business is often charged by the size of their sales volume even if profitability is not perfect. Businesses that are very profitable but small are of no use to buyers in most cases so understanding enterprise value can only come when the small business owner starts thinking like corporate America. It is important to achieve a critical mass in sales for smaller business so that it can make the cross over to a larger businesses. Only then will you be on the road to creating enterprise value for another buyer.
As our children create their Christmas lists of toys they want the most, business owners are creating lists of their own. While they may also include some toys, perhaps Google Glass or the Apple Watch, a healthy and successful business is #1 on the list for most.
One of the best ways of measuring business health is cash flow. Healthy cash flow doesn’t necessarily mean making a lot of sales – although that helps. What you should be seeing when you look at your cash flow is more cash flowing in versus flowing out. This signifies healthy cash flow and solid working capital.
For many business owners, the holidays represent increased demand on working capital. Customers are buying more online and in stores as part of the holiday gift-giving tradition. This often means buying on credit versus paying with cash. While increased accounts receivable look good on the balance sheet, it does not equate to cash in hand. Instead, you are paying more for production, labor, inventory and related operational costs, while waiting to get paid. Hence, more cash is flowing out than coming in.
Fortunately, there are multiple ways a business owner can alleviate much of the stress that comes with this seasonal imbalance in cash flow.
Have a Plan | The most efficient way is to have a plan. Spending decisions should always be made with caution in business. By planning strategically ahead of time for periods where you expect cash flow demands to be heavier, you can be better prepared to handle it financially.
Negotiate with Suppliers | Negotiating supplier credit is another way to reduce cash flow demands. Making purchases on credit allows you to continue to meet customer demand, but with a lower immediate cost, freeing up cash flow.
Leverage Accounts Receivables | Work with a factoring company such as PMF Bancorp. Instead of waiting for accounts receivable to be paid off, invoice factoring allows you to gain immediate access to that cash flow. Not only does this increase your working capital, but it also reduces the risk of unpaid invoices.
The holidays are time to celebrate, not worry about your business’s health. By planning ahead and having the right strategies in hand you can make it through the end of the year on a positive note and start the New Year off right.
As our children create their Christmas lists of toys they want the most, business owners are creating lists of their own. While they may also include some toys, perhaps Google Glass or the Apple Watch, a healthy and successful business is #1 on the list for most.
One of the best ways of measuring business health is cash flow. Healthy cash flow doesn’t necessarily mean making a lot of sales – although that helps. What you should be seeing when you look at your cash flow is more cash flowing in versus flowing out. This signifies healthy cash flow and solid working capital.
For many business owners, the holidays represent increased demand on working capital. Customers are buying more online and in stores as part of the holiday gift-giving tradition. This often means buying on credit versus paying with cash. While increased accounts receivable look good on the balance sheet, it does not equate to cash in hand. Instead, you are paying more for production, labor, inventory and related operational costs, while waiting to get paid. Hence, more cash is flowing out than coming in.
Fortunately, there are multiple ways a business owner can alleviate much of the stress that comes with this seasonal imbalance in cash flow.
Have a Plan | The most efficient way is to have a plan. Spending decisions should always be made with caution in business. By planning strategically ahead of time for periods where you expect cash flow demands to be heavier, you can be better prepared to handle it financially.
Negotiate with Suppliers | Negotiating supplier credit is another way to reduce cash flow demands. Making purchases on credit allows you to continue to meet customer demand, but with a lower immediate cost, freeing up cash flow.
Leverage Accounts Receivables | Work with a factoring company such as PMF Bancorp. Instead of waiting for accounts receivable to be paid off, invoice factoring allows you to gain immediate access to that cash flow. Not only does this increase your working capital, but it also reduces the risk of unpaid invoices.
The holidays are time to celebrate, not worry about your business’s health. By planning ahead and having the right strategies in hand you can make it through the end of the year on a positive note and start the New Year off right.
PMF Bancorp wishes health happiness for all during this Thanksgiving season, but its important to also remember to keep your business’ financial health in mind too.
By following these 7 business tips, your business will be on course for healthy & profitable 2016:
Use your Balance Sheet as a financial Road Map (and if you are a small business then this is the perfect time to start your balance sheet);
Start on the Left Side of your Balance Sheet where your Assets are described to make sure your Cash account’s position is strong enough to support several months of downturn at minimum (a 6 month cash reserve should be your goal);
Review Inventory and try to always balance to minimize it as its your enemy as well as your best friend;
Receivables should always be under 90 days and your goal should be to get all your customers between 30 and 45 day terms max;
Moving to the Right Side of your Balance Sheet with your Liabilities (and Equity), make sure the accounts payable are not more than your receivables. Aim for accounts payable being 1/3 of your receivables which will indicate in most cases that your equity is working for you as well;
Loans are something to have, but not in excess…as Jack Welch described that a company without loans is a company in a position not to maximize their utilization of assets and sales capabilities;
Always try to retain a little Equity in your company each year so that banks and lenders will see a positive retention trend which will make them more likely to lend when the time is right.
The right time for a business line is when you don’t need it, so if you are doing fine now, then it is the right time for a lender to want to lend to your company. Take advantage of this and open a business line with PMF Bancorp. PMF Bancorp makes the process simple for businesses as our +30 years of experience lending has only been in the area of working capital lines to our business clients for their growth. Our smartest clients get their loans when they least need them, knowing that in the future, they might have a working capital need.
How to manage Business Cash flow at the same time…
In the best of all worlds, sales and net profits would be increasing all the time, but this is not the immediate goal for many businesses depending on their strategies, industry, business life cycle point, etc. There are so many permutations to this equation for a successful business that I will limit my focus to 3 most common types of businesses.
Our discussion will be on the following:
The young startup tech business,
The service business, &
The traditional manufacturing / product design to wholesale model.
Fast Growing Tech Companies: Sales vs Profit.
In most cases, there is a technology time to market component that provides the edge for this kind of company. This company and its investors have to be focused on ramping sales quickly due to the fast paced nature of technology, and the advantage of being first to market. Companies like Uber, Snap Chat, Twitter and similar tech models have little use for profit as they are in the mode of growing sales which can be measured in gross sales dollars, and even more importantly, gross or total users of their platform(s) which is often a more valuable form of measurement in the tech industry. Smaller tech companies making apps for IOS or Android do not have the luxury of deep pockets like the big names we hear about in the news so critical sales volume (and user base) must be reached more quickly. Often, a combination of investors (equity) and debt financing are best to maintain cash flow. A start up software or app company needs to plan for cash flow before taking on a new line so not to place the overall company in distress in the near term. Fast growing companies do not often have traditional banks looking to provide loans due to very high credit requirements. Often, alternative financing is not thought of as a viable solution due to lack of familiarity or knowledge in the executive ranks. Receivable financing or factoring invoices is a great solution to immediate working capital needs. Factoring invoices is the process of converting your invoices into immediate cash. For example, a new product may require new staff which places an immediate cash crunch on company. There also may be needs for new inventory or bridge financing between new orders. Factoring is a great way for a small tech start up or even a more mature company with a new business division to manage its new working capital needs.
Service Businesses: Profit vs Sales.
Service businesses are typically labor intensive and require a lot of cash flow to maintain the business because payrolls are every two weeks. Focusing on sales for the typical service business is a death nail. Service businesses must be focused on profit for every invoice. For example, a Staffing Company does not have products or intangible assets working like a tech or manufacturing company. They must make a profit on each invoice or they will soon find their working capital disappearing. Any business heavy in labor, whether a staffing company or not, has the same issues for cash flow. Factoring invoices and receivable financing are very common for businesses in this field as traditional banks shy away from companies without inventory, machines, land, or other hard collateral. A factoring company can convert invoices into cash in a matter of days so employing tools such as these can a wise way to ensure cash flow even if you think your basis are covered.
Traditional manufacturing / Product Design to Wholesale Model: Profit vs Sales.
Traditional manufacturing is a complicated formula to give any perfect strategy on whether to focus more on sales or profitability; however, a proper balance of sales and profitability is the correct goal at all times for manufacturing. The right answer is the % mix that the unique business needs to hit its critical sales targets while maximizing profits (understanding your breakeven point helps in this endeavor). Manufactures always have their loss leader products to hook the bigger customers, but too much of this will affect the profitability and eventually the ability for the manufacture to provide its products. For example, if you are a beauty supply company and your cosmetic kits are barely profitable when compared to the profitability of your makeup products…then selling mostly cosmetic kits is not a good business strategy even though these might be the main items your customers want. Therefore, devising a strategy to sell the right % mix of cosmetics is vital. Again, manufactures can leverage their sales without diluting their equity by taking in the right amount of financing. As Jack Welch stated, “A business that is not financing some amount is not leveraging its assets appropriately for their shareholder’s return and sales growth.” Smart manufactures setup lines of credit when the cash is not needed. However, there are many circumstances to poor cash flow so finding a solution to maintain your optimal % mix of sales is of the utmost of importance. Manufactures selling their products via wholesale to large customers often have additional working capital issues because their customers require 30-90 day payment terms. Even if your company has financing, the seasonal demands may exceed its capacity so setting up a line of credit that grows with your sales such as an a/r financing or factoring invoice line would be a strategic move to ensure smooth cash flow. An experienced factoring company can provide financing by converting your company’s invoices in to immediate cash to meet those seasonal or unexpected product demands.
try to stay away from the need of financing. It is normal to think of financing as a cost center. However, the very successful entrepreneurs that grow their businesses beyond $10 million typically understand the value of financing. In fact, financing is often used to grow the infrastructure and improve the overall value of a business.
owners are creating lists of their own. While they may also include some toys, perhaps Google Glass or the Apple Watch, a healthy and successful business is #1 on the list for most.
