The results are in and the numbers show what many of us were already seeing, factoring and asset based lending are on the increase. Amazingly, factoring has experienced continued growth for the past 33 years in every year except 2001.
Just take a quick look at these highlights from the 2008 Asset-Based Lending and Factoring Surveys recently released by the Commercial Finance Association in June 2009 to see where opportunity is knocking in the United States.
Factoring Highlights
- Factoring experienced an annual volume of $136 billion in 2008 compared to $20.2 billion volume in 1976, the first year reported for the survey results.
- While the growth was a nominal .5% compared to 2007, it still reflects stable volume during volatile economic times.
- The major regional market for factoring continues to be the Northeast (47%) followed by the West (24%) and the Southeast (20%). The Midwest and Southwest comprised just 5% and 4% respectively of market share.
- The textile/apparel industry prevails as the primary client base for large scale factoring companies while transportation and business services contributed to much of the small factor volume.
- Non-recourse factoring makes up 77% of transactions with the remainder consisting of full or partial recourse factoring.
- Notification factoring comprised 78% of the volume with non-notification contributing the other 22%.
Asset Based Lending (ABL) Highlights
- The Asset-based lending industry reached $590 billion in 2008, an 8.3% increase over the prior year.
- The regional market allocation for ABL was more consistent across the United States but was still led by the Northeast (27%). It was followed by the Southeast (25%), the Midwest (20%), the West (16%), and the Southwest (12%).
- Just 12 states represented almost 65% of ABL outstanding loans.
The Commercial Finance Association releases this informative survey each year. Adrej Suskavcevic, the trade association CEO, shared these comments, “Businesses in need of capital should look beyond traditional bank loans and realize there are lenders that are able to help business meet their capital needs.” To view the full press release and survey results you can visit the Commercial Finance Association.
In face of a tightening credit market the need for alternative financing is on the rise. This is just part of the reason factoring made Yahoo’s Top Ten Jobs List for 2009. Yes, that is opportunity you hear knocking!
Hello Tracy,
I remember listening to one of the ACFC CD’s where you were explaining how people could use their retirement or pension funds to invest with.
Well, I have a client who has a $40K pension fund that needs to utilize $10K for starting a International Design Staging business.
I know that MFS – Ralph & Flor factors small amounts, however it was you who taught me about the option of using a pension/retirement account.
Would this be something that your company would factor, or who would you suggest that I present this to?
Thank you so much,
Sincerely,
Marla
Marla De Freese
Affluent Funding Solutions
(727) 471-9007
marla@affluentfunds.com
Hello Marla! Thanks for the great question. If your client would like to use their retirement funds for the company start-up they would want to contact a self-directed retirement account administrator. We have used both Entrust and Equity Trust with good results. This would allow them to set-up a self-directed retirement account and learn the ropes of using retirement accounts for this type of investment. A factoring company would get involved after the company was set-up and had accounts receivable they wanted to factor for a cash advance. For additional information on small business factoring be sure to check out the Small Factor Series by Jeff Callender. Please feel free to contact me with additional questions. All the best, Tracy Z. Rewey
Marla, as you’ve described this, your client doesn’t have an invoice to a business or government agency, which is what a factor buys. However once his business is under way and he has invoices to sell a factor, that could be done.
If your client wants to invest this money in a factoring company and earn monthly interest payments from the factor, that can be done through one of the self-direct IRA companies Tracy mentions. Given today’s interest rates, most factors who accept such funds pay a far higher return than you can get for invested funds, though of course such funds invested in a factoring company are not insured by the FDIC as bank accounts are.
People with IRA funds cannot easily use their IRA funds to fund their own factoring companies, though it can be done with some strong restrictions built into the IRA investment rules established by the government. In general however if someone wants to invest in a factoring company, it’s best to do so in a company in which the investor has no ownership at all. Hope this helps…Jeff
Question: What is the mim amount financed for asset lending. Secondly what is loan ratio of the appraised value.
Thank you!