Staying Afloat When Big Clients Delay Payment

by Crestmark 25. July 2012 10:49

As the economy has continued to adjust, companies are seeking ways to save money. One method they've chosen involves delaying payments to their (often smaller) suppliers for as long as they can. Sometimes it’s by asking for extended dating. Other times it’s by involuntarily stretching their payments. This delay of payment can create major problems for these smaller companies because they rely on payment to finance their upcoming work. If this situation describes your company, you need short term working capital to keep your business on track.

When this happens, the majority of your capital is essentially in limbo. You've already provided the goods or services to your client, but they're delaying payment – sometimes for months. This puts you in a tough position. Big banks aren't likely to want to get involved in loans as small as what you need, and term loans aren't the best solution for this type of situation anyway. What you need is a mechanism to smooth out the peaks and valleys of your cash needs. What you want is a line of credit, but one that's based on your outstanding unpaid invoices to your clients.

Invoice factoring is the solution for this exact situation. Invoice factoring allows your company to borrow against your clients' unpaid invoices. It provides immediate access to the money you're going to receive in the future. Because of the nature of this borrowing, it also means that you don't have to be worried about your credit. This short term working capital is secured against your client's credit rather than your own, which takes a lot of the burden off of you.

In this market, small business owners and suppliers are feeling the squeeze. Crestmark can help you get the funding you need by facilitating borrowing against your future receipts, essentially negating the payment gap and providing those funds long before your client pays. 

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Alternatives To Term Loans

by Crestmark 8. May 2012 04:57

There are a number of reasons why a company may not want to take a term loan. They may want to pledge personal collateral, find it difficult to obtain this more traditional form of financing, they may simply not want to accept the terms that are available, or they may simply prefer these non-traditional financing options as a way to meet their financing needs. Whatever your situation, if you're looking outside the term loan box, you should look at these potential solutions.

Accounts Receivable Financing

A/R financing is a flexible line of credit solution available to most businesses. This type of financing leverages the money you are due to receive from invoices you have sent to your customers. A/R financing helps bridge the gap between your cost of sales  and when you get paid for your goods or services.

Asset Based Lending

This line of credit is secured by an asset that your business currently holds. Asset based lending is a line of credit, meaning that you can use as much or as little of your potential credit as you select up to the value of the collateral pledged. You can change it monthly, weekly, or even daily depending on your needs.

Factoring

In this type of financing, a third party factor actually purchases your unpaid invoices. You receive a portion of the value upfront, with the rest of it being delivered, less an administrative fee, when your client makes good on the debt. Factoring may be traditional, where the factor fully purchases the invoice and assumes both the credit risk and responsibility for collection of the receivable. Or  on a recourse basis where the receivable is sold back to the seller after a certain period of time elapses. Unlike other types of financing there are less restrictive covenants inherent in factoring transactions.

 

Government Contract Financing

by Crestmark 11. April 2012 05:53

As a government contractor, you face a totally different set of restrictions and regulations from your private sector counterparts. If this is your first foray into the field of government contracting, you'll need to take time and understand the basics of what to expect. One of the most important things to understand is that finding a lender who understands the intricacies and complexities of the government and can effectively work within them can be difficult. Be sure that your lender has a solid understanding of the differences that exist between financing a government contractor and financing in the private sector.  

Assignment Of Claims Act

When a government contractor is financed, the government itself must be sent a notice of assignment. This provision was created by the Assignment of Claims Act, designed to protect the government's interest and always ensure clarity about who is receiving payment. The government notice of assignment is a mandatory and common step in government contractor financing.

Federal Acquisition Regulation

This is the comprehensive document specifying exactly how the government gets virtually everything it buys. Ensuring that you adhere to the requirements of this document will help your transaction proceed as smoothly as possible, especially if you plan to obtain some kind of financing.

Big Contracts Need Big Financing

Supplying the Federal government is noble and potentially a major boon to your business, but it can also mean a lot of strain on your cash flow. Government contract financing can help. It is possible to leverage a number of different financing opportunities; just work with a lender that has sufficient experience navigating the complexities of government financing and you're in a good position to succeed.

If you have questions about government contractor financing or would like to learn more about the options available, contact one of Crestmark's government specialists. 

Funding New Opportunities With Accounts Receivable Financing

by Crestmark 4. April 2012 06:19

Accounts receivable financing is a simple concept. You start by providing a product or service to your customer. Then you bill them for what you provided. The service has been provided, but they haven't paid you yet. An outstanding invoice like this is a perfect candidate for accounts receivable financing. Rather than having to wait for the client to eventually pay you, you may be able to obtain cash from the invoice more quickly by working with a lender like Crestmark.

Why It Works For New, Big Clients

There are many applications where accounts receivable can shine, but it can be particularly valuable when your business experiences a sudden surge of growth, such as a new client. When you provide the first delivery of goods or services, it is often difficult to come up with the funding to handle the second and third under your current business conditions. Using accounts receivable financing allows you to bridge the gap between the funds your business has currently and what you expect to need for future orders.

A Non-Conventional Funding Alternative

Accounts receivable financing is a good opportunity for new businesses because it often has different requirements for approval when compared with bank products such as a traditional term loan. In this case, the main concern is how creditworthy your client is, not your business. For this reason, a lot of new firms use this to help them expand early on as they receive their first major orders.

Crestmark offers accounts receivable financing and other financial tools that can help when traditional bank loans don't meet your needs. Contact one of our lending experts today to learn about how we might be able to assist you with your business capital requirements. 

How Crestmark Helps

by Michelle 25. August 2010 04:48

Today we are going to begin a series in our blog on How We Help.  Occaisionally, over the next weeks and months I will post articles and comments from our clients on how Crestmark was able to help them with their specific needs.  Today’s example is from a Staffing company on the east coast.

The company is a very well known and respected temp medical staffing company located on the East Coast.  They provide a variety of medical professionals including LPN’s, RN’s and physical therapists to hospitals and nursing homes. 

They began to see significant decrease in their business from about June 2008 through January 2009.  The leadership took very proactive steps to reduce their overhead and business expenses, a process which they continue to do.  Due to management taking an active role in managing to a new sales forecast they have begun to turn the corner and are projecting a breakeven 2009.  Leadership felt strongly that they could post positive net income during 2010. 


Problem:
Their previous lender became nervous about the relationship after they experienced 50% drop in sales from the previous year.  The losses caused their lender to become very restrictive with their credit facility and availability as well as imposing some very strict financial covenants.  This put the company in a very precarious position; they had a drastic drop in business, they were experiencing longer than usual turn on their receivables, and their lender was restricting their credit line.


Solution:
They first came to Crestmark in June, 2009.  The client said he knew from day one talking with Crestmark, that we were different than the other companies he had spoken with.

We were able to quickly review and provide them with feedback on what we would be able to do for them.  Our solution was an AR Loan with an available credit limit that would give them more than adequate cash flow and some very welcome breathing room.  In addition we offered a 90% advance rate which was more aggressive than the previous lender, the new relationship was completed by the previous lender’s deadline

All of this has allowed them to continue to make necessary improvements to processes and expenses while being confident that they have a lender who will be there with them step by step to bring them through difficult times and ultimately to profitability once again.


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