Factoring 101: Don’t Make It Difficult

One thing I love about the factoring industry is that once we remove all the layers of speculation, it really is a straight forward business.

People new to the industry, both brokers and companies thinking about using factoring services, have an uncanny ability of making things more difficult than need be.

Terms like “hold back,” “reserves,” “advance rate,” and “points” can put people on edge.

Add to the fact that just about everyone tries to compare “factoring vs. bank loans” and it is no wonder Read more

Factoring Business: Should You Use Google+1 or Facebook?

You may have a strong factoring business built on solid networking.

Sooner or later, your efforts are going to turn to the Internet to find ways to leverage new clients.

In the beginning you will be faced with two big options…FACEBOOK® or GOOGLE+1™. Read more

Consumers Should Expect Higher Prices This Holiday

At the end of August, Apparel published the following “warning” if you will.

With costs going up, consumers were going to have to pay more -  painting a potentially gloomy picture for holiday spending. But did this actually happen and what about the cost of factoring during this period?

(8/31/11 Source: Apparel) – A new survey of consumer goods manufacturers and importers shows that the dual trends of weak inventory sales and rising prices paint a dark picture for the upcoming holiday season. As of July 31, 2011, during which time most holiday orders are placed:

• 83 percent expect prices of consumer goods to rise this holiday season, with one-third saying prices could rise as much as 10-15 percent
• To deal with the rising cost of goods and the gloomy economic outlook, 89.4 percent expect retailers to rely heavily on discounting to move merchandise
• 64 percent of manufacturers and importers reported that retail orders are the same, or less, as compared to last year (2010)
• 30 percent of respondents reported that the increased costs to manufacture and ship goods will be passed along to consumers as compared to only 20 percent of respondents passing increased costs along to the consumer six months ago

“Inflation is coming and the era when retailers and manufacturers absorb price increases to protect consumers is over. Our manufacturing clients are telling us that prices for clothing, bedding and other soft goods will rise this holiday season. However, all hope is not lost, as one-third of those surveyed believe that despite current market challenges, retailers will increase inventories this holiday season,” said Andrew Tananbaum, executive chairman of Capital Business Credit.

Additional findings of note:

• Nearly three-fourths (73 percent) of respondents expect sales this holiday season to be the same, or weaker, than last year
• 60.5 percent believe that an increase in the cost of goods will be spread across  consumers, retailers and importers
• Half (53 percent) cited that due to the increase in raw materials and logistics costs, retailers are asking for longer payment terms during the holidays indicating that suppliers are forced to become more flexible with respect to payments and contract terms

These changes will affect margins across the board, as an overwhelming 95 percent of respondents indicated that their margins would be affected in some way.

The Global Retail Manufacturers and Importers Survey, conducted by Capital Business Credit LLC (CBC) (www.capitalbusinesscredit.com), a global integrated financial products and services company that serves the retail sector, surveyed 80 manufacturers and importers in the apparel, housewares, home furnishings, fashion accessories and furniture industries, who manufacture some, if not all, of their products in China, India, Vietnam, Bangladesh and Pakistan. The survey was conducted the week of Aug. 1, 2011.

Cotton

Almost all (95 percent) of respondents saw an increase in the cost of raw materials over the last 12 months. To combat the increased cost of raw materials, 33 percent will be replacing some of the cotton content in their products with rayon (60 percent) or Lycra (40 percent). More than a quarter (26.7 percent) of those who have high-cotton content products will vary the cut or design of their products to use fewer raw materials. Respondents also noted that cotton prices will directly affect consumer prices this holiday season.

Labor

Approximately 44 percent of survey respondents plan to move some or all of their manufacturing out of China due to the increased cost of labor. Almost three-fourths (71.4 percent) of those respondents are considering relocating some of their production to Vietnam.

Logistics

The CBC survey also identified that the increased cost of logistics – due in large part to the rising cost of oil – is a major cost concern (92.2 percent) for importers and manufacturers. Almost two-thirds (66 percent) of respondents said that logistics costs have increased by more than five percent in the last 12 months with nearly 58.3 percent of respondents citing an increase of five percent or more due to the current cost of oil.

“The rising costs of raw materials, labor and logistics only magnifies the existing problems facing manufacturers, importers and retailers. On a bright note, looking forward to the Spring season, we anticipate prices to decrease at retail, due to forward looking data on the decline in cotton prices,” said Tananbaum.

The good news is that consumer shopping on Black Friday last week surpassed all records with sales up over 6% (Source MSN.com).

So even if there was a slight increase in production cost (that may not have been passed on to the consumer) the volume should make up for any factoring costs incurred by companies selling invoices.

In the end, consumers were sick and tired of staying on the sidelines (spending wise) and this gave business a good hit at the end of 2011.

Should You Make Invoice Factoring Offers Via Email?

In an age where birthday wishes seem limited to a Facebook Wall post and asking someone out on a date is abbreviated to accommodate Twitter’s 160 character limit, it leads us to ask:

Are we getting too impersonal when it comes to making offers or negotiation? Read more

How to Factor Invoices on Small Margins

You probably have heard the many benefits of factoring receivables but may have thought it’s only viable for those companies with large profit margins. Well, you might be surprised to know that many companies with small profit margins are benefiting from factoring also.

For example let us say that you are only making a 3% profit on your product and the factoring fee is also 3%. Read more

Could You Tell a Client They Don’t Need Factoring Help?

I witnessed an odd exchange of dialogue the other day on the Internet. It would have been humorous except neither of the cash flow consultants came to the right decision – over a long period of opportunity.

The “Dilemma”

The exchange started with a simple post from a factoring broker that had a “dilemma” with a new soon-to-be client.

In going over the client’s information, the consultant discovered that the client really did not need factoring help. He had two other alternatives that were clearly better choices for the client , with no additional risk.

The consultant was concerned how he was going to keep is his client focused on factoring so he could get the deal. “Any feedback would be helpful.”

Enter the “Expert”

The post was almost immediately replied to by a so-called “industry expert” that had been involved with similar negotiations (all going his way of course).

His advice bordered between “bait and switch” and “smoke and mirrors.”

Seriously?

In the ongoing posts back and forth neither of them ever considered actually telling the client that there were better options available.

What? Risk losing the deal in exchange for taking the professional higher ground?

Yes, and here is why…

1. The client is going to find out anyway. When they do, you are going to look like either an idiot or a thief. Ok, maybe those sound a bit harsh, but you will probably be viewed somewhere in the not so favorable middle.

2. They have friends to send you. Your “missed opportunity” with this client could come back ten-fold if you actually help your client. Trust me, he is going to tell every one of his colleagues about you. You saved the day, even if it didn’t involve invoice factoring. Who do you think his friends are going to call?

3. They have friends to steer away from you. Same as the last point, but in a bad turn of reversal. Remember, he will find out what happened, and will be sure to tell his friends if he thinks you purposely didn’t help him in order to make a few bucks.

Look, the rule of thumb is simple…

Always do the right thing.

Help your client in any way, shape, or form that you can. If it involves factoring receivables and you get a commission on the deal – that’s great!

If it doesn’t, but you are still able to help, just consider that you put some future business on lay away – maybe it will show up just in time for the holidays!

Thanks!

All Done!

In a few short minutes you will be receiving (via email) your very own copy of The Factoring Hot List.

You are also part of the Factoring Investor ‘inner circle.”   This entitles you to receive free weekly updates on what is going on in the factoring industry including special funder interviews and real world strategies to help you excel in the cash flow business.

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If you have any questions, or would like to know more about a particular topic, don’t hesitate to contact us.

We look forward to working with you!

All the best,

Fred and Tracy Rewey, FactoringInvestor.com

Handling Customer Questions About Factoring Invoices

Many companies that start using factoring often have questions regarding their customers.

How will they be treated? What if they pay me directly? What do I tell them? Here are some common questions and helpful answers. Read more

Bank Factoring or a Factoring Company?

A common question among companies is whether they should pursue bank factoring or deal with a company that specializes in factoring when deciding to sell account receivables. Read more

Factoring FAQs

Ok, you are considering factoring and you are busy. You are not looking to read volumes of factoring manuals or sit through a weekend seminar. You just want the 60 second big picture overview.

Well, this article is for you! Read more

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