Purchase Order Financing Blog - Learn About Purchase Order Funding

Financing Startups? Yes - But Be Sensible!

2009-06-24T10:21:00.005-04:00

We are quite happy to offer purchase order financing to startups. Because of that, we get many calls from budding entrepreneurs looking for business financing. Many are disappointed when we decline the opportunity to participate in the business. In part, we decline many of them because they have unrealistic expectations. Here are some examples of things we see that will garner a DECLINE:

1. Entrepreneurs that don't put any money themselves

This one is a classic. We get a balance sheet that shows that the owner put $1,000 in their business with NO other assets or sales and expect us to fund the rest. I think there is a myth, in part propagated by some famous entrepreneurs that did start with $1000, that this is enough. Let me ask, why would *WE* risk capital if the owner is only risking $1,000? The short answer is we wouldn't - and don't.

2. No Experience

It is common for people to try and start a business for which they have no experience. As a matter of fact - I did so myself. But it is unrealistic to ask others to finance your startup until you have had some successful transactions under your belt. You should expect to self-finance your business until you learn the ropes, just like I did :-)

3. Unrealistic Goals

"Marco, this is a new concept and we'll be a $12,000,000 by the end of the year. We just need the Money. And, oh by the way, I only put $1000 in the business (read #1)." Sorry, the odds are that you wont be a going concern by the end of the year. Well thought out sales forecasts are a must. And also - tone down sales expectations - otherwise you could set your self up for failure if you don't meet them. Remember that running a startup is challenging.

4. Thinking their business has no risk (riiiight!)

This is a classic. I get a call from a startup entrepreneur who tells me their transaction has no risk. As a rule of thumb, I always turn these down. No exceptions. Even if everything else appears well thought out. All transactions have risk. Period. Otherwise, there would be an opportunity for Arbitrage. And if an entrepreneur cannot see that -then we consider them dangerous. Investors consider one of the few risk free assets to be US Government securities (e.g. TBILLS).

So weather you are looking for a business loan, factoring or any type of funding, keep these points in mind.

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Looking for information on purchase order financing? Read the purchase order finance blog or look for business loan financing in wisconsin.

The 5 C's of Lending

2009-06-11T09:46:00.002-04:00

Although this blog is not about lending, let me borrow a page from their playbook. Lenders always talk about the 5 C's of lending. They are:

Capacity

Credit

Collateral

Conditions

Character

Today we will talk about Character. Now that the economy has been in shambles for a while, many companies are starting to become desperate for any kind of business financing. It's a survival thing, and it's understandable. But credit crisis or not - the 5 C's still rule. Now, more than ever. Character - and this refers to the owners and managers - is critical. What is character?

Well, it varies by firm. In my little world of purchase order financing, for us, Character involves having prospects that either:

1. Have a complete clean slate. That is, they have good/reasonable credit and not blemishes such as bankruptcies/etc.

-or-

2. Have a blemished slate - that is explainable and reasonable. And also - be upfront about it. Don't wait for our underwriting team to find it.

You read #2 right. Don't hide it. Rather bring it upfront early and have sensible explanations for what happened. Even if you made a "dumb mistake", be upfront. That may not guarantee approval, but will almost certainly trigger respect. And respect helps you get approved.

Let me tell you a story about a prospect that I had years ago. They ran a successful start up that sold products to the government. They had not been able to get a business loan so they approached us for some financing. In their application they marked that none of the owners had ever been involved in a bankruptcy.

Our search indicated that they had a prior Chapter 7. When confronted, the owner explained that there had been a medical problem - coupled with a nasty divorce - that led to the bankruptcy. If they had explained this situation upfront they would have been approved. But they hid it and lied on their application. Unfortunately, we declined them.

This may sound harsh. But think about it this way. Problems will happen during a financing relationship. It's just how it is. We understand it. But we also only want to work with people that will own up to them and face them, not with people that will hide them until the problems blow up.

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Looking for information on purchase order financing? Read the purchase order finance blog to learn about business loan financing in wyoming

Credit Enhancements as a Substitute for Purchase Order Financing

2009-05-20T11:31:00.004-04:00

Recently I have been getting a number of call from companies that are looking for purchase order financing. After a short conversation, we invariably find that we can usually help this client by combining conventional invoice factoring with a credit enhancement.

Lets first look at the problem they are trying to solve. Most of this prospects have suppliers that are unwilling to extend them additional trade credit. If their suppliers were willing to extend their already existing credit they would be fine.

Well, this can be done using factoring and including an agreement where the factoring company direct advances to the supplier (to satisfy moneys owed) first, and then send the reminder to the client. Usually, this does the trick.

The advantages:

1. It helps you build your commercial credit
2. It's usually cheaper than purchase order funding
3. It's less complicated than po funding

Now, not every factoring company offers this. Also, I have over simplified a few points for brevity. But if you are looking for purchase order financing, you'd be wise to compare it against conventional credit enhancements.

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Looking for information on purchase order financing? Read the purchase order finance blog

Retail Sales Still Sliding

2009-05-13T10:48:00.006-04:00

As this report from the WSJ shows, retail sales are still sliding. Given that we are now in May, this is problematic as I think that this coming Christmas season may be in jeopardy on two possible fronts:

1. Things recover but stores run out of certain items due to cautious ordering
2. Things don't recover and retailers get hammered, again.

There are three sides to purchase order financing. There are:

1. Commercial sales
2. Retail sales
3. Government sales

Most people are seeing a decline in #1 and #2, but an increase in #3. This is certainly an interesting time to be in this industry. The fact that many companies still cannot get conventional business financing at their local institution are making things easier since there is still deal-flow.

But the fact remains that the retail industry, especially large chains, are a major engine of the purchase order financing industry. Until thing improve in that market, things will be a little bit funky for purchase order financiers.

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Please keep us in mind if you are looking for factoring an purchase order financing in Alabama. We offer factoring in Alabama.

Things are bottoming out

2009-05-08T11:54:00.002-04:00

Here is a very interesting article on the Financial Times that talks about how things are stabilizing. In my humble opinion is does not mean that things are going up - just stabilizing. With stability you get some predictability. Predictability is the platform for possible future growth. So this is good.

Many now that the purchase order financing market has taken a bit of a hit since there is heavy involvement in the retail sector. However, other area of it are growing to compensate. And given the current lack of availability of business financing, it remains a viable alternative for companies that cannot get a business loan.

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Looking for information on purchase order financing? Read the purchase order finance blog

Why PO Financing works best with High Margin Transactions

2009-05-08T11:38:00.002-04:00

I commonly get calls from companies that are excited about the prospect of using purchase order financing, only to find out that they don't qualify because their gross margins are too low. So why do many purchase order finance companies usually require high margins (20% to 30%)?

There are a couple of reasons:

1. Finance companies consider purchase order financing transactions to be risky since many things can go wrong. Having a high margin enables some things to go wrong, while providing a sufficiently large cushion to soften the impact.

2. Purchase order financing is not cheap. Especially if you compare it against other forms of business financing such as a business loan. Requiring high margins ensures that the owners have a sufficiently large profit margin to make the transaction worth their while

Can finance companies work with orders that have smaller margins. Of course. They can do so on exceptional situations if the transactions makes sense. But be aware that the risk will also be higher.

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Looking for information on purchase order financing? Read the purchase order finance blog

Venture Capital in Problems?

2009-04-22T11:13:00.005-04:00

As you can see from this article on the WSJ, the number of venture capital investments has dropped significantly. This is a statistic that concerns me because VC's are an important source of business financing for the economy. Whereas a business loan is usually targeted to an existing business (or an owner with lots of assets), VC's target companies that could grow and go public.

I am actually surprised that VC investments since I always thought that a good time to invest is in a downturn when things are cheap. Let's hope this pick up. At least I am seeing a pickup in the factoring market.

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Looking for information on purchase order financing? Read the purchase order finance blog

Good news from the Federal Reserve

2009-04-19T07:33:00.004-04:00

I was pleased to read this morning that fed officials think that worst of the recession is over. At last! After a year of seeing lots of negativity in the press, finally officials (and businesses) show some cautious optimism. One of the problems that exacerbated the crisis has been the exaggerated pessimism. So called economic pundits that appear on TV trying to deliver shock value through bad news. I have always thought that their effect was enourmous - and becauise of that they should act responsibly. I'd like to note how there were not many pundits out there predicting that the crisis would happen - before it happened. This tells oyu a little bit about their ability to predict things in general.

There are two things to remember:

1. Recessions happen. It is what it is.

2. So far, the USA has ultimately always recovered.

I think that we will see thinkgs improve once there is a uptick in business financing activity. An increase in the business credit flows (read: business loan) is what needs to happen before we see any major improvements.

But lets bask in these good news.

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Looking for information on purchase order financing? Read the purchase order finance blog

NPR News

2009-04-08T09:43:00.002-04:00

NPR had a news piece yesterday about the "new normal". The new normal, was really different. They suspected that Americans would save more and consume less. It was an interesting perception - they thought that the recession had fundamentally altered American shopping habits.

Most companies that use purchase order financing tend to sell goods to retailers. If retail sales are going to stay down, that bodes badly for them.

I have to admit I have my doubts about the new normal. I am not against it, by the way. I just think that retail sales will pick up once things improve, and new retailers will emerge to replace those lost to bankruptcy.

In the meantime, things keep on moving though. It's still tough to get business financing from a bank, thanks to the drought on business loans, so alternative options remain at the forefront.

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Looking for information on purchase order financing? Read the purchase order finance blog

Foreign Suppliers - Why a Letter of Credit is a Good Idea

2009-04-07T10:20:00.007-04:00

I recently read an article in Business Week that talked about how factories in China were closing, and just how messy those closings were. Many suppliers were left unpaid. Clients were left without product.....

This brings me to a point of doing business in a foreign land. Most of my purchase order financing have foreign suppliers. These suppliers usually demand payment in cash - however we always insist on paying with a Letter of Credit. Why? Well, it's not because we are unreasonable. It's because we want to engage in a protected transaction (our client is protected) in which the supplier is guaranteed a payment - only if they deliver: in time and in the right quality/quantity. It protects the supplier (they get paid), and the client (they get the product).

By the way - and this is just a personal thought - I am always suspicious of a supplier who is unwilling to accept a letter of credit for a large order. In my opinion, it's a red flag and it can mean that they are in trouble and they need money themselves.

Now imagine the worst case scenario - you send an advance - say 50%, and then your supplier dissapears. Now what? Travel to abroad and try to collect? Not likely. That is where a Letter of Credit protects you - and why we insist that our purchase order financing clients use them.

Even with things as complex as they are - temember that purchase order financing is a very flexible form of business financing that is still easier to get than a business loan.

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Looking for information on purchase order financing? Read the purchase order finance blog

Is Purchase Order Financing on the Rise?

2009-02-12T14:52:00.002-05:00

It's been a few weeks since my last post. Mostly because I have been very busy. But I wanted to make an observation - interest in purchase order financing services has been growing lately. That is somewhat counterintuitive because we are in a recession. I wonder if this is because things are turning around - or because companies are having a harder time qualifying for conventional business financing. Many of our prospects have come to us complaining they could not get a business loan.

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Looking for information on purchase order financing? Read the purchase order finance blog

Retailer Bankruptcies

2008-12-29T11:39:00.004-05:00

People are already grumbling about a bad holiday season for many retailers. Possible the worst holiday season in recent history. That begs the question - are there going to be any retailer bankruptcies?

Possibly. The bigger question is "who will go Bankrupt?" I have some inklings but none that I would post in a public forum.

This is why credit insurance is very important! Credit insurance should protect you against the default of a client - especially if they go bankrupt.

If you use purchase order financing, you may want to discuss adding credit insurance to your transaction. Likewise, if you are using invoice factoring make sure you are working with a good non recourse invoice factoring company or consider getting credit insurance yourself.

By the way, I hope I am wrong. I truly hope that none of the large retailers goes bust due to this bad sales season. The economy and most people certainly don't need more bad news.

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Looking for information on purchase order financing? Read the purchase order finance blog

2008: A Bad Year for Some Importers

2008-10-31T10:01:00.000-04:00

As we approach the holiday season, it is becoming clear that this holiday season is not going to be a good one for retailers. And that problem, of course, will trickle... change that ..... gush like a geyser into their suppliers.

The logic is simple. Consumers are not planning on buying much this year from retailers. Thus, retailers won't be buying much from their suppliers. And likewise, these suppliers won't be buying much from their own suppliers either.

This will affect one group of companies that uses purchase order financing: Product resellers. Companies that bring goods from abroad (usually) to fulfil retailer orders.

Even those that still get orders will need to cope with a much longer wait to get paid, although invoice factoring can be used in these circumstances

Unfortunately, not everyone will survive this shakedown. But those that do, will probably emerge stronger as they will have even stringer ties with their customers.

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Looking for information on purchase order financing? Read the purchase order finance blog. More information about business loan alternatives as well.

The Economy and Purchase order Finance Companies

2008-10-10T14:11:00.000-04:00

Anyone who has kept up with the news knows that things in the financial industry are not going very well. Although banks and regular financial companies are doing badly, most purchase order financing companies have managed to thrive in this environment. Since banks are not giving out business loans as quickly or easily as when times were better, clients are turning to alternative source. There are factoring (aka invoice factoring) - and po financing.

Just remember, not all purchase order financing or factoring companies are created equal. And, if your financing company is capitalized by a troubled bank, you could suffer as well.

So now is the time to due your due diligence on your funding company. Whether you are getting a small business loan or just plain old factoring - be sure to ask lots of questions.

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Looking for information on purchase order financing? Read the purchase order finance blog

Guaranteed Sales? That will kill your changes of financing

2008-08-02T09:58:00.000-04:00

A number of retailers are known for buying goods from their suppliers using a sales term commonly known as a "guaranteed sale". Don't let the name fool you, guaranteed sales can be very risky for you. They can be challenging for your business and eliminate any chances of having the transacting funded with purchase order financing.

What is a guaranteed sale? According to the business dictionary it's an

"Arrangement under which a manufacturer or supplier takes back the goods that remain unsold after a specified period. See also consignment sale."

Let me state it a little bit differently. In a guaranteed sale scenario, your client can return any goods for whatever reason, whether real or imagined. Furthermore, they can demand you return any payments they have made for those goods - or - they can deduct the cost of the return from future payments.

So, a guaranteed sale is NOT a sale until and if your client SELLS the product. Let's hope his sales staff is good because you are depending on them...

Now from the home stretch, why does this kill any chances of getting factoring or purchase order financing? In both instances, the collateral is the payment from your client. And in a guaranteed sale scenario the payment amount will always be in question.

Let me give you an extreme example.

Let's say that your client purchases 1,000 widgets from you at $1 per widget. Let's also say that the purchase order finance company paid $700 to your widget supplier for that 1000 widget sale.

Now, two weeks after the purchase, your client's purchasing manager realizes that she purchased way too many widgets. They were only able to sell 500 of them. She then, pays the $500 invoice for sold and returns the 500 unsold widgets.

But wait, you financed $700 for the transaction but only have a $500 payment. The transaction is now underwater. You are now the proud owner of a busted transaction.

I am not saying that you should not do guaranteed sale transactions - only you can decide that. But I do want to make sure you understand their ramifications.

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Looking for information on purchase order financing? Read the purchase order finance blog

Unrealistic Expectations - How They Derail a PO Financing Transaction

2008-07-16T09:36:00.000-04:00

I had a prospect who recently called me to talk about financing his business. IN principle, the transaction looked great. Excellent suppliers. Great customers. Your classic textbook purchase order financing transaction. There was just one problem. The transaction had to be completed in 4 days. Regretfully, I had to decline it. Declining it was not easy because the transaction was very big and would have provided us with some hefty profit.

Why did I decline it? Well, for a couple reasons but here is one:

Although the po financing can be obtained very quickly, we still have to go through the process of reviewing an application, reviewing financials and executing a contract. That process can take up to 2 weeks. Now, in the world of business financing - that is quick. Anyone who has tried to obtain funding from an institution knows the process can take months. Expecting to close a multi-million dollar transaction in days is just not realistic.... even with the flxibility of po funding.

What I find surprising is that I see this very often - more often than I'd like to admit. In my opinion, it points to lack of planning. Yep - sounds harsh. But think about it this way - if you were the CEO of a company - would you engage in a transaction that you can't do alone without securing your financing first? In my opinion, that is very risky. You'll be better served making sure that you can cover the transaction before committing to it.

By the way, in the factoring world, thing are a little bit different. I have seen factoring transactions close in 5 days. But even then - that is cutting it close. You are better off planning your financing needs ahead of time.

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Looking for information on purchase order financing? Read the purchase order finance blog

Purchase Order Finance and Complex Orders

2008-07-12T08:53:00.000-04:00

In a perfect world, you would have situations where each client order, generates a corresponding order to a supplier. So you have a 1 to 1 relation. In this case, purchase order financing is fairly simple to implement.

But the world is seldom perfect.

So, what happens if in your business you collect many client orders and then combine them into a single (larger) order to you supplier. Does that mean that purchase order finance is no longer an option? Well, maybe.

Having many orders combined into a single large order complicates matters exponentially, as the purchase order finance company now has to track the delivery to each client and ensure that the clients specific order requirements are met.

Does it mean that these complex orders cannot be financed. Not really. However, these orders will need to be sizable enough to be worth the effort. And the complexity will need to be limited - usually to a maximum of 3 or 4 different clients.

Factoring financing, on the other hand, can easily be used in these types of orders, regardless of the number of clients. So invoice factoring remains an alternative.

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Looking for information on purchase order financing? Read the purchase order finance blog

Long transaction times

2008-06-10T11:12:00.001-04:00

Recently, a prospect asked me if we could finance a 150 day transaction. The answer is yes, maybe. Like most types of financing, the costs of purchase order financing increase with time. That means that a transaction that takes 150 days will be more expense than one that takes 60 days. Obvious right?

As a rule of thumb, purchase order financing works best for transactions that have at least 30% margins and a turnaround time of 90 days or less. But, it's fairly flexible an can be used in other circumstances.

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Learn more at the purchase order financing blog. Looking for factoring Missouri? Consider doing business with us.

Need a business loan? Consider these alternative options

2008-05-30T17:17:00.000-04:00

Looking for a business loan but can’t find one? Or worse, has your loan request been rejected? One of the toughest jobs for business owners is trying to secure business financing. Unfortunately, getting a business loan isn’t always easy. Although most banks want to lend money, they have strict underwriting criteria that they must follow. This commonly includes asking for your company’s financial history and looking for assets. However – not all small businesses have long track records or tangible assets. Does this mean that you can get business financing? No – it just means that business loans may not be the best alternative for your company.

Does your company give its clients 30 to 45 days to pay invoices? Most companies that offer payment terms usually run into cash flow problems. This is because few businesses have the required cash cushion to wait 45 days to get paid. That forces owners to either juggle vendor payments – or worse – turn away opportunities. There is a solution for this problem. It’s called invoice factoring.

Suppose that instead of waiting 45 days to get paid, you were able to get 80% immediately and the remaining 20% in after 45 days. Would that work better for you? Of course it would. And you can achieve this by factoring your invoices. The biggest advantage of factoring is that you get an immediate advance on your invoices. This gives you funds you need to pay suppliers and employees. It also enables you to take advantage of new sales opportunities without having to worry about juggling vendor payments.

An accounts receivable factoring transaction works as follows. Once you deliver your product (or service) you invoice your client. At that point you also finance the invoice through the factoring company. The factoring company advances you 80% immediately. You get the remaining 20%, less a small factoring fee, once your client pays the invoice in full.

One advantage of working with factoring companies is that they look at businesses in a different way than banks do. They consider your invoices from solid paying clients to be your biggest asset. And as such, they are willing to advance money against them. Of course, factoring companies also look at other criteria. But the main criteria are to have good invoices.

Factoring can be used in many industries and has a number of sub-specialties. Freight bill factoring is a form of factoring that is common in the transportation industry. Construction factoring and medical factoring are used in the construction and medical industries respectively. Factoring financing is a flexible solution that can be used across many industries and can help position your company for growth.

About Commercial Capital LLC

Looking for business loans? We are a leading business financing company and can provide business loan alternatives. For information, please call (877) 300 3258.

Options and Alternatives to Finance a Small Company

2008-05-29T12:03:00.000-04:00

Small business owners are usually confronted with a number of challenges. One of them is getting business financing. Although most entrepreneurs start their businesses with their own funds, or those of friends and family, soon they reach a point where they need additional funding to grow the business.

One solution is to look for additional financing among your friends. This is a risky strategy since there is a risk of losing the friendship if you run into business problems. Another solution is to try to go to the bank for a business loan. However, to qualify for a bank loan, your company usually needs to show three years of profitable operations and appropriate collateral assets. Generally, this puts business loans out of the reach of most small business owners.

Two alternatives that are often overlooked by businesses are factoring and purchase order financing. Both offer great flexibility and are much easier to obtain than conventional business financing.

Invoice Factoring

Do have clients that pay their invoices in 30 to 60 days? If you need funds quickly in order to meet company expenses you should consider invoice factoring. With this type of financing, a factoring company can give your business an invoice advance, secured by your soon to be paid receivables. Although terms vary, most factoring companies advance about 80% of your outstanding invoices. The remaining 20%, less the financing fee, is advanced once the invoice is actually paid. One of the advantages of an accounts receivable factoring facility is that you can use it regularly to reduce the length of time it takes you to get paid on your invoices. Also, factoring financing is tied to your sales and increases as your company grows.

Purchase Order Financing

One common challenge for resellers (and wholesalers) is winning a purchase order that exceeds their financial capabilities. Purchase order financing can be used in these situations to bridge the financing gap, enabling the company to complete the order and book the sale. Basically, purchase order funding covers your supplier expenses. The transaction is settled once your customer receives the goods and pays for them. Purchase order factoring is only available to companies that resell goods, or companies that use third party manufacturing. Unfortunately, it most po finance companies cannot service direct manufacturers.

Conclusions

Factoring and purchase order financing have gained substantial traction as a financing solution for small and medium sized companies. They both have the advantage of being easy to obtain and setup. They can be an ideal solution for companies looking for pre-delivery and post-delivery financing of their commercial sales.

About Commercial Capital LLC

Looking for business financing? We can provide business loan alternatives for companies seeking business loans. For information, call (877) 300 3258.

Do you need $125,000,000?

2008-05-16T08:59:00.002-04:00

It may sound funny, but every other day I get a call from a business owner - or broker - that needs my help to finance a $125,000,000 (or similar number) transaction. These transactions seem to have some things in common:

1. The caller is usually a broker that is new to the business.
2. The transaction involves precious stones or precious metals
3. The "supplier" is usually in some politically unstable African country or deep deep inside the Ukraine
4. The "supplier" needs "proof of funds" or a more formal "Bank Comfirmation Letter" or "Ready Willing and Able Statement"
5. The paper work looks good until you actually read it

My suspicion is that there are some shady companies that think that someone will put a proof of funds. Of course, the proof - or the shady operator will never be seen again.

I shoudl start directing those callers to this blog post :-)

Needless to say, we would not offer purchase order financing or factoring for these transactions.

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Best purchase order financing blog! Looking for factoring in iowa? Consider doing business with us.

A new Sunrise...

2008-05-15T09:38:00.001-04:00

A few months ago, all the news about the economy and the markets was all doom & gloom. The tide is beginning to change. If you read the news, you will now see a mash of good and bad news.

This is important, I think.

There is a theory, or so I have heard, that many times the economy mirrors the news about it. Sure, other people say that the news mirrors the economy. Either way. Months ago it was all BAD news. Now you see bad news AND good news.

Does that signal something?

Fortunately, the market for factoring, invoice factoring and purchase order finance has been strong.

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Learn about purchase order financing. Need factoring in Illinois? Consider doing business with us.

Are things looking up in the US?

2008-05-10T12:34:00.002-04:00

According to Mr. Greenspan, one of our exalted economic luminaries, the worst of the credit crisis may be over. In the same article, and in another one, he stated that there was more pain for the housing market.

Be that as it may, we are also seeing vulture investors in the housing market. Many times, these investor signal the "end of the end" and the beginning of new things. However, it may take a while for things to turn. In the mean time, the vultures will feast.

Although economic times have been uncertain, things have been good in the purchase order financing market. Purchase order financing and factoring companies have been seeing an increase in business.

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Looking for factoring in georgia? Consider doing business with us.

Guaranteed Sales

2008-05-06T10:04:00.000-04:00

For some reason, people always get confused by the term Guaranteed Sale. More importantly, most new resellers incorrectly believe that their client is guaranteeing their sale.

WRONG

A guaranteed sale is an agreement by which the vendor agrees to TAKE BACK merchandise that their client was not able to sell. Said differently, if you offer guaranteed terms, you have not made a sale until your client has made the sale. Note a very good position to be in.

More importantly, guaranteed sales will kill any chances of using purchase order financing for that order. This is for a very simple reason. The purchase order financing company usually gets paid once the end client pays their invoice. Whoever, with a guaranteed sale there is no way of knowing the amount of the final invoice. As a matter of fact, the end client could return the whole shipment.

This is why a guaranteed sale will also kill your chances of using factoring (accounts receivable factoring).

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Looking for factoring in florida? Please consider doing business with us.

Back to Basics: Never Lie to Your Financing Company

2008-05-01T10:02:00.001-04:00

I am always surprised when a company that claims to be well managed and have "huge" prospects, turns in a shoddy application. These companies are asking for substantial amounts of business financing. Yet, they submit applications that have typos and are missing documents. Sometimes is carelessness. Sometimes it's something else....

Last week, I got an application that was missing a balance sheet, a profit and loss and their receivables aging report. We requested 7 different documents. We got four. They missed three most important documents for our decision making process. They did this purposefully because their financials were not good. They though that maybe by not submitting them.....we would not notice in our due diligence.

We declined to provide purchase order financing and invoice factoring.

Not because their financials were bad (they were, but we could deal with that). But rather, because of how they went about the process. When we asked. They hemmed. They hawed. The came up with a million excuses, and only at the last minute did they admit their financials were not good and that they had lied to us. Their company was tanking and we were their last ditch effort.

Here is the kicker. If they had been upfront about the situation we probably would have financed them. We can be creative. As a factoring company, we are used to dealing with situations that are "less than optimal" (that is what factoring companies do).

We just don't like it when they hide things from us, give us false pretenses and paint a rosy picture... when the picture is bleak.

Here are some things to keep in mind if your company is looking to apply for business financing:

1. Have a conversation with the finance officer. Explain your situation. If your company has problems - be candid. We prefer to know about problems up front. That way we can structure an appropriate solution.

2. Fill out the application clearly. Poor penmanship does not help.

3. Submit all required documents.

4. If you are missing any documents, mention it, explain why, and then try to come up with an alternative.

5. Above all - don't lie or play games. That is the easiest way to get disqualified!