With traditional financial institutions continuing their stranglehold on lending to businesses, the factoring industry has experienced a renewed interest from companies seeking additional capital to fuel their growth and maintain even cash flow.

Believe it or not many businesses are doing quite well in the current economic climate despite all of the negative news we read on a daily basis. Companies like Apple and Google continue to have record profits and their stock prices continue to climb.

We’ve also seen an influx of initial public offerings from internet startups such as LinkedIn, Pandora, Groupon and Zillow. With any new IPO, only time will tell how well these companies will perform in the months and years to come. Coming from a person that took a company public a few years ago, get ready for 10-Qs, 10-Ks, earnings calls and every other disclosure required by the Securities and Exchange Commission.

Economic indicators are showing positive signs as well. According to the United States Department of Commerce, the U.S. Gross Domestic Product (GDP) increased at an annual rate of 1.8 percent in the third quarter of 2011. Earnings statistics in Q3 2011 were quite impressive. Based on 443 companies of the S&P 500 index, 76 percent of stocks reported higher earnings per share compared to Q3 2010. Also, 69 percent of S&P 500 topped earnings estimates.

As much as we would like to revel in all of this good economic news, it still needs to be tempered with a dose of reality. The housing market continues to struggle to gain any traction. It is estimated the home values lost over 700 million in 2011. The national unemployment rate is around 8.6 percent with several states such as California and Nevada still in double digit figures.

So what does all of this news mean for the average factoring company?

We take the position that factoring is a valuable tool for businesses in both good times and bad. Whether companies are expanding or maintaining their current structure, accelerated cash flow through factoring is always a viable solution. We advise our clients that if their company’s profit margins allow them to absorb the cost and increase sales, the margins will increase and be a win for both the factor and the client.

Don D’Ambrosio is the president of Oxygen Funding, Inc., an invoice factoring company located in Lake Forest, California.

For more information, he can be reached at don.dambrosio@oxygenfunding.com or you can visit his company’s website at www.oxygenfunding.com.

The Accounts Receivable Factoring Alternative

Fortunately, there is an excellent alternative underutilized financing option that can keep a company’s cash flow going – private duty care accounts receivable factoring. As opposed to a more tradition form of financing, such as a small business loan, private duty care accounts receivable financing is not a loan at all. In this type of funding arrangement, a factoring firm purchases the rights to the private duty agency’s invoices, advances cash immediately on those invoices and then collects on them.

The best part about accounts receivable financing is that credit decisions are based on the creditworthiness of the private duty agency’s customers (i.e. Medicaid, VA or other governmental agency,) rather than the agency itself or the business owner’s personal credit. This allows the business owner to leverage the higher quality of their customers’ credit in securing funds. (NOTE: Private duty care factoring companies cannot purchase invoices that are payable directly by individuals because evaluating the credit of an individual is far more difficult than leveraging the government’s creditworthiness).

Keep in mind that many private duty care factoring companies can also work with start-up companies. In addition, small and large companies that are going through a rapid growth phase can also factor their private duty care receivables. What’s more, many factoring firms are able fund receivables without requiring the private duty agency owner to sign a personal guarantee, which lets the owner protect his/her personal assets. What’s more, private duty care factoring arrangements tend to provide generous lines of credit because factors are able to set credit limits and increase their funding as their clients’ businesses grow.

So How Does Private Duty Care Factoring Work?

Let’s say that the owner of a private duty care agency sent employees into an elderly person’s home to assist that person throughout his/her daily activities. The agency owner then bills Medicaid for the services provided. Because it takes time between when the agency owner sends the invoice and when Medicaid actually pays for the home care services, the agency owner can sell that invoice to a private duty care factoring firm and receive roughly 80 percent of what was invoiced immediately. In turn, Medicaid payments are sent to the factor. Once the factor is paid, the firm will deduct its fees and return the balance back to the agency owner.

Factoring firms come in all different shapes and sizes, and they are spread out all over the country, and each offers their own twist to the invoice funding model. Therefore, it’s important to take the time to research factoring companies and select the best one to meet your private duty home care agency’s financing needs.

In a time when more banks and credit card companies are saying “no,” private duty home care agency owners should look into accounts receivable factoring as a viable alternative financing option.

Nikki Flores is a Consultant Liaison for PRN Funding, LLC, which is an extraordinarily focused niche player in healthcare factoring.

PRN Funding exclusively factors the accounts receivable of companies that sell goods or provide services to healthcare providers.

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™.

There seems to be a lot of confusion out there on whether your business should be using Facebook or Google+1 as a way to bolster up some marketing efforts.

Although both Facebook and Google+1 should have a place in your efforts (you don’t have to pick just one), most likely, one outshines the other as a good fit.

Here are a couple things to pay attention to when marketing your factoring company online.

If you are looking for interaction, you want Facebook.

But this assumes TRUE interaction. In other words, just because you have 3000 Facebook fans doesn’t mean they are reading anything you are putting up.

Are they leaving comments?

Are they sharing your posts?

If they are leaving comments, hitting the “like” button, and interacting, Facebook may be well suited for you. You just need to find a way to convert them to clients. If there is not a lot of interaction, you may just be wasting your time.

Fans work well when the “page” is a product or celebrity – not so much a company. A “company” is just too broad.

For example, how many raving fans would there be if I had a fan page on “Farms?” I am sure I would have some. Now, how many fans would I have if my page were the subject of “bacon.” – lots I imagine (who doesn’t like bacon) – and it is way more targeted.

The other downside on Facebook is that your efforts are limited to your ability to keep the content coming – and it won’t, for the most part, help you in the search rankings.

So, if you have interaction, go with Facebook. Otherwise think of Google+1.

Are you looking for “hands off” marketing?

Google+1 has two big advantages over Facebook when it comes to increasing your Internet exposure (and hopefully factoring business).

One, it does not require an ongoing amount of content from you. If people click the “+1” button their additional “circles” will be in on the action. It doesn’t require more content from you or more people “sharing” like Facebook.

Secondly, that little plus button can help you in the search rankings. Although Google does not formally release all the ins and outs behind their programming, one thing is clear: the more people “+1” your site, the higher up you may get in the search rankings.

As popular as Facebook is, it has yet to make a big “business” impact. Many Fan Pages are dead on arrival and do nothing for actual business.

Google +1 seems more in the thick of it when it comes to business. If someone is searching for your company the +1 can give you some extra credibility (Facebook can’t really help you there).

(Note: FACEBOOK is a registered trademark of Facebook, Inc. and GOOGLE is a registered trademark of Google Inc. This article was written based on research and professional experience.  This author, company, and website are not endorsed by or affiliated with either FACEBOOK, Inc. or GOOGLE Inc).

So, who is right for your factoring business?

As we mentioned in the beginning, we really thing you need to keep both on your radar…but for now, we give the edge to Google +1 if you are talking about getting more business.

Facebook is personal. But until users can separate business from personal on Facebook (as in two separate accounts) the business side just seems to be an after thought.

The guide contains information on industry related topics including, benefits of factoring, factoring vs. bank financing, sample transactions, targeted industries, qualifying prospects, overcoming objections and more.

The response was absolutely overwhelming!

Within a day of entering the post, we received requests from brokers in the United States, Canada, Mexico, Great Britain, Slovenia, New Zealand, China, Saudi Arabia, Africa, and China. I was floored that so many people from around the globe knew what factoring was and wanted to learn how to participate in the industry.

For those of you that missed our guide and are interested in learning more about brokering or just the factoring industry in general, here are a few key points that we feel you might find useful.

Factoring Defined

Factoring refers to an arrangement whereby a factor purchases an account(s) receivable from a business at a discount to the face value of that receivable. The factor earns a fee based on the number of days that the receivable remains unpaid, i.e., the longer the receivable remains unpaid, the larger the fee incurred.

Effectively, the business is no longer dependent on the conversion of accounts receivable to cash from the actual payment from their customers, which takes place on typical 30 to 90 day terms. Businesses benefit from the acceleration of cash flow.

Today, the most common form of factoring fits conveniently in your wallet – the credit card. Each time a merchant accepts a credit card, the merchant (seller of the goods) is giving up a portion of the total sale to the card issuer (typically a bank) who in turn, eventually collects from the consumer.

Benefits of Factoring Invoices

Any company, whether starting out, experiencing a growth phase, or mature in years needs good cash flow. When a business sells a product or service to a customer, that business provides an invoice stating the products or services sold and the amount the customer has agreed to pay. It is an IOU from the customer to the business. Sometimes these invoices are paid immediately but quite often they are paid anywhere from 7 to 120 days.

There are a number of benefits derived from the use of factoring:

• Immediate Access to Cash

• Take Advantage of Early Payment Discounts

• Eliminate Overhead and Invoice Processing Expenses

• Build Your Credit Rating

• No Liability on your Balance Sheet

Advantages of Invoice Factoring vs. Bank Financing

Factoring is not a “loan” – it is the sale of an asset.

A loan places a debt on a balance sheet, and it costs interest. By contrast, factoring puts money in the bank without creating any obligation to pay it back. Thus having more cash on hand and fewer receivables strengthens one’s balance sheet.

Loans are largely dependent on the borrower’s financial soundness. With factoring, it is the soundness of the client’s customer that matters most – a real plus for new businesses without an established track record.

These are just a few key points that are covered in our “Guide to Wholesale Factoring. For those new to the factoring industry there are many associations, professionals and publications that provide educational guidance and useful information about the factoring industry.

While you’re at it, check out this publication for great insight from professionals giving you their perspectives and experiences on a wide range of factoring topics. This is a great time to get involved in the factoring industry with many resources available to new brokers.

Don D’Ambrosio is the president of Oxygen Funding, Inc., an invoice factoring company located in Lake Forest, California or online at www.oxygenfunding.com.

For a complimentary copy of his How To Guide for Factoring Brokers and to register as a broker please email don.dambrosio@oxygenfunding.com. 

Whether I’m conducting a cash flow workshop or networking with colleagues, this question seems to come up at least once per event.

With the recent downturn in the economy and banks constricting lending, invoice factoring has become a popular alternative for many businesses seeking capital to expand their operations.

Although factoring has been around for ages, its newfound popularity and low barrier to entry has created an influx of new factoring brokers and funding sources looking to make deals. Having worked in both the insurance and mortgage industries many salespeople contact me inquiring about factoring and where to find new referral business.

So, back to the original question,

“Where does a factoring broker or funding source go to find prospects for invoice factoring?”

From my perspective, there is no magic place or formula, otherwise everyone would have figured it out by now. Here are a few points to consider before you begin to prospect for new clients:

1. Personality

Every person is unique and what works for one may not work for another. Some brokers may prefer speaking in front of groups of people while others are more comfortable with networking groups. Several of our colleagues are extremely proficient with social media or have very popular websites that draw new prospects through ad clicks.

2. Experience

I have found that many successful brokers have experience in a particular industry, which utilizes factoring giving them an edge in finding prospects. For example, we have funded many prospects from brokers in the apparel and transportation industry that had previously worked in those industries.

3. Persistence

Plant seeds. The prospect or business referral you meet today may not connect with you at first but may bear fruit sometime in the future. I cannot tell you how many times we receive calls and emails from brokers, bankers and CPAs that were from events from months and years past.

The bottom line is that your success depends on you. Some factoring brokers may prefer to stay in their sweet spot when looking for new business while others may wish to venture into new areas of opportunity. No matter which course you choose be persistent, be patient and most importantly enjoy the ride.

Don D’Ambrosio is the president of Oxygen Funding, Inc., an invoice factoring company located in Lake Forest, California. For more information, he can be reached at don.dambrosio@oxygenfunding.com or you can visit his factoring company website at www.oxygenfunding.com.

You may also enjoy these additional articles by Don on the factoring business:

Factoring Invoices – Waking a Small Sleeping Giant

Is Factoring Always About the Account Debtor?

Starting Your Own Factoring Business?  It’s Your Call!

We are honored to get insights from Bert Goldberg, Executive Director and founder of the International Factoring Association, in this issue of the Factoring Company spotlight.

Dedicated to providing training, information, and valuable resources to members of the factoring industry, IFA is well-known for its annual conference and publication of The Commercial Factor magazine.

1. How did you personally get started in the factoring business?

I began my factoring career in 1982 as a computer programmer for Distinctive Solutions (DSC). DSC was developing a new Asset Based Lending System, a product similar to factoring.

About 10 years later, DSC decided to develop a Factoring software product. I was initially as a programmer, but I worked my way up the corporate ladder and was promoted to President in 1994.

2. What prompted you to start the International Factoring Association in 1999?

When I became President of Distinctive Solutions, I started conducting user group meetings to help educate our customers on both our software and Factoring. I brought in experts from the factoring industry to lead some of the sessions. The speaking sessions turned out to be so popular that factors that did not have our software wanted to attend our meetings.

So that we could market the meetings to non customers, I created the International Factoring Association. From those humble beginnings, the IFA has grown to be the largest association for commercial finance companies in the world.

3. Please share some of the unique benefits the IFA organization provides to members.

Some of the benefits that we offer are:

• Access to FactorSearch, a service designed to let businesses that are seeking factoring the ability to e-mail specifics regarding their business to IFA members
• Membership in the IFA’ Social Media Website
• Access to IFA web site Forums
• Access to the IFA Membership List
• Discounts from IFA Preferred Vendors
• Annual Factoring Conference discount
• Discount on IFA Conference Calls
• Discounts in the IFA Store
• Discount listings on the IFA Job Board
• Discounts on IFA Training Classes
• Ability to submit legal briefs to the Amicus Brief program
• Use of the IFA logo for advertising, web sites, etc.

4. Who is eligible for membership and can factoring brokers participate?

Membership is open to any companies that conduct factoring or asset based lending. Brokers may participate in any and all of the courses and meetings that the IFA offers.

5. What factoring training events are scheduled for the year?

Account Executive / Loan Officer Training
October 18 – 19 – Planet Hollywood – Las Vegas, NV

Small Factors Meeting
October 20 – 21 – Planet Hollywood – Las Vegas, NV

Sales & Marketing
October 27 – 28 – Planet Hollywood – Las Vegas, NV

Negotiations with Märianne Eby, Esq.
December 8 – 9 – Planet Hollywood – Las Vegas, NV

Presidents & Senior Executives Meeting
January 26 – 27 – JW Marriott Guanacaste – Costa Rica

6. Where will you hold the 2012 IFA convention and how many people usually attend?

We are expecting over 600 attendees at the 2012 convention to be held April 18 – 21st at the Hyatt Regency Resort & Spa in Huntington Beach, CA.

This is the largest gathering of people and companies involved with the factoring industry in the world.

7. What do you consider the best methods for finding factoring leads?

Network, Network, Network.

Meet with accountants and attorneys in your area. Attend business meetings such as chamber of commerce mixers. Also, be persistent with your message, timing is important.

8. What advice would you give to new factoring professionals just starting out in the industry?

Do what you know.

If you’re background is in manufacturing, contact companies in that industry. You will know the buzzwords and be able to communicate with them more effectively than you could in an industry that you don’t understand. Also, spend the time to learn about factoring. Attend an IFA training course or meeting. The knowledge you gain will enable you to talk intelligently with both the factoring community and businesses.

9. What is the most common business mistake you see factoring companies make?

Factors should always follow their procedures and then not get too greedy. Factors go out of business because their insufficient due diligence and they were over concentrated with a single client / debtor.

10. Are there any changes or concerns currently facing the factoring industry?

The biggest concern to the factoring industry is the threat of being legislated out of existence. Fraud may put one factor out of business; legislation could put all factors out of business. I created the American Factoring Association (AFA) for the sole purpose of educating policy makers in Washington DC on the benefits of the factoring industry. Information about the AFA is at www.americanfactoring.org.

11. Where can people contact you to obtain more information?

International Factoring Association Website: www.factoring.org
Email: bert[@]factoring.org
Phone: 805-773-0011 x 12

12. Is there anything else you would like to share with our readers?

Factoring is a wonderful industry, but it does have its own set of challenges. If you become involved with this industry, learn all you can about it. If you plan to broker, learn what factors do and how they run their business.

The more you learn, the better broker you will become. The IFA offers a Sales & Marketing course specifically for the factoring industry. If you are serious about this industry, take the time to educate yourself by attending our training courses and our annual factoring conference.

Every business owner wants to succeed and have their company flourish which is why we took the leap of faith in the first place. Sometimes however, our actions or lack thereof can answer that question in ways that may surprise even the savviest entrepreneur.

Anyone familiar with the asset based lending industry knows there are numerous risks associated with invoice factoring. How many times have we heard from our salespeople,

“This prospect is a no brainer and we should be able to fund him in less than a day.”

Those of us that fund accounts receivable know that what may look like the perfect prospect could be your worst nightmare.

As I have previously written in our June 13th  article, “Factoring: Is It Always About the Account Debtor?” we all know that there is no substitute for good underwriting policies and procedures that focus your due diligence on both the client and the account debtor. However, besides focusing strictly on underwriting guidelines, every now and then common sense can play a very large factor in determining if a certain deal is right for you. Below are a few common sense suggestions you may want to consider before you send out that next ACH or wire:

1) Does the factoring deal make sense?

I realize this may sound foolish, but I cannot tell you how many times there are conflicts between what the prospect says and the paperwork gathered with the application. If you cannot understand the deal flow, run it by a colleague or professional in that field who may have more experience and continue to ask questions.

2) How long has the prospect been in business?

Even though the debtor has excellent credit, if your client has no track record and produces faulty goods or delivers shabby services, chances are pretty good that you will wind up in a dispute and not get paid.

3) Why is the prospect looking for a new factoring company?

Whenever a prospect is leaving a factor and wanting to start a relationship with a new factor, be cautious. The prospect has every right to shop around because they may have received poor customer service or they feel they can get a more competitive rate from another factor. It may be worth your while to put a call into the current factoring company to see if they could provide some background on the client. Even though it may be an uncomfortable call, you will be surprised how many times factors cooperate with one another in buyout situations.

4) Is it best to just walk away?

This is probably the toughest one of all. You’ve worked so hard to bring in this lead, gather the paperwork and the returns look amazing. Unfortunately, the deal just doesn’t fit your company’s profile. As a very good friend and colleague of mine once told me when I first started my business, “Sometimes the best deal is no deal.”

Don D’Ambrosio is the president of Oxygen Funding, Inc., an invoice factoring company located in Lake Forest, California. For more information, he can be reached at don.dambrosio@oxygenfunding.com or you can visit his company’s website at www.oxygenfunding.com

Many pawnshops are reporting that over half their customers are now small business owners that are basically pawning to meet payroll.

Lured by the high price of gold and ease of credit, they are bringing in everything from engagement rings to high end watches for a quick cash infusion as revealed in a recent article from CNN Money entitled Pawning Rolexes to Make Payroll (Source: http://money.cnn.com/2011/08/02/smallbusiness/small_business_loans_pawn_shop/index.htm)

While selling the gold is one option, using a pawnshop allows the business owner to utilize the assets as security for a loan. If the loan isn’t repaid within the specified time frame, generally 30 to 60 days, the pawnbroker keeps the items.

The advantage is fast cash without credit checks or restrictive guidelines. The downside of course is the interest rate. It’s not uncommon to see monthly interest rates of 5%, as reported by one business owner using gold and jewelry for a $20,000 loan.

Factoring Invoices – A Viable Alternative to Pawning for Payroll

Rather than pawning for payroll, small business owners can turn to less expensive options like selling accounts receivable. In today’s competitive market factoring fees often average less than 5%.

Instead of making a loan, factoring companies purchase outstanding invoices at a discounted rate. They look to the strength of the customer or debtor on the invoice instead of the business selling the invoice, making it a viable option for businesses that aren’t considered “bank quality” to traditional lenders.

To learn more about the factoring industry check out these articles:

Comparing Factoring Companies

How Factoring Brokers Earn Fees

Factoring Broker Training – Don’t Make These Three Mistakes

Way back in the day, (maybe six or seven years ago), most marketing plans consisted of an advertising budget, maybe some PR, a newsletter and occasional updates to the company’s website. Depending on the size of the company, a marketing director could spend a small fortune on a basic “shotgun approach” where they place ads in local papers or trade magazines and hope that someone found it interesting enough to purchase their product or service. Just scan through the daily mail you receive at your home or office and you’ll find flyers and postcards from companies trying to earn your business. I’m not saying these approaches are not effective, but with advent of social media, many businesses with little or no budget can market their goods and services in a very effective manner.

Unless you live under a rock, almost everyone is familiar with social media and how it has changed the way we communicate with each other. Social networking sites such as Facebook have over 750 million subscribers with each user having an average of 130 friends. From a business perspective, entrepreneurs and developers from more than 190 countries build with Facebook Platform. Twitter, which just celebrated its five year anniversary in May, has about 175 million subscribers that send over 456 “tweets” per second! There are many other forms of social media other than social networks such as podcasts, blogs, RSS feeds to name a few.

What makes this social media movement so exciting for factoring companies and other small businesses is that any company looking to get noticed can do so with little or no money. Setting up an account with Facebook, Twitter or LinkedIn is free and a very good place to start. On LinkedIn, start by joining groups within your own industry to keep track of the latest news and events. Create a Facebook page for your business and get your friends and colleagues to “Like” your page. On Twitter, go to the “Who to follow” section and search for people and companies with similar interests.

Just as it is import to be part of social media for your business, it is even more important to participate by posting information with good content. What exactly does good content mean? Here are a few general guidelines that I like to use before I post information on our website:

1. Post useful information – this may sound like a no brainer, but you would be surprised how often I come across posts from friends and colleagues with no real point.

2. Entertain – try not to be boring. Liven up your post with some humor, or a personal experience on how you might have done something better.

3. Be an expert – know your facts about the topic so your followers look to you as a resource when they have questions.

What makes social media appealing to so many businesses is that there is no barrier to entry, little or no cost and you can use it as much as you want. Not a bad deal at all.

About the Author: Don D’Ambrosio is the president of Oxygen Funding, Inc., an invoice factoring company located in Lake Forest, California. For more information, he can be reached at don.dambrosio@oxygenfunding.com or you can visit his company’s website at www.oxygenfunding.com.

Factoring Broker Training Tips!

One of the first marketing skills to master as a factoring broker is creating and delivering your personal 30-second infomercial.

No, we’re not talking about late night television. Rather it is your practiced introduction that lets people know what you can do for them!

Commonly called the “elevator speech,” it is the mainstay of networking groups and a must for any one-to-one marketing. A great elevator speech should generate quick interest from people that need your service or know someone that does. It should be short, direct, and ready to deliver with a friendly handshake and business card.

Jeff Callender, Owner of Dash Point Financial and Author of the Small Factor Series, shares four elevator speeches he has used in his factoring business:

Factoring Speech #1

“My company provides financing for very small-business owners who are turned away by banks. Instead of providing loans, we purchase our clients’ invoices for immediate cash which enables them to meet payroll, pay bills, accept larger customers, and many other business necessities.”

Factoring Speech #2

“My business supplies something every company needs: money! Our clients have invoices that take 30 days to pay, and we purchase their invoices with cash advances within 24 hours of the invoices being created. We’ve helped hundreds of businesses get started, grow quickly, and operate profitably.”

Factoring Speech #3

“I finance very small companies by buying their receivables at a small discount, as soon as their invoices are created. This enables my clients to increase their cash flow quickly, without generating debt. Our clients are small-business owners who have been turned down for bank loans.”

Factoring Speech #4

“My name is Jeff Callender, my company is Dash Point Financial Services, and I get paid to wait! My clients are very small-business owners who wait 30 days to receive payment from their business or government customers. I buy the rights to their payments, give them an up-front advance, and then wait for their customers to pay me. This enables my clients to give 30 day terms yet still get paid tomorrow.

Source: Small Factor Series by Jeff Callender Available in the Factoring Bookstore

Now take these ideas and personalize them for your business and targeted clients. Just remember these important points:

• Make it benefits oriented

• No more than 2-4 sentences.

• Keep it 30 seconds or less.

• Practice saying it out loud, before a mirror, and in front of friends and family until it rolls off your tongue with ease.

Over time you’ll develop several versions of your personal factoring broker commercial depending on the type of business contacts you are meeting.

Have your own favorite elevator speech? Please share in the comments section below!

Looking for more great factoring broker training and tips?

Be sure to grab your copy of the Small Factor Series. These 6 powerful factoring eBooks are packed with unique ready-to-use ideas and strategies!