SBA Lending: Small Businesses Still Waiting to be “Stimulated”

It all seemed so promising…

Last year, Senator John Kerry’s Small Business and Entrepreneurship Committee managed to not only save several small business loan programs that were effectively reduced or completely nixed under the President’s proposed 2009 budget, but they also managed to secure over $100 million in additional funding. This additional funding was supposed to cover “increased loan oversight and reduced fees, microloans, contracting assistance, Small Business Development Centers, Women’s Business Centers, veterans outreach programs, and technical assistance programs…”

Over the year that followed, the SBA has heavily promoted its flagship offerings to small businesses- namely the 7(a) and 504 lending programs. And recently, it caused a stir with its America’s Recovery Capital Program, or A.R.C. Under this program, previously profitable small businesses currently experiencing financial difficulty would be given the chance to catch up on their debt. The A.R.C. loans, which can go up to $35,000, carry no fees and no interest, and are to be used to pay down existing debt. What’s more, the borrowing company does not have to begin repaying the loan until a year after it receives the final installment.

It sounded great, and many small businesses owners across the nation no doubt breathed a sigh of relief expecting that help would come their way. But the help has been slow in coming. Even with all the money and high hopes, banks both big and small and other “preferred” SBA lenders have been reluctant to offer SBA- backed loans (or any loans for that matter) to small businesses (for example, read here and here).

Even though both the SBA and the media have reported that small business lending has increased in the last few months, it is too little, too late for many of the small businesses who need this funding the most.

All disappointment, frustration, (an even anger) aside, the reality is that most small businesses would do better to abandon hopes for a government life-preserver and instead consider alternative forms of financing, such as accounts receivables factoring and merchant cash advances or tapping into the resources of friends and family to stay afloat in these difficult times.




How Small Business Owners Can Reduce the Stress of Laying-Off Workers

In the face of a glooming recession, much of the business world has adopted a hang on mentality when it comes to their employees. Rather then having to go through the process of loosing and later replacing productive, experienced workers, many companies are doing whatever they can to keep their workforces intact. Currently, the most popular cost-cutting tactics include: establishing four-day workweeks, unpaid vacations, and flexible work schedules along with wage freezes and cuts in pensions and health care coverage.


But for many smaller businesses even these tactics are not enough to keep them from letting go of their workers, and that can put a tremendous amount of strain on the small business owner.

In a small business where connections to employees naturally tend to run deeper and are more personal, having to lay off workers can be a painful blow– both emotionally and psychologically. Moreover, having to loose employees can often signal the end of a small business (After all, wearing multiple hats can only happen when their are enough heads to wear them.)

If laying-off employees in your small business seems inevitable, then here are a few tips to help make the process less stressful- for you and your workers.

  • Be open with employees about the status of your business and their job security. It goes without saying that letting go of workers is not an easy situation, and you can expect that your employees may not take the news so well. But the openness will ultimately be appreciated because it gives everyone time to absorb the message and make other plans.

  • Create a game plan. By creating a strategy with clear cut goals and a process of reevaluation you will be left with a greater sense of control and well-being. Basically, you need to determine how your business will operate with a reduced workforce, including how you will spread out the responsibilities among the remaining workers, if your output change or be reduced, and how you plan on using the freed capital to cover expenses?

  • Improve cash flow to spread out or delay layoffs. In some cases, it may be a good idea to try to “comfortably” spread out your employee layoffs or even delay them outright. You could do this by altering your cash flow. If, for example, your business deals with receivables, you may be able access tied up capital by factoring your outstanding bills of sale or applying for a merchant cash advance.

  • Talk to other small business owners. Speaking to others who have experienced what you are going through or who are currently experiencing a similar situation can bring you fresh motivation, insight, and ideas. Either you can speak to any friends and family who own a small business, look up your local SCORE chapter, or join your local chamber of commerce to connect to other business owners. You could also join an online small business community, such as those moderated by the Bank of America,, or Cybershmooze.

Image credit: Notions Capital

New Launch: Invoice Factor Brokerage Site

A new brokerage for invoice factors launched January 1, 2008 which could possibly provide a boost within the invoice factoring industry: FactorLane.  The website is supposed to be similar in concept to The Lending Tree, which is a mortgage broker site.  Factors bid for company invoices, and companies rate the various factors.

Although this is a great idea, and will surely be very useful, I have some doubts.  I tend to think that with a few exceptions, it will help the factors themselves more than the companies seeking financing.  On the one hand you do have competition in the picture, which will almost certainly help to get the best deal; on the other hand, the potential clients still need to get all the same information together.  According to Factor Lane’s website:

“Customers that use FactorLane have the option of uploading the documentation you need into our secure intranet where you can complete the bidding process and begin the underwriting. That means no more waiting for customers to call, and no more waiting for documents to be mailed or faxed. Instead, you gain immediate access to the information you need to make your bid, and even close the deal!  
FactorLane’s online system also helps you target the right customer using various criteria, such as: factor amount, credit score, years in operation, location, industry, value of assets, etc. Because our process is easier and less time consuming, you can devote more time to securing new clients.”

Basically, it sounds great for the factors, but like a lot of work for a company in need of quick cash.  To top it off, if you: have bad credit, have just been around for a few months, live in the wrong state, etc – You probably won’t get the money you need.  And all the work you spent getting together paperwork and scanning it to the site is in vain.

As someone in the Credit Card Factoring field, I strongly recommend looking into this alternative financing method – before you invest your time, just to be rejected again.

We can get you $250,000 approved in 24 hours – credit score doesn’t matter.  Check out business cash advance.

Invoice Factoring vs Credit Card Factoring

I came across a blog for aromatherapy providers with a post about the type of factoring called ‘invoice discounting.’  The gentleman who wrote it is from the UK – but it sounds as though they do things very similarly over there.

Anyway, a few things caught my eye and I wanted to go over them:

“Invoice discounting …. can dramatically improve your cash flow by releasing money as soon as you have completed an order and raised an invoice rather than having to wait for your customer to pay. This makes them ideal for funding growth.”

If this is “ideal for funding growth” because money is released as soon as you have completed an order – then credit card factoring must be “superideal” – because you don’t have to wait for that order.  We advance cash to businesses based on their PAST credit card sales.

“The amount you can borrow grows in line with sales and it is often possible for you to repay bank facilities and release previously pledged security.”

This is also true with the type of credit card factoring / business cash advance factoring that we do at Fast Up Front; we do have limit on the amount you can borrow, though: $250,000.

Some points that Mr. Courtney did not bring up include: paperwork, time it takes to get approved, and the involvement of your clients and customers with your creditors.  These are all issues you may want to research before going the route of invoice factoring.  I know that in credit card factoring, we NEVER contact your clients, we provide approval within 24 hours, and there is minimal paperwork.  I believe that these are major issues which makes credit card factoring much more attractive to our customers.

To read the article referenced above: Post on Invoice Factoring 

Factoring – Financing Small Businesses Since the Romans

I found a great review about invoice factoring and invoice discounting by Henry Byers – It has a history (since the Romans), definition, list of industries which use factoring, etc.  Remember, credit card factoring / financing has all the benefits of invoice factoring, with less risks.

I particularly like how Byers boils down what invoice factoring is, he compares invoice factoring to a cash advance.  Credit card factoring, on the other hand, IS a cash advance.  It has all the benefits of invoice factoring, with less of the risk.  Here is what Byers’ wrote:

Invoice factoring is not a loan; rather, it’s an outright sale of an asset. Another way of looking at it is as a cash advance: you give up a certain portion of the money you expect to receive in the future in exchange for ready cash today.

Anyone who would be interested in invoice factoring should also check out credit card factoring – I am confident credit card factoring will win out every time.

Byers recommends looking into factoring if you are “…heavily vested in human services and need to be able to meet payroll” or if you are any of the following:

  • A young company with creditworthy customers, but not sufficient credit history for your own business to be considered creditworthy by banks
  • A company with the necessity of taking advantage of new, time-limited sales and profit opportunities, but inadequate cash flow currently to do so
  • Companies with income, credit, or tax problems
  • Companies that have filed for bankruptcy, but that stand to turn a profit
  • Companies that are growing too rapidly for ready capital to keep up with business needs
  • Companies poised to grow very soon but do not want to incur debt
  • Companies that are growing rapidly, but do not have good enough credit to take out bank loans.
  • Start-up companies with no capital base currently
  • Companies with seasonal sales patterns or uneven sales patterns

In any event Byers’ invoice factoring article  has some general info.

Factoring – A Mainstream Financing Option

Now the article I’m refering to is actually RE invoice factoring.  I recommend credit card factoring due to lack of fees, less hassle, etc…  I wrote a short post comparing Invoice Factoring vs Credit Card Factoring

My favorite bit:

Factoring is a long established and mainstream financing option for businesses. Invoice factoring is the time honored and increasingly utilized financial tool that speeds client cash flow and helps avoid the problems that slow-paying customers can create for fast-growing companies.

In an earlier post, I linked to an article that had a bit of the history of factoring (dating back to the Romans) – I think that because it is considered “alternative financing” that some people don’t realize just how mainstream factoring actually is these days.

As always, I recommend contacting us for more detailed information.

Invoice Factoring Fees – Avoiding Unwanted Factoring Fees.

Yesterday I read an article online about how great invoice factoring can be. The article warns business owners to confirm all the cost details associated with the factoring advance. It suggests verifying the following potential fees:

  • Application fee
  • Due diligence fees
  • Credit reporting fees
  • Background or lien search fees
  • Factoring company lock box fees
  • Minimum monthly volume fees
  • Charges to add a new receivables factoring client
  • Early termination fees from receivables factoring contract
  • Upfront advance fee and then an interest fee
  • Fee for same day advances
  • Monitoring fees
  • Automated clearing house (ACH) fees
  • Wiring fees

One of the biggest advantages to a business cash advance, compared with invoice factoring is the fact that there are no hidden or associated fees like the fees typically associated with invoice factoring. A business cash advance is a type of factoring (credit card factoring) but does not require the in depth accounting to determine advance amounts and is far more simple to fund – with automated repayment based credit card sales.

If your business accepts credit cards, a business cash advance (or credit card factoring advance) may be preferred for its simplicity and lack of associated fees.