David Gass asked:




Credit card services for small businesses have gained much importance today because of a sudden increase in the number of people operating small businesses from their homes. According to a recent study, there are about forty one million such businesses are in operation and two new businesses are starting every minute. Credit card service providers are trying to cash on this opportunity. They know that biggest problem the new small businesses are facing is of access to the capital. Credit card services for small businesses are very useful tool to solve this problem of cash crunch.

The two main brands that are providing credit card services for small businesses are MasterCard and Visa Business Card. Visa Business Card provides the credit lines up to fifty thousand dollars while the limit for MasterCard is one hundred thousand dollars. For expense monitoring and tax deduction identification, both companies provide quarterly or annual report of expenses without any charge. Visa card allows you to rack up the points, just like frequent flier miles in aviation industry, and get the discounts at several retail stores.

Eligibility Criteria;
If the number of employees is less than hundred or the revenues are not more than $10,000,000, you are eligible for getting these credit cards. As individual banks also provide these cards, it will be useful to do some research and get the best possible deal with minimum interest rates and no annual fee at all.

How to Choose?
It is true that you have just started your business and you are running a small business. However, you should a credit card service for small businesses that keeps the pace with you when you start growing. So, before you choose a credit card service, you should look for following points -

1. What are the regular rates of interest after introductory APR offer?

2. What is annual charge?

3. How much is the line of credit in the beginning and is it possible to increase later?

4. Maximum number of credit cards that an account can have.

5. Is something like airline mile point exists there?

6. What about cash rebate program?

7. Is there any kind of understanding with the leading retailers so that you can get discount on the purchases of office equipments using business cards?

8. Is online facility available?

9. Is it possible to delay the payment for purchases of big amount?

10. Will you get quarterly and yearly reports?

11. Is this information transferable to the existing accounting software of company?

12. Is it possible to have summary in the format of my liking?

There are professional help available online to help you with getting business credit cards for your small business.

Businesses Loans

Lexe Charleston asked:




Individuals with bad credit know the sting of its financial repercussions–whether they cannot qualify to finance a car or home, or otherwise. Millions of people are affected by bad credit, including numerous entrepenuers and small business owners. Phoenix small business investing officials know it is more difficult than ever to get a loan to help get a business off the ground. Still, it is not impossible.

Establish Business Credit

While Phoenix small business funding experts know that many small business owners do not want to wait years to apply for a loan, they recommend building business credit if a business owner has bad personal credit. The process can take a few years but Phoenix small business investing professionals highly suggest it because you may be able to quality for a better, low interest loan in the future. This is simple because if established correctly your business credit will be in no way tied to your personal credit, which means that when you go in to apply for a loan your personal credit will not be checked.

I. Formalize Your Business

Start by formalizing your business. This will immediately establish that it is seperate from your personal finances. LLCs and sub chapter S corporations are too formal types of business, for example.

II. Business Checking Account

Next, Phoenix small business investing officials state that you will need to start a business checking account that is under the formal name of your company. Make all business transactions through this account, and avoid using your personal accounts for business purposes.

III. Business Phone Line

You should also set up a business phone line under the formal name of your business. Contact phone companies to ensure that they report payment history and other information to the credit bureaus. This is important. If a company does not do this, you should move on and find a company that does.

IV. Trade or Vender Credit

Phoenix small business investing experts suggest setting up vendor credit. Vendor credit is when you acquire business supplies, equipment, and more from a vendor, and they finance you the supplies to you. You pay the vendor back over time and can keep an open line of credit with some vendors, where if you are making your payments on time you can continue to get more supplies. Small business funding authorities say it’s important to find vendors who do not require the use of any personal information that is tied to your personal finances and credit, like your social security number, for example. Everything should be done using business information and finances only.

V. Business Credit Cards

Lastly, you will need a few business credit cards. Again, they should be under the formal business name and you should always pay them off on time. Just as with vendor credit, you need to make sure that the cards are in no one tied to your personal credit. And just as with the phone line, you must make sure that the credit card companies report your payment history to the credit bureaus.



Credit For Your Business

Chris Wise asked:




Since starting started my first business at the age of 12, sharpening chain saw chains for equipment rental stores, I have discovered that there are four ways to access capital. But throughout my journey I’ve come across many “opportunities” on the internet that promises a Get Rich Quick approach to getting the levels of capital you desire. However, many of these are not legitimate. As I mentioned, legally, there are only four ways to access or receive money:
Borrow It – You can borrow the money from another person, usually done in the form of a promissory note. You can borrow the money from a bank in the form of a loan or line of credit. Typically, when you borrow money from other people it is called debt. It is the approach that I took on my path to becoming a millionaire. In later articles, I will go on to explain this in greater detail, explaining the main source of borrowing I have used, and continue to recommend to my students. Exchange it for Equity – You can receive money in exchange for ownership in a company which is also known as equity. If you are just starting your journey, it is unlikely that you will have a large enough stake in a company for this to be a viable option to get access to the levels of money you need. Production – You can earn the money by exchanging dollars for hours or by creating a system that produces value for other people that is then exchanged for money. If you were able to proceed with this option, then you would not be reading this article. Very few people can earn the levels of money they need through this approach alone. Stumble upon it – Lastly you can receive it from an inheritance or win it in the lottery.

These are the only four legal ways for anyone to access or receive money. And don’t bet on the last one. Having been in business since the early age of 12, I have studied and used the first three methods in my life many many times and what I have discovered is that borrowing money has been, by far, the easiest way that I have ever found to get access to capital. Stay tuned for future articles where I will go into detail on this method.

The Credit Company

Marco Terry asked:




Do you own a growing business that needs financing? If you are like most business owners, whenever your business needs money you head over to the bank. Unfortunately, as most small business owners soon find out, most banks do not lend money to businesses unless they have significant collateral and a history of successful operations. This presents quite a challenge for business owners.

When banks are not an option, small business owners turn to what is known as the alternative financing funding market. Although the financing options discussed in this article fall under the alternative financing category, they are actually quite widely used and should be considered mainstream. Most major companies (including public companies) have used this alternative financing at one time or another during their growth history.

Most of the tools described in this article can only be used by businesses that are already in operation, and whose main requirement is working capital. Although startups can benefit from these tools, the companies will need to be in operation for a little while and have a growing list of clients.

General Invoice Factoring

Invoice factoring (also known as accounts receivable factoring) is ideal for business owners who cannot afford to wait 30 to 90 days to get paid by their clients. It allows a business to sell invoices from commercial customers to a financing company for immediate payment. The financing company buys the invoices at a discount and waits for the customer to pay.

The main advantage of factoring your invoices is that the financing company makes its decision using the credit of the payer, rather than yours. That means that if you own a small company that is doing business with a large credit worthy company, you are almost certain to have the transaction approved. Another advantage of factoring is that it does not have set limits like lines of credit.. The level of financing is limited only by the amount you sell to credit worthy clients. General factors can work with most industries, although there are two main industry subspecialties – freight bill factoring and medical factoring.

Freight Bill Invoice Factoring

Trucking companies tend to be very cash hungry businesses. The owners need money to pay their drivers, pay gasoline and pay suppliers. However, most trucking companies also work with a high volume of freight invoices from credit worthy clients. That makes freight bill factoring an ideal solution for their cash flow issues. Just like in general factoring, the factoring company buys the freight invoices from the trucking company for immediate cash.. Furthermore, the risk for these types of transactions is lower than in general factoring. This means that trucking companies can qualify for preferential financing terms.

Medical Factoring

Most medical industry businesses (doctor’s offices, hospitals, medical testing centers and medical supply companies) make the bulk of their earnings by billing 3rd party insurance companies, Medicare and Medicaid. Unfortunately, insurance companies are notorious for paying their invoices in 30 to 90 days, creating cash flow problems at the medical office. Factoring medical offices is a subspecialty of general factoring. Given the complexities of the insurance industry, it usually requires the participation of a factoring company with extensive industry experience.

Generally speaking, the medical factoring company will provide you with financing based on your NET collectables rather then your gross collectables. They will also need to be part of the billing process, to ensure that they finance the right amounts. Due to its complexity, medical factoring is only accessible to medical businesses making at least $100,000 a month. However, if your business qualifies for it, you will find that it is a great tool to streamline your cash flow and grow.

Purchase Order Funding

Most distributors and import/export companies tend to be very cash hungry businesses, in part because of how the sales process works. Usually, the process starts when the distributor gets a purchase order (PO) from a client. They then purchase the items from their supplier, who then drop ships it to the end customer. This works well as long as the company has enough money to pay the suppliers and wait for their clients to pay for the product. However, sometimes a payment can take up to 60 or 90 days to arrive, creating a big cash flow challenge for the distributor. Other times, the company may become too successful and get a purchase order that is too big for them to finance. In these instances, the company should consider purchase order funding financing. With PO financing, a finance company handles your supplier payments and ensures that the goods are properly delivered. Once the client pays for the product, the transaction is settled and all parties are paid. PO funding is a product that truly allows you to grow your company – sometimes exponentially – while using someone else’s money.



Business Factoring Companies

Marco Terry asked:




Invoice factoring is a form of business financing that has been gaining a lot of notoriety in recent years. It is a specialized form of business financing that is designed to help companies that offer net 30 to net 60 terms to their customers, but can’t afford to wait that long to get paid. Factoring invoices solves this problem by advancing funds to companies based on their slow paying invoices. This improves their cash flow and helps them stabilize operations, allowing them to grow.

Most factoring transactions are structured as the purchase of an invoice by a factoring company. The purchase is done in two installments. The first installment is called the advance, and is provided as soon as you sell the invoice to the factoring company. The percentage that is advanced is based on your industry, your track record, the payment record of your customer and market risk conditions. Most advances average 80% of the invoice. However, transportation companies using freight factoring can get advances as high as 90%. Likewise, staffing companies can get factoring advances that go as high as 90%.

The second installment, called the factoring rebate, is paid to you once the customer pays the invoice in full. The rebate will include the remaining amount that was not advanced, less any fees. For example, if the advance was 80%, the rebate will be 20%, less any factoring fees.

When a factoring company purchases an invoice from your company, it can do so with recourse or without recourse. In a recourse factoring transaction , the factoring company has the right to sell back to you any invoices that have not been paid within 90 days, regardless of the reason for nonpayment. A non recourse transaction is a little bit different. The factoring company will absorb the loss of a non paid invoice if (and only if) your customer does not pay the invoice due to a declared insolvency (such as a bankruptcy) during the purchase period. Each factoring company engineers transactions in their own way, so you should familiarize yourself with the terms of your contract.

One very important aspect of a factoring transaction is the notice of assignment. Before you start factoring invoices for a particular customer, the factoring company will need to setup the customer. This is usually a fairly quick process where the factoring company checks your customers commercial credit, and then notifies them that their invoices will be factored. The notification letter, commonly referred to as a notice of assignment, informs your customer that you are working with a factoring company, who is helping you with your receivables. It also contains a new payment address. Many times the payment can continue to be made in your company’s name, provided it goes to the new address. The notice of assignment is fairly standard in the factoring industry but each factoring company has its own version of it.

Although factoring transactions appear to have many moving parts, they are fairly simple to implement and can be easily integrated into most companies. One of its most important benefits is that factoring is flexible. The line is dynamic and tied directly to your sales. You can easily grow your financing – as necessary – provided you sell good products or services to a diverse number of credit worthy customers.

 



Factoring Business

Tracy Rewey asked:




Moneymaking opportunities abound for factoring brokers and cash flow consultants.  Why?  It’s a worn out news story, but banks are still holding tight to their lending dollars in the struggling economy.  As businesses look for alternative financing the demand for invoice factoring is on the rise.

Think of the factoring broker as a marketing division that only gets paid when deals are closed. The broker locates a business in need of accounts receivable funding and earns a commission for matching this business with a Factoring Company.

Commissions are paid to the Broker by the Factoring Investor for closed transactions. While commission rates and structures vary, a broker can typically earn a commission between 5 and 15 percent of the Factor’s discount.

For example, if a business factors $25,000 worth of invoices and the Factoring Company charges a 5 percent discount the Factor earns $1,250 ($25,000 x .05).  If a commission rate of 10 percent is paid to the Factoring Broker then they earn a finder’s fee of $125.00 ($1,250 x .10).  This type of commission is generally paid when the Factor receives payment on the invoices.

Another method of calculating commissions is based on the face value of the invoices rather than the discount.  The Factoring Broker would earn an average of one-half percent to 1.5 percent of the invoice amounts.  For example, if the commission rate were 1 percent and $25,000 worth of invoices were assigned; the commission to the Broker would be $250.00 ($25,000 x .01).  This type of commission is usually paid when the business receives their advance.

A Factoring Investor typically honors the payment of commissions to the Broker on all future advances with the same business client. This is a great source of future residual income since many businesses use factoring on a regular ongoing basis.

Most factoring brokers operate as a home based business.  They market factoring services to the small and mid-sized businesses that the large banking operations often overlook. The key is to target companies that generate accounts receivables with creditworthy customers or debtors.

Factoring is one of several cash flow areas where brokers can earn fees by acting as a financial matchmaker between the customer and the investor.  The cash flow industry is based on providing cash now for future payment streams.



Factoring Credit Line

Stan Prokop asked:




We encountered a great term the other day when it comes to business financing – the term was ‘ expansionary finance ‘. Is it just us or does this term seem to perfectly cover off factoring and receivables financing.

Often though three key issues come up when Canadian business owners and financial managers consider this type of financing. What are those 3 issues? They are the total cost of this type of financing, the rates associated with this facility, and probably most importantly what type of firm offers the best facility to match your company’s own specific needs.

Let’s learn and cover off those issues, which will allow you to get more comfortable we think with this type of Canadian business financing.

So, why should you even be considering receivables factoring? Simply because it has become a common way for Canadian business to cash flow their accounts receivable and generate working capital based on your own policy of extending credit terms to your customers.

And, as most business owners know, sales does not equal cash flow and when business financing of your A/R is not available from your bank a logical place to turn to is to an independent finance firm that offers invoice financing.

But, what does this type of financing cost, and who offers it, and an even better question… ‘How do you pick the best factoring partner?

In Canada the financing and factoring of A/R varies widely. As a general rule we can say the cost is between 1-3% per month based on the size of the facility, your overall financial condition, and most importantly, whether you have sought out and picked the finance firm that best suits your needs.

Let’s clarify our comment on your overall financial condition. Receivable financing places much less emphasis on your firms overall financial health – in fact a huge amount of Canadian firms that utilize this type of financing are in stages of turn around, high growth, experiencing temporary financial losses, etc. So don’t despair that your firm isn’t eligible. But, as we said, your client base, the size of your A/R portfolio on a monthly basis and some other factors will dictate your overall pricing.

Frankly the best costs in factoring finance in Canada start to be achieved when your monthly financing capability for A/R is greater than 250k. Is there a ceiling on the amount of facility? Absolutely not, and facilities that go into the several millions of dollars on a monthly basis happen everyday in Canada.

Clients often ask our favorite most recommended type of facility. That’s a simple one – its called C I D – which stands for confidential invoice discounting, allowing you to be in total control of billing and collecting your own a/r without any notification to clients that comes with the U.S. and U.K.versions of a/r finance.

Remember also that when you are addressing the always top of the list issue with firms such as yourself, ‘ Cost ‘ that you need to factor in things you might never have thought about. They include your ability to grow your business and generate more profits simply because you now have the capital to do so, albeit at a higher cost. And couldn’t you offset some of the cost of factoring by taking discounts with your own suppliers (and improving relations with them along the way!), as well as purchasing more effectively with your new found working capital?

So, in summary, if you need a financing partner when you are considering a receivable management and financing solution seek out and speak to a trusted, credible and experienced Canadian business financing advisor who will ensure your cost and partnership with your factoring firm is focused on a mutually beneficial relationship for financing success.

Factoring Account

Marco Terry asked:




Does your company have a lot of sales and not a lot of cash at hand? This situation is very common if you allow your customers to pay their invoices in 30 to 60 days. As a matter of fact, most new and growing business have this challenge. They have a lot of money owed to them by clients, but little actual cash in hand.

Many business owners – and perhaps yourself – try to address this problem by demanding quicker payment from clients. Unfortunately, that seldom works. Both commercial and government clients pay on set schedules, and, waiting to be paid is part of the cost doing business. Others try to approach a bank looking for a business loan. Unfortunately, business loans are very hard to obtain. Most banks will ask for 3 years worth of proven financial statements before offering any business financing. It may appear as many businesses have few available financing options. Actually, there is a solution for this problem and it’s surprisingly easy to obtain.

Let’s say that instead of waiting 30 days to pay, your clients made you the following offer. They will pay you 80% upon receiving the goods/services and then pay the remaining 20% after 30 days. Would some, if not all, of your cash flow issues disappear? Factoring your invoices can offer you a similar proposition, without asking your clients for faster payment terms. You get an advance of 70% to 90% from the factoring company as soon as you deliver your product or service. You get the remainder, less a small fee, as soon as your customer pays for the invoice. Invoice factoring provides you with predictable cash flow and helps you ensure you can pay business expenses and employee salaries on time.

Factoring companies offer a number of advantages over conventional banks. Factoring financing lines are flexible and tied to your sales. That means that your financing facility increases as your sales increase. Furthermore, they are relatively easy to obtain and can be set up in about a week or so. The biggest requirement is that you have sales to good paying clients, such as reputable companies or government agencies.

The costs of factoring your invoices vary based on the size of your financing line and the credit quality of your customers. Generally you should expect to pay between 1.5% and 3.5% per month based on these criteria. Factoring invoices is one of the most effective strategies to stabilize your cash flow, providing you with a platform for strong growth.

Factoring Accounting

Brandon Cornett asked:




Invoice factoring is a useful but often misunderstood element of small business finance. So in this article, I’ll explain what factoring is and how it can help certain business owners sustain their growth.

By way of definition, factoring is a process through which small business owners can convert accounts receivable (invoices) into much-needed working capital. Basically, there are three primary parties involved in the process:

The Invoicing Company – This could be any company with accounts receivable in the form of invoices. Additionally, the company’s owner wants to convert those invoices into much-needed working capital. For this example, let’s refer to this business as “Acme Corp.” The End Customers – These are the customers who have been invoiced by Acme Corp and are thus part of Acme’s accounts receivable system. The Factoring Company – This is the financing company that specializes in providing working capital through such services as invoice factoring. This is where Acme Corp will go to try and convert their invoices into working capital, a.k.a. cash flow.

Now let’s assume that next month will bring some major equipment purchases for Acme Corp. They need two new vehicles for their business, along with some other equipment. The only problem is, a lot of their capital is tied up in the form of invoices. This represents future revenue, but it doesn’t help Acme Corp here in the present, and it won’t help them make those equipment purchases next month. In other words, those invoices are not considered working capital.

In this common scenario, a small business factoring company could step in to help Acme Corp transform their accounts receivable into working capital (which could be used to make those equipment purchases next month).

So Acme’s owner (Bob Smith) would work with a factoring company to transfer some or all of his invoices to the company. The factoring company would then advance Bob a portion of the invoice total, typically around 80 percent. Bob has just converted 80 percent of his accounts receivable into capital that he can use to cover those equipment purchases.

The end customers (the people who owed Bob those invoices) would now make payments to the factoring company, instead of sending them to Acme Corp.

This approach to financing is not for every business. Like any other financial strategy, there are many considerations that must be taken into account. But the point of this article is not to say whether or not factoring is right for your business, but merely to make you aware of this unique approach to small business finance.

Account Receivables Financing

Sylvia Roberts asked:




There are many advantages of using factoring if you’re a business owner. One of the biggest is that you can quickly and easily boost your company’s cash flow. This can be especially useful for businesses that are short of working capital, or that need to expand quickly.

Some other benefits include:

A choice of dozens of companies within the UK that offer factoring products. These include invoice finance and invoice discounting at various different rates. Because of the high level of competition within the marketplace, prices of factoring remain low and factors are willing to work with businesses that have lower turnovers.

Being able to outsource your sales ledger. Traditional factoring involves letting the factor handle your sales book, and this includes chasing invoices and securing payment from your customers. Businesses often find that this frees up a lot of time and resources that they can direct elsewhere.

Opting for non-recourse factoring means that the factor takes on the risk of bad debt. This means that if you use invoice factoring and then your customer doesn’t pay, you don’t have to pay anything – you’re not liable for that debt. If you work in a high-risk industry or you’ve had problems with your customers in the past, this can give you the confidence to run your business without worrying about not being paid.

Finding out your customer’s credit status. The factoring company will perform credit checks on everyone they collect payments from to make sure that they can actually pay. This can alert you in advance of any problems your customers may have, so you can take action before it’s too late.

Factoring And Invoice Discounting