Learn how some companies find creative ways to improve cash flow
without alienating their customers or stringing out their suppliers.
A prospective client of
ours (a CEO) was having cash flow problems (due to growth in his
business). His CFO presented him with two options:
1. Pressure customers to pay more timely, which might cause them to
go running to a competitor.
2. Pay suppliers more slowly and increase payables outstanding by another 15 days. This option would negatively affect the Company’s excellent rating with Dun and Bradstreet.
The CEO contacted us to see if there was an alternative financing
method that we could suggest. He did not want suppliers to carry the
cash flow burden. They were already providing a great value-added
service and played an important strategic partnership role in the
production of inventory. They provided in-house inventory (raw
materials, etc.) without cost, until it was used. This increased the
company’s cash flow because the cost of goods sold was invested in
finished products only, not raw materials. Since the cost of
inventory was calculated on finished goods only, inventory turns
were exceptional.
In an effort to keep his suppliers current and still accommodate new
customer growth by extending credit, he opted for debt free
financing. He did not want a traditional line of credit that would
require audit fees, personal guarantees, a pledge of hard assets (as
collateral), appraisal fees, monitoring fees and other fees that are
usually involved with conventional credit lines.
So what did we offer him?
Accounts receivable financing - a
debt-free type of financing that many companies are turning to. It
allows them to convert accounts receivable into a working line of
credit (without the debt) and increase cash flow without pressuring
customers for collection.
Unlike larger banks that focus on large corporate customers,
accounts receivable finance companies have emerged to help smaller
companies that need
receivable factoring. Accounts receivable financing can be
established with as little as $10,000 a month in sales for smaller
companies, and with as much as $10 million in sales per month for
larger companies. Not all factoring companies accept every industry.
1st Commercial
Credit, a
nationwide
factoring company headquartered in El Paso, Texas. Provides accounts
receivable financing in the US, Canada, and the UK; offers
export trade finance to clients in every major world
market and can convert receivable finance transactions in 17
currencies.
View Recent Transactions
US and Canada Tel 1 800 450 9653
United Kingdom Tel 0 800 404 9669
Start Factoring Today!
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1st Commercial Credit (SM) is a trademark of 1st Commercial Credit, LLC.
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