PULSE / SCORE Business Corner
written by: Gray Poehler
Question
I’m a local contractor and have exhausted my bank line of credit due to customers that wait months after the last nail is driv- en to pay.I require a deposit for materials and periodic draws, but the final payment representing my profit is slow in coming. I may have to turn away business because my cash flow is insufficient to cover day to day expenses. What do you suggest?
Answer
It’s not unreasonable for customers to hold back a percentage of the job until they are satisfied that the work has been com- pleted. Your problem is inadequate cash flow. It will be helpful to construct a twelve month forward looking cash flow income and expenses statement. You can find an excel spreadsheet on
www.score.org, and then click on the “template gallery.” This will enable you to project income and ex- penses on a month-to-month basis.
Knowing what your company’s financial needs are and generating the cash nec- essary to pay your bills on a timely basis are two different things. If you’ve already tapped out your bank line of credit, there’s an alternative known as “Factoring” that may be worth considering.
Factoring, in its purest form, refers to a well practiced method of business finance in which short-term debts (money owed to
22 | Pulse Magazine SWFL
you) are purchased by a factoring com- pany at a discount to their face value. The balance is then immediately paid to you, thus eliminating your cash flow problem. Because the debt is owed by your custom- er, it is their creditworthiness, not yours that the factoring company considers in granting the loan.
In most cases, factors care little if a busi- ness owner has tarnished credit or if the business itself has little or no credit histo- ry. The factoring facility will generally be approved so long as the customers of the business are varied and have a good credit history. Single, large, slow paying custom- ers can also be accommodated with good credit.
Factoring can also be useful to businesses operating on a cash basis. It enables them to offer terms of payment ranging from 30 to 60 days. In many cases, when terms of payment are offered, customers tend to buy more products or services..
While certainly not a household word, fac- toring in the United State is an enormous industry with current volume of approxi- mately $125 billion annually. For many startups and “first stage” businesses with little access to traditional financing, factor- ing can provide the working capital need- ed for growth and business expansion.
To learn more, visit
www.factoring.org, the official website for the International Factoring Association. You can also locate a broker in your area who can match you to a factoring company that best under- stands your business.
About the Writer:
GRAY POEHLER is a volunteer counselor with the local Naples Chapter of SCORE. To learn more about management issues facing small businesses today and SCORE’s many workshops, please call (239) 430-0081 or visit their website.
Questions specifically for the writer may be addressed to
http://naples.score.org/contact.phping.
Interested individuals can schedule free one-on-one counseling with a SCORE volunteer online at:
http://naples.score.org/mentors.
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72