Texas Freight Carrier Saved by Accounts Receivable Factoring
Imagine this: You are the Ops Manager at a Trucking company doing about $1.0 million dollars in sales per month, you have kept your receivables under 60days for the most part, you are making your financial obligations and you get a registered letter from your bank calling your Line of Credit.
This is a real event for a Texas based Freight Carrier recently. After a brief panic attack, the CEO called his bank and the account manager told him that due to revisions of the banks risk structures are laid out, he has no choice but to pull the financing. He has 2 weeks from the receipt of the letter to repay the loan of $1.0 million. Upon dealing with a Professional Commercial Finance Broker, not only was the loan paid off at the bank on time, but the trucking company had a new Line of Credit of $1.75 million now.
This has happened many times to many different companies in the United States and Canada over the last couple of years. As much as President Obama is working to make funding available to companies for their operations, banks still are contracting their risk threshold and are less willing to expose themselves to risk every day.
Most companies do not need more debt; they usually have enough of that. What they do need is cash flow. If this sounds similar to your situation, please, speak to a Commercial Finance Broker. They are trained professionals whose career is based on keeping on top of the new finance options coming out and knowing which lender does what deals the best.
It really does not matter if you are in Canada or United States; it is the same story all over. Commercial Lenders do vary in regards to the products they carry and the strengths they posses in the various industries. Just because a lender is good in Commercial Equipment Loans does not mean they can handle you Line of Credit in your trucking company. Commercial Finance Brokers have the experience to know who does what the best.
Commercial Finance Brokers specialty is Commercial Lending products. Not Residential Mortgages or Personal InvestmentsCommercial Lending. It is their job to keep up with the new trends and guidelines so they can put your deal with the best funder. The Financial Products most Brokers deal in are Accounts Receivable Factoring, Purchase Order Finance, Export Finance, Commercial Equipment Loans or Commercial Mortgage.
US Government Now in Accounts Receivable Factoring Business
In another bold move to assist the economy the US Government released its intention to start Factoring US Auto suppliers invoices to the automotive sector.
NY Times (03/19/2009):
DETROIT ” The Obama administration moved on Thursday to stabilize the American auto industry by creating a $5 billion fund to support troubled parts suppliers.
The program will provide supply companies with much-needed access to liquidity to assist them in meeting payrolls and covering their expenses, while giving the domestic auto companies reliable access to the parts they need, the Treasury announcement said.
It is too early to say exactly what the details of this latest new is but President Obama has shown time and again that he is going to push through this recession and nothing is going to hold him back.
A few days ago I stated that Accounts Receivable Factoring is going to be a major part of the new economy and this turns out to be right on track, but a little sooner than I expected.
For those of you that are not familiar with Accounts Receivable Factoring it is essentially a Line of Credit for Businesses that use the Invoices that are outstanding as security for the advances received by the company which generated the Invoices.
In an average Accounts Receivable Factoring facility, the company that is financing their receivables will be eligible to receive between 80% and 90% of the invoice face value. One the end customer pays they will receive the balance of the funds less the finance fee,
Most Factoring facilities will charge from 2% to 4% per month depending on the industry, credit rating of the customer and the advance rate,
What is often used with Accounts Receivable Factoring is Purchase Order Finance. If you do get Purchase Order Finance you will need an Accounts Receivable Factoring line to go along with it in 99% of the cases I have seen.
This option works best for distributors but Accounts Receivable Factoring can work for companies in nearly any sector. If your company needs financing like this, the best option is to speak to a Professional Commercial Finance Broker because they will be up on all the trends and latest programs available through the various lender channels.
Best of all, most Professional Commercial Finance Brokers will be paid by the lender so you are not normally required to pay them for their services so it really is in your best interest to consult with them.
Factoring Saves Texas Based Trucking Company
What do you think of a bank that would pull the plug on the financing of a successful trucking company that employs more that 100 drivers? Now what I am referring to is a profitable company that is struggling to make ends meet, but is doing just that.
This is exactly what happened to a Texas based freight carrier recently. The explanation the bank gave the owners was that the bank had reviewed its guidelines recently and the trucking company no longer fit the guidelines so in compliance with the covenants in the Commercial Line of Credit they secured 3 years prior with the bank, they were now within their rights to call the loan. The owners of the company contacted an Internet Based Commercial Finance Brokerage who put together an Accounts Receivable Factoring facility for them which not only was able to pay off the bank as required but also was able to increase the amount of financing available to the company for their operations.
This is a popular scenario today with the tightening restrictions on lending today. Even with the announcement of Presidents Obamas grand plans, banks are still pulling the plug on companies that are making it, forcing some to close down and put people out of work.
If your company has a need of liquidity, and not debt, do your self a favor and speak with a Professional Commercial Finance Broker as they will have the answers your bank will not, and odds are they will not even tell you about the other options that are out there.
Be aware though, not all lenders are created equal, even if they do the same thing, not all Commercial Equipment Lenders are best for all equipment and business types. They have their strengths. Just like your company. Your company is the best at certain things, but in others, that is not your focus so you can do the other stuff, but you are far better at your main product or service.
Commercial Finance Brokers are up to date with the latest changes and options available. Many Commercial Finance Brokers can handle Financing options ranging from Accounts Receivable Factoring, Purchase Order Finance, Export Finance, Commercial Equipment Loans or Commercial Mortgage.
Increased Sales Can Be A Double Edged Sword
Ever worked on getting that big customer for months, chasing after then, long drives or flights to see them so you can win them over with your service and determination? Then have the worst thing that can happen in a situation like that you get the order and now you have to figure out how you can possibly fill it because the order larger than your total Operating Line of Credit.
This has happened to other companies and it can happen to you to. After you get over the initial rush of the big order and you think of all the cash that will be coming in, then you think How can I possibly pull this order off? You will need to hire staff, buy equipment, pay for materials and you do not have the money for that. That is exactly what happened to a company in New York State USA. The owner of the company just figured he would go to the bank and they would lend him the money he needed, but the bank declined him.
In this scenario the customer of my client required 30 day terms and the supplier of the goods required payment before they released the good, so you can see the problem. We have a gap of about 40 days including the shipping time. With no financing in place the company was struggling with the possibility of having to refuse the order after all that hard work of trying to get it in the first place.
The owner of the company did speak with some Accounts Receivable Factoring Companies but they were not able to help out due to the time lag between the timing of the advance requirement and the delivery of the goods to the customer. They could not Factor the Accounts Receivable until the product was delivered, and they could not deliver the product until they received an advance to pay for the product.
The owner of the Company was then referred to a Commercial Finance Brokerage who immediately assembled a Purchase Order Finance and Accounts Receivable Factoring facility. Now the order was able to be processed and now the door is open for future orders from and large buyers.
Accounts Receivable Factoring For Business Loans In Canada
Recently an Importer in Ontario Canada contacted my office after having exhausted its efforts in seeking a Business Loan from its local banks in Toronto, Ontario, Canada.
China is the origin of the goods they import. The $50,000 Credit Line with their bank barely covered a quarter of their outstanding Accounts Receivable.
As you may know, the typical terms when dealing with China are 30% payment with the order and the 70% balance before they are shipped.
Their days to collect on their invoices was quite typical, it is 45 days. With average Accounts Receivables outstanding is $200,000 you can see why the $50,000 Credit Line was pretty useless to them.
The company had to carry inventory since their customers expected orders to be shipped within 1 week of receipt and the fact the main supplier was in China meant they had to have sufficient stock to carry them for a months sales at any given time.
Against the owners wishes, they had to use personal loans to cover the cash shortage so that they could operate and carry the required inventory.
The solution to this problem was to set up a new Operating Line of Credit for the company using the Invoices for delivered goods as security in an Accounts Receivable Factoring facility.
The Importer now can take advances up to 85% of their outstanding Accounts Receivable to carry the needed inventory, pay off the bank that was not willing to help them and even pay off the personal loans they had taken. Imagine the relief.
As if this were not enough, due to the fact their sales are growing, the Operation Funds availability grows as their sales do. The more Accounts Receivable, the higher their available funds are to replenish stock.
Are You Ready To Turn Your Business Over To Angel Investors?
Today getting a small business loan is a daunting task at best ” regardless if you are in the United States or Canada. Many businesses look to Angel Investors for the much needed cash injections the banks had turned them away for. But is this the Best Alternative?
Angel Investors look at deals differently than banks, or most other lenders for that matter. Their focus is to net between 5 and 10 times their initial investment in a period not to exceed 5 years. They do this by carefully plotting their exit strategy to recover their funds within the specific time period they define which can take the form of public offerings of stock, takeover or liquidating the assets of the company. What ever it takes.
Angel Investors have now increased their threshold for their ROI to a minimum of 10 times to as much as 50 times their investment because of the failure rate and the length of time that the investor will be tied into the company. When you consider the bigger picture, the effective return on investment for the Professional Angel Investor is usually around 20% to 30%.
Due to this excessive ROI requirement, Angel Funding is very expensive, but the lesser expensive funds at the bank are not available. Banks typically do not like new start-ups or companies with out strong financials.
So you are declined at the bank and you can not afford Angel Investors now what?
It is irrelevant if you are in Canada or the United States, the story is the same but there are options. This is a real life deal that I just completed recently. It is a Distribution company in Alberta Canada that had a unique product that it wanted to market throughout North America. The owner went to the usual banking institutions and was denied the loan. He then spoke to a few Angel Investors who gave him proposals which he did ponder over but shortly after continued to search for options. When I spoke with him I suggested a combination Accounts Receivable Factoring and Purchase Order Finance facility.
The company had just shipped out one order which took nearly 70% of his inventory and he had another order going out the following week which would wipe out the rest. They he was planning to wait until he received payment from his customer before he could order more product from his suppliers. Next trouble was the he had other orders waiting to be filled.
In a matter of 7 days after the application was returned to me he was ready to fund and now has access to the much needed cash he needs to grow his business.
So if you have a situation going on at your company that you can not fill orders or pay bills because of the cash flow constraint, and the banks and other lenders have been no help to you, be sure to check into Accounts Receivable Factoring and Purchase Order Finance.
FTC To Discuss Collection Litigation And Arbitration
The Federal Trade Commission shall host a round-table to discuss debt collection and arbitration practices Aug. 5 and 6 at the Thorne Auditorium, Northwestern School of Law, in Chicago.
The round-table follows up on the FTCs February 2009 report Collecting Consumer Debts: The Challenges of Change ” A Workshop Report, which recommended that the debt collection regulatory system in the U.S. should be reconstructed and brought up to date. The report also broadcasted a series of regional round-tables to further discuss debt collection litigation and arbitration, next weeks meeting being the first.
The round-table will be made up of representatives from the collection industry, government officials, judicial system representatives, consumer advocates, academicians and other stakeholders.
On the first day, the round-table will cover litigation topics including service of process, consumer default rates, time-barred debts, evidentiary specifications, and troubles in collection actions and post-judgment affairs.The second day will cover arbitration topics including the role of consumer choice, consumer arbitration codes and propriety, perceptions of bias, transparency of results and post-decision issues.
Too many consumer attorneys clash collections not on the evidence of whether the consumer legally owes the debt, but on minuscular technical issues, according to Markoff. The FTC doesn’t regulate attorneys. Among the issues ACA International hopes to bring up at the Chicago round-table is the education of consumers regarding statute of limitations for collections, process servers and proper notice for consumers on arbitration issues. NAF agreed to immediately stop accepting cases involving consumer credit.
New Yorks attorney general also announced the filing of a lawsuit against 37 law firms that could potentially overturn 100,000 consumer credit judgments against consumers in the state. The suit also targets two collection lawsuit process servers. In addition to the FTC, NARCA and ACA, others on the round-table will include representatives from Public Justice, the Consumers Union, the Michigan Poverty Law Program, the Michigan Creditors Bar Association, the University of Kansas School of Law, Public Citizen, the Center for Responsible Lending, the Illinois Credit Bar Association, the American Arbitration Association, the AARP Foundation, the National Arbitration Forum and DBA International.
Angel Investors Are Not Always The Best Alternative.
No one has to tell a business owner that getting access to much needed cash flow is a difficult task today. It matter not if you are in Canada or the United States, if you have gone to the bank to inquire about financing, there is a good chance you were turned away. For this reason many companies turned to Angel Investors for that all important cash injection.
Be aware that Angel Investors typically look for a ROI of 5 ” 10 times their investment in under 5 years. This is accomplished by looking at many aspects including the salvage value of your company. They will create an exit strategy to recover the funds from your company in the predetermined time frame regardless of consequences to your company.
Since the market over the last few years has been such a challenge, Angel Investors have now increased their requirements fro 10 to 50 times their initial investment because the time frame they need to have funds tied up for has increased to up to 10 years.
Due to this excessive ROI requirement, Angel Funding is very expensive, but the lesser expensive funds at the bank are not available. Banks typically do not like new start-ups or companies with out strong financials.
At this point, you have been turned down by the banks and credit unions plus the Angel Investor proposal does not look very attractive, so what do you do now?
Regardless if your company is in the United States or Canada, there are options. The following is a real life situation that I was involved in to avert an Angel Investor situation. There is a company in Alberta Canada that possesses a unique product that he was planning to market across North America. He went to the usual places to inquire about financing for his business. After the banks turned him away, he spoke to a few Angel Investors. After considering their proposals he continued his search for financing when I presented him with an option called Accounts Receivable Factoring and Purchase Order Finance.
When I had initially spoken to the owner of the company, he had shipped out one large order and was about to ship out his second large order which was going to wipe out his entire inventory and he would have to wait to receive payment from the customers before he could replenish his stock but he had several additional orders to be filled and he had no way to fill them without cash.
After I received the application from him it was about a week when he received his first advance on his new Line of Credit using Accounts Receivable Factoring and now he has the cash to make his business run more smoothly.
So if you have a situation going on at your company that you can not fill orders or pay bills because of the cash flow constraint, and the banks and other lenders have been no help to you, be sure to check into Accounts Receivable Factoring and Purchase Order Finance.
Lawsuits, Complaints Claim Debt Collectors ARE Violating FDCPA
There’s snowballing affirmation in the form of lawsuits and complaints that some debt collection companies are using abusive and illegal strategies in an effort to debtors to pay up. Attorney Steve Halbert handles 30-50 cases at one time, representing clients who say they’re being harassed and even bullied by debt collection companies.
Halbert says, at a time when many can’t afford to pay the hundreds or thousands of dollars they owe in one lump sum, collectors are becoming less and less willing to work out a payment plan.”Now the collectors are saying we can’t do that,” said Halbert. “We’re only going to have this account for a short time. We need a lot of money and we need it up front, and we need it fast.”
Indiana Deputy Attorney General David Paetzmann say his office assumes at least a dozen calls every week from people complaining about defamatory debt collectors. The number of calls has increased more than 20 percent from just four years ago.”We do keep track of the names of the collection agencies against whom we receive complaints, and there are some that we receive more complaints against than others,” said Paetzmann.
One of those companies is Premiere Credit of North America. It’s named in two of the six lawsuits obtained by Fox 59 News.A spokesperson for Premiere Credit says the company has “strict policies, training and monitoring against threats and harassments.”Paetzmann suggests consumers familiarize themselves with the Fair Debt Collection Practices Act and the legal limits it places on debt collectors.
“The collection agency is only supposed to contact people between eight o’clock in the morning and nine o’clock at night so people should be aware of those limitations,” said Paetzmann.
The act also prohibits debt collectors from treacherously claiming they can arrest you or take your property, exchanging information about your debt with anyone else, and trying to collect any fee in addition to the amount owed.
New Regulations Seek To Limit Debt Collections
Debt collectors could be dealing with stricter regulations on their ability to collect money if bills proposed by the governor and New York state Assembly ever get passed by the state Senate. Before the state Senate went into a terminal impasse, the state Assembly passed a series of laws aimed at cutting down on debt collector abuses that include threatening phone calls, harassment and intimidation. In addition, Gov. David Paterson has proposed similar measures to protect the public from abusive consumer debt collection practices.
The proposals would establish the Consumer Credit Fairness Act, which would reduce the current statute of limitations on personal debt from six to three years and would prohibit debt collectors from recovering debts that exceed the statute of limitations. It would also require debt collection firms to provide consumers with a written Debtors Bill of Rights that details the manner in which a debt collection company can recover debt and informs customers of frequent dishonest practices.
Debt collection organizations would also be required to get a license of operation from the state of New York and would require firms to hand in a summary of the methods used to confirm the certainty of debts it seeks to recover, a clear record-keeping policy and whether it intends to sell debts. Don L. Hochler, an East Meadow attorney, said the designed rules are a fair way to deal with abuses that have grown more repeated with the economic downturn.
According to the governors office, there were almost 3,900 complaints made to the state about debt collectors in the past four years. The consumer more often than not had no idea about any of the changes in debt holders and didnt know who it was that was trying to collect on the debt.
The proposals would necessitate the collectors to adjust with the requirements of the federal Fair Debt Collection Practices Act, which restricts calls to consumers to between 8 a.m. and 9 p.m. Kevin Schlosser, chairman of the litigation and dispute resolution law practice at Meyer, Suozzi, English & Klein in Garden City, said more people are paying attention to debt collection practices because of the economy.
Debt collectors capital job is to communicate with consumers and resolve consumer problems, Cherner said. Proposals that only restrict communication will only cause a rise in complaints.