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www.us-
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April, 2011 ManagEMEnT New Ways to Access Working Capital By Patrick Hoss, Capital Partners, Carlsbad, CA I
n today’s tough lending climate, many small and medium-sized electronic manufacturers or hi-
tech businesses are facing financial challenges, and as a result the busi- ness owners or senior executives who are running day-to-day operations are looking for new ways to access creative working capital; their busi- ness is positioned for growth, but lacks sufficient funding. To survive this unpredictable
environment, small hi-tech business- es need a level of innovative financ- ing options, affordable rates and financial flexibility without adding debt to business. Quick access to working capital must be readily available before the small business owner or the emerging company can grow their business. Subsequently, most hi-tech
business owners and operators have realized that there are also some serious hard and soft costs associated with negative cash flow and under- capitalization which was the Number 1 reason for small business closings in 2010. Undercapitalization can have these results:
l l l
Reduced growth, innovation, R&D, production and marketing of prod- ucts and service.
l Penalties for late tax payments. l
l l
Lack of confidence and negative psychological factors. In summary, as one CEO of a
Loss of customer goodwill or employees.
mid-size circuit board manufacturer said it best: “It’s all about managing our money, work with small business lenders to access cash flow to survive this economic tsunami.” So, what is the solution? The
most common method of raising cash involves either selling assets, selling part of the business or taking out a loan. While each method has its ben- efits, each also forces the small busi- ness owner to make some kind of sacrifice. There are some direct small
business lenders who think “Outside of the Bank”; they have adopted
Bank overdraft or interest charges from vendors.
Lost sales, profit and possibility of business failure.
Loss or reduction of vendor credit terms.
innovative, modernized business lending practices, creating an excel- lent alternative financing source cou- pled with smart financial strategies called “Flexible Accounts Receivable Financing”. This new approach per- mits a business to convert its accounts receivable into immediate cash to fund operations, with interest rates as low as 1 percent percent. Strictly speaking, this solution
is not a loan; it simply provides an advance against invoices and its principal benefit is giving the busi- ness an increase in working capital without needing to borrow money, tying up business or personal assets, or surrendering equity. The solution offers total flexibility: no loans, no new payments. Just quick working capital — the cash that the business would have received anyway — right when it is most needed. Waiting 30 to 120+ days for
payment of invoices or to obtain tra- ditional bank financing can take too long. Utilizing this solution, the busi- ness is able to get the needed money rapidly, without the requirement of pledging personal collateral and avoiding any need to interrupt the business’ operation. It also allows the business to raise funds without giv- ing up anything more than a small percentage of your receivables which is typically 1 percent to 3 percent percent — less than a typical credit card finance charges. Many companies within the
electronics manufacturing and relat- ed hi-tech industries have recognized the benefits of invoice financing as the best alternative financing solu- tion to pay for ordinary day-to-day expenses, buy more equipment or inventory, issue credit terms to new credit-worthy customers, and spend more time building business and less time collecting money.
How it Works The lender can provide an
immediate advance of cash against the value of outstanding invoices. Then the lender can release addition- al funds against new invoices up to 90 percent percent of the value of that invoice within 24 hours. The remaining 10 percent is paid to the business, less a small service fee, once payment has been received from the customer. It’s fast, simple, and worry-free.
There are no financial statements, tax returns or minimum credit score requirements. There are no mini- mum volumes, hidden fees or teaser rates and no additional debt for the client business. The solution pro- vides rates as low as 1.0 percent and is available with easy application for fast funding. Unlike many traditional lending
options, Accounts Receivable Financing looks at the whole picture — the quality of the accounts receivable, the number of invoices to be funded, as
well as the company’s potential for sustained growth. Because funding is based on the number and amount of the invoice factoring, the client compa- ny is essentially in control of its own funds. These funds can be used to pur- chase new inventory, make improve- ments to existing equipment or buy new equipment, meet payroll, pay bills, to meet any business expenses.
Accelerated ROI Due to its latest improved tech-
nology, process flows, and lower cost of funds, some businesses choose to use this solution for 12 or 18 months and then, as business evens out, they may qualify for bank financing. Others prefer to stick with the flexi- bility and quick response that the solution can provide. Benefits include: l
renewal of loans or maturity dates. l
vide access to continuous cash flow without the need to deal with the
makes, the more cash it can draw. l
going ability to obtain cash. Quite simply, the more sales a business
Growing sales that create on-
tional efficiencies. l
with suppliers. l
new technology, R&D programs, decrease accounting costs and credit risk, and improve overall opera-
Provides wherewithal to invest in
Take advantage of discounts on bulk purchases and early payments
often unpredictable. l
a loan board to grant or deny busi- ness loan, for which the outcome is
Eliminate wasted time waiting for
able delays and negotiations, allowing the business owner time to do what they do best, run their business.
Eliminate periodic accounts receiv- Flexible Accounts Receivable
Financing has become a viable and very popular form of business financ- ing for small and medium-sized hi- tech businesses, simply because it does not add any debt to the business and provides immediate cash flow and working capital. With this solu- tion, a business can operate and grow without having to wait for customers to fulfill their financial obligations. Many businesses that utilize
this solution as a primary means of raising capital find that, aside from being simple, flexible, innovative, and easy to manage, it has a number of advantages over other methods of financing. Capital Partners has developed
a reputation over the past 18 years as a premier source for Flexible Account Receivable Financing Solu - tions and Smart Financial Strategies — serving a nationwide client base of hi-tech manufacturers, component wholesalers, electronic distributors, and technology services providers. Contact: Capital Partners, 2544
Campbell Place, Suite 200, Carlsbad, CA 92009 % 866-310-1955 Option 5 fax: 866-310-1954 E-mail:
Solutions@cpfactor.com Web:
www.cpfactor.com r
The ability to raise cash and pro-
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