1. Genie
The core mission of the Finance
Institute (“TFI”) is lead generation to
the Alternative Finance Industry.
TFI delivers on this mission by
quickly educating, guiding and
supporting an elite consultant and
professional referral source network
across North America.
Whether you’re a working Business
Professional, B to B Sales
Professional, Business-minded
Entrepreneur, Real Estate -
Financial Pro, Corporate Expatriate
or Job Seeker..
The Finance Institute has the
support system for you!
TM
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The History of Factoring
Recorded history reveals that the concept of turning future payments into cash ( or cash
equivalents) dates back thousands of years. Much like today, the need for liquidity, or “cash”
to pay everyday expenses, has always been a great need. Think of the days when merchants
would travel the seas in search of various treasures. Ships would be filled with those in need of
food and necessities to survive. Financiers offered payments against future rewards as a means
to earn a return on their investment. This financing was an integral part of the success in
establishing world trade. Thus, the concept of factoring was born dating back some four
thousand years.
Prior to the 1980’s, factoring was used primarily in the garment, textile, and furniture
industries – typically only available to larger companies. Entrepreneurial funding companies,
coupled with the creation of a referral source and consultant (broker) network, changed all
this in the late 1990’s. Today more companies than ever are turning to factoring to create
immediate debt free working capital. Historically, factoring was used to finance struggling
businesses but, the recent credit crisis and bank meltdown (2008) has changed all that - SMB
business bank loan application decline rates are reaching epidemic proportions. Today,
businesses are holding onto their cash for as long as they can. This means that suppliers to
these businesses are becoming “stretched out” – with regard to payments. Factoring has
quickly become one of the alternative financing tools of choice, in many cases the only choice
and this trend is poised to continue for the unforeseen future.
3. Genie Cloud
AppThe Facts
A recent study conducted by the Credit Research Foundation found nearly 80% of North
American companies report that the economy has had a direct negative effect on their business
with a majority citing
1. Lack of Available Working Capital
2. Tightening of Cash Flow
3. Slow Down in Customer Payments
As the three major issues that are having disastrous affects on the viability of their businesses.
Companies that were accustomed to receiving payment on their invoices in 30 days are faced
with the reality that the payment cycle is now surpassing 60 days, 90 days or longer. The
national average for invoices to be paid across North America is a Staggering 73 days!
The trickle down effect of this is tremendous. Without the needed cash flow, companies are
forced to make tough decisions. Employees are being let go (no money for payroll), supplier
payments are delayed (resulting in delayed or cancelled shipments for future orders), delaying
payment of operating expenses (negatively affecting the company’s credit history which will
adversely affect their purchasing power), payment of taxes are delayed (resulting in judgments
and tax liens) and the list goes on.
4. What drives the economy?
Understanding the trends.....
Is it interest and/or Mortgage rates?
No, they are currently hitting record lows and the economy is still bad.
Simply said, when consumers spend their money, the economy thrives. Therefore, the question
is: why are consumers choosing to save their money as opposed to spending it?
We have all heard the term “Baby Boomers”. “Baby” now seems to be a misnomer as over
10,000 “boomers” turn 65 each day – and this trend will continue for the next 15 years!
So, how does this have an effect on our economy?
Statistics show an individual’s highest earning capacity is between the ages of 35 and 55.
Spending is typically concurrent with earnings – the more you make, the more you spend. The
opposite is true as well. The less you make, the less you spend. Since the “boomers” are earning
less, they are spending less. In addition, the unemployment rate is higher than it has been in
decades. The average unemployed person has been out of work for at least 9 months.
Finally, throw the real estate and stock market disasters (from 2008) into the mix and you have
the recipe for an economic collapse. The demand for credit has shrunk amongst consumers in
spite of the stimulus plan and bank bailouts - there is evidence of a looming recession in 2015.
Banks are “circling the wagons” in an effort to stabilize their existing loan portfolios, and are
turning down small to mid size business loan applications at an unprecedented rate.
5. So what are we left with?
Our economies are driven by small business. Just recently many Banks have increased the
minimum years a company needs to be established and show a profit to qualify for financing
from 2 years to 3 years. Banks are not lending and we are witnessing the potential demise of
the small business. As small to mid size businesses decline, employment declines and consumer
confidence tumbles.
However, there is a solution!
When cash flow is tight, where do companies turn? Traditionally, this answer has been to
banks. Pick up today’s paper, listen to the news, research the internet and you will see that
banks are NOT the solution. Banks are looking to the federal government (remember the
stimulus plan) for help in overcoming astronomical losses due to loosened credit policies in the
past. Their directive is to protect their existing portfolios, earn fees for ancillary services (e.g.
deposits, insurance, ATM etc.) while becoming extremely conservative in providing new loans
(if any).
The concept of Factoring has undergone many changes over the last decade today there are
more factoring companies than ever, which results in lower costs as they compete for clients.
The creation of our sister company The InvoiceXchange has created a unique auction based
more efficient market place allowing prices to be driven down, providing the most liquidity for
the least cost with a simple and flexible terms. As more and more companies embrace the many
benefits of factoring the face of this industry will continue to change forever.
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So, what is Factoring, why is important to you?
The definition of Factoring is simple: The purchase of business to business (B2B) or business to
government (B2G) accounts receivable (invoices) for products delivered or services that were
rendered in the past, at a discount.
Factoring is NOT A LOAN and NO INTEREST is charged. It is simply the discounted
purchase (sale) of a company’s non performing asset (accounts receivable – an invoice that is
current or paid over time).
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So, what is Factoring, why is important to you?
The definition of Factoring is simple: The purchase of business to business (B2B) or business to
government (B2G) accounts receivable (invoices) for products delivered or services that were
rendered in the past, at a discount.
Factoring is NOT A LOAN and NO INTEREST is charged. It is simply the discounted
purchase (sale) of a company’s non performing asset (accounts receivable – an invoice that is
current or paid over time).
8. Genie Cloud
AppFactoring related transactions are somewhat vast. By definition,
invoices must be from one business to another business or, from a
business to the government. With this in mind, the number of
potential prospects is HUGE! At the time of publishing this E-book,
there were over 55 million small businesses scattered all across North
America (United States and Canada) but, less than 10% of these
business utilize factoring because most businesses, most people have
never heard about the concept of Factoring.
This number is sure to increase due to new start up companies that
have sprouted up recently, mainly as a result of those individuals that
have been downsized and subsequently have started their own
businesses.
Ask yourself this question: “How many businesses do you know of
that provide a product or service to another business or the
government?”
Now ask yourself: “How many of those businesses are getting paid in
over 30 days? 45 days? 60 days? 90 days?”
Is factoring just for a few select industries?
Since just about everything in a factoring transaction is centered on an
invoice, let’s review why it is so important in the Factoring industry......
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There are a number of components that make up an invoice. Let’s quickly highlight and
describe these components.
Bill To: Identifies the customer or the payee information in the sales transaction
Description: Identifies the products that were manufactured and shipped, products that
were redistributed or services that were rendered.
Quantity: Identifies the number of units of the products that were shipped or services that
were rendered.
Unit Price: Is the individual price of each product that was shipped or the services that were
rendered.
Line Total: Is calculated by multiplying quantity times the unit price.
One of the most important components that make up an invoice is the TERMS of payment.
Typical terms in business are: 2% 10/net 30 days which means if the customer pays for the
invoice within 10 days they will receive a 2% discount off the face (total value) of the invoice. If
the customer pays for their invoice after ten days, they are required to pay the total (face value)
of the invoice. This is fundamental for the factoring industry. The longer the terms (time to
receive payment), the larger the ultimate burden on cash flow for many businesses.
IMPORTANT TO NOTE: Many businesses are forced to offer up to 10 % and more discount
in exchange for early payment to give them the cash they need to thrive on a daily basis.
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How Factoring Works
First, let’s define the participants in any factoring transaction.
• Payee (Seller of invoices)
The Payee, also referred to as the “Seller”, is the company that has manufactured a product
and shipped that product or rendered a service. In the factoring process, we call the “seller” a
prospect/client. That company will now create an invoice for a sales transaction that has taken
place.
• Buyer (factor)
The buyer (factor) is the company that supplies the capital in a factoring transaction. The
factor is commonly referred to as a funding source that buys invoices at a discount.
• Payor (also known as the debtor or customer)
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The payor is a company (customer) or government agency that makes payments against an
invoice of the Payee, the “seller” (prospect/client).
The factoring process begins when a Payee (client) is introduced to a Buyer (Factor/Funding
Source). The Buyer then makes their funding decisions based on whether or not the Payor has
the credit strength to pay for the invoices and how long they typically take to pay for their
invoices. Unlike applying for a bank loan, the Factor does not concern itself with the financial
strength or the credit of the business or the business owner(s).
The opportunity to make money in the factoring business is three fold.
1.As a Referral Source/Broker/Consultant – Finding a Payee (company) that is in
need of cash flow to assist them in growing their business or alternatively, needed to
survive.
2.As an Investor or Funding Source (Factor) – Buying the payment or stream of
payments (invoices) from a Payor (Customer) to a Payee (Company).
3.As a Business Owner – Selling the payment or stream of payments (invoices) from a
Payor (Customer) to a Payee (Business Owner’s Company).
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Two Key Disbursements
There are two key disbursements that are associated with a factoring facility. The first
disbursement is called an “Advance” and the second disbursement is called the “Reserve”.
• Advance – the client receives up to 95% of the face value (total) of the invoice when the
invoice has been purchased by the factor. The advance rate depends on the “risks” involved
with the transaction – the greater the risk, the lower the advance.
• Reserve – the client receives the reserve balance once the customer has paid for the
invoice – less the discount fee charged by the factor.
For example - if the invoice is $1,000.00 and the “Advance” has been set at 90% by the factor,
then the “Reserve” would be 10% (100% of invoice - 90% = 10%). The reserve is released once
the invoice has been paid by the customer (typically referred to as a debtor).
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Two Key Disbursements
There are two key disbursements that are associated with a factoring facility. The first
disbursement is called an “Advance” and the second disbursement is called the “Reserve”.
• Advance – the client receives up to 95% of the face value (total) of the invoice when the
invoice has been purchased by the factor. The advance rate depends on the “risks” involved
with the transaction – the greater the risk, the lower the advance.
• Reserve – the client receives the reserve balance once the customer has paid for the
invoice – less the discount fee charged by the factor.
For example - if the invoice is $1,000.00 and the “Advance” has been set at 90% by the factor,
then the “Reserve” would be 10% (100% of invoice - 90% = 10%). The reserve is released once
the invoice has been paid by the customer (typically referred to as a debtor).
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Factoring Terms
To help you better understand how Factoring works lets define some of the most commonly
used terms that are used in a Factoring transaction:
1. Invoice - a business document defining the amount owed for a service rendered or
product sold and delivered. An invoice can also be referred to as a legal document, or a short
term note to the customer, when terms are listed on the invoice.
2. Accounts Receivable - an invoice (or group of invoices) that remain unpaid and is
due to be payable in the future
3. Due Diligence- The process of evaluating the risks involved in funding a client. In
factoring, this typically includes a number of actions including: review of financial statements,
credit reviews on the clients customers, and payment history on past invoices.
4. Prospect – A company in need of improved cash flow that is seeking alternative
financing options
5. Client – Once a prospect commits to a funding source (typically by signing a legal
document called a “Factoring and Security” agreement), they become a client.
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6. Customer/Debtor – the entity that has received a product or service and is now
indebted to the client for payment. In most alternative financing scenarios, this must be a
credit approved business or some form of public entity (government)
7. Factor – a commercial entity that provides alternative financing options to various
business. Factors specialize in purchasing business-to -usiness or business –to-government
accounts receivables at a discount.
8. Referral Source – typically a working business professional or corporate expatriate
that adds this service to what they are currently doing to enhance their client/customer
satisfaction strategy. In this case the referral source introduces a prospect that is in need of
working capital to one of our file managers who intercept, structures and places the
transaction with one of our affiliated funding sources.
9. Consultant – typically a professionally trained individual that acts as a “match
maker” (on a larger scale vs. a referral source) in a factoring transaction. Simply put, the
consultant finds and introduces a prospect that is in need of financing to the concept of
factoring, gathers some simple information, submits the information to one of our file
managers who intercepts, structures and places the transaction with one of our affiliated
funding sources.
10. Discount Fee - the fee charged by the factor. The discount fee is typically charged on
the face value (total) of the invoices and increases as the invoice ages.
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How do Factors generate Revenue?
When entering a discussion on how a factoring (funding Source) company makes money, you
must first embrace the idea that a factor is not a “lender.” This is a grave error perpetrated by
many who not only enter the field, but also by those companies who are considering using
factoring as a tool to accelerate cash flow in their business.
Why is this important, you ask? It is important for a few reasons:
Annual Percentage Rate: We are all conditioned to believe the only way to get money is
through a bank. After all, our first account was a passbook savings account at a bank. When
we grew older and it was time to get a checking account, we secured this at a bank. To further
the example, we ask: Where does the business owner turn to get a business checking account
or a loan for his/her company? One thinks that the only place to get these things is… at a
bank. Therefore, it is safe to assume that whenever you are talking to a company about
financing, they will equate you and in this case, factoring, to a bank.
We must emphasize again that banks charge interest on money they lend while Factors buy
invoices at a “discount fee”.
No Lending, Different Regulations: Since factors are actually purchasing assets at a
discount and not lending money, they are not regulated in the same way that banks are. This
flexibility allows factors to pursue funding opportunities that are typically avoided by the
banks (eg… new start ups, companies established < 3 years, non-bankable and companies with
historic losses, good credit, bad credit, no credit or liens against them).
18. Genie Cloud
AppWhen a bank says “No,” why will a factor say “Yes”?
Said another way, why would a factor fund a company that a bank won’t lend to? When a
bank makes a loan to a company, they are relying on that company’s ability to pay back the
loan. They look to hard assets like property, equipment, inventory and cash as security in the
event the company defaults on the repayment of the loan. When a factor purchases an invoice
at a discount, they are simply relying on the client’s customer/debtor to pay the outstanding
invoices, in full.
To summarize, factors prosper by taking a different approach to commercial financing. Banks
are making their credit decisions based on the strength of the borrower’s assets. Factors make
their credit decisions based on the credit strength of the Borrower’s customers. A win-win.
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The is an example of How Factoring Works:
Invoice Amount: $100,000.00
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Amount Advanced to Client = 90%: $ 90,000.00
Amount Held In Reserve = 10%: $ 10,00.00
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30 Days Later:
Amount paid by client’s customer: $100,000.00
Advance amount back to factor: - 90,000.00
Discount Fee = 2.5% of invoice: - 2500.00
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Amount rebated to client: $ 7500.00
Total Amount Received by client from Factor -----------------$ 97,500.00
Factor earns $2500.00 for the service
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During the transaction, the amount held back in Reserve serves to protect the factoring
company against any potential credit offsets taken by the client’s customer (debtor). If there
were a credit taken by the client’s customer, that amount would be subtracted from the
“reserve” before rebating the remaining monies to the client.
As you can see, in total, the client received an advance of $90,000 and a reserve rebate of
$7,500 for a total of $97,500. The factor received a discount fee of $2500 for the service.
Now imagine a factor managing hundreds of thousands of invoices at any given time, all of
which are being purchased at a discount. The yield can certainly add up for the factor! Best of
all, the client is getting the use of working capital which will make them stronger. A stronger
client creates more invoices. In many cases that client will grow and factor all of their invoices
for a considerable length of time (in many cases up to 5 years and longer) because it creates
continuous predictable cash flow on a regular basis.
Think of all the service companies out there - businesses that don’t have any hard assets will
never qualify for bank financing (this is just one industry and the tip of the ice berg) and these
companies are seeking what it is we have to offer, they just don’t know that it exists.
That’s Where YOU Come In.....
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How Do Referral Sources/Consultants Make Money?
The factoring industry is unique in that there are several ways to get involved in the industry and
make money. You can participate on any level, depending on your comfort level. Below are the most
common ways to earn income without risking any of your money.
As a referral source - is a working business professional that is interested in adding a new service
to what they are already currently doing to enhance the client/customer satisfaction strategy.
Educating their business contacts about the many benefits of factoring that could in turn help
their businesses create immediate debt free working capital. Once the referral source identifies a
prospect for factoring they submit the contact information to one of our file managers that will
intercept, gather information, structure, place and close the factoring facility within our group of
affiliated funding sources.
As consultant (broker) - is an individual professionally trained to “Find” and quickly screen
prospective small - to - medium sized businesses that are in need of accelerating their cash flow.
Once the consultant has identified a good prospect, they gather some simple information and then
submit the information to one of our file managers. The file manager will then intercept,
structure, place and close the factoring facility within our group of affiliated funding sources.
When the transaction closes, the referral source will earn a substantial residual referral fee of 8%
up to 15% as a Cash Flow Consultant each and every time the factor buys invoices, the customer
(s) pays for the invoice and the factor earns a fee. As a referral source or consultant this income
stream can be substantial because you continue to get paid your referral fee for the length of the
relationship between the factor and the business client. Depending on the type of business you find
you can get paid each month up to 5 years and longer.
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Factoring Case Studies
Here are some real life case studies that will serve to better illustrate the benefits of factoring
and how you and Factors can make money.
Health Care Staffing
First, we must define the players in the transaction.
• Payee – Health care staffing company providing nurses to hospitals on a temporary
employment basis (client)
• Buyer – “”Funding Source” (factor)
• Payor – Hospitals (customer)
Background:
The health care staffing company sought out a “consultant” (an individual just like you) after
being turned down by a local bank for funding. The “consultant” introduced and educated the
staffing company on the benefits of factoring.
The Current situation:
Client was providing temporary nursing services to various hospitals. Client’s major operating
expense was in meeting the payroll demands of its temporary workforce (nursing) on a weekly
basis. Client was receiving payment on invoices to hospitals in 60 days. However, the client had
the ability to “cash flow” these expenditures out of current working capital.
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Client received a phone call from a very large hospital informing them they had been awarded
a contract for 50 nurses to be employed 40 hours per week. The hospital was mandating 60 day
payment terms on all invoices.
The Math:
Client (health care staffing company) pays its nurses (on average) $24.00 per hour.
Client charges it’s customers (on average) $32.00 per hour for hours worked.
Hospital pays its invoices for services provided by the client in eight weeks or every 60 days.
Client must pay nurses weekly for hours worked.
In order to fulfill this new contract, the client is faced with the reality of having to come up
with $384,000 in cash to cover the payroll burden:
50 (nurses) X $24.00 (average hourly pay) x 40 (hours worked per week) x
8 (number of weeks for hospital to pay) = $384,000.
The Issue - The Bank:
Client approaches the bank to request a loan for $500,000.
Bank declines the loan due to “insufficient collateral” – only asset is accounts receivables. In
addition, the health care staffing company had only been in business for 16 months and did not
have enough financial history.
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The Solution:
Client is introduced to factor. The Factor reviews the credit history of the payor (hospital) and
determines it to be a solid credit risk. The Factor agrees to advance 90% against invoices
purchased.
Keep in mind, the $24.00 per hour was not the amount that the client charged the hospital. If it
were then the client would not earn a profit. In this transaction the client charged the hospital
$32.00 per hour, so the client earned $8.00 per hour (gross profit) for each hour the nurses
worked ($32.00 amount charged to hospital - $24.00 amount paid to each nurse = $8.00)
50 (nurses) X $32.00 (average hourly pay) x 40 (hours worked per week) x
8 (number of weeks for hospital to pay) = $512,000
The Factor will “Advance” (first key disbursement) 90% against invoices created:
$512,000 X 90% = $460,800
Note: Keep in mind that Factor will fund weekly based on verified hours worked per nurse.
This figure provides an aggregate amount that is funded over the 8 week period.
Since the payroll burden is $384,000, The Factor’s advance of $460,800 is more than enough to
cover the payroll and provide additional working capital over the eight week time period. The
client now has additional working capital to source out new contracts, and to help meet fixed
costs like rent, telephone, utility payments, etc. A win-win situation!
The Factor in this case charged a discount fee of 5% or 512,000 x 5% = 25,600 Factor Fee.
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If you were the referral source that introduced this deal you would earn $25,600 x 8% =
$2,048.00 residual income each and every month thereafter that the sales transaction took
place.
If you were the consultant that brought in this deal you would earn $25,600 x 15% = $3,840.00
in residual income each and every month thereafter that the sales transaction took place.
Delta Components
Delta Components, Inc. (“Delta”) is a relatively small distribution company located in Reston,
VA. Delta currently has just over $500,000 in revenues and during the past year, Delta enjoyed
significant sales growth. While most business owners would be thrilled to experience the
growth that Delta has, Ron Cotton (Principal), was very concerned that his company’s cash
flow status would be unable to keep pace with its sales growth.
The majorities of Delta’s customers are strong financially and have a history of paying their
invoices on time. However, “on time” these days means 45 to 60 days. Delta pays their
employees every week and they must pay their vendors in 30 days. The discrepancy between
the time Delta needs to pay their employees and vendors has, and will continue to create a cash
flow problem for Delta.
In an effort to meet his internal cash flow needs, Ron has delayed vendor payments resulting in
placing his purchasing power at risk. This could result in his vendors implementing more
restrictive payment policies (basically, Delta would need to pay faster, if not up front, in order
to receive future shipments from the vendors).
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This lack of cash flow has also caused Ron to take a pass on a number of significant business
opportunities.
In Ron’s mind, it did not make sense to just take on new orders if it meant increasing his
inability to pay his vendors on time, and most importantly, hindering his need to pay his
employees on time. Let’s review the following table:
Delta Components, Inc. Current financial position (without factoring)
Yearly Sales $500,000
Variable costs (70% of sales) $350,000
Fixed Costs $50,000
Total Costs $400,000
Gross Profit/Loss (Sales - Costs) $100,000
Note: Ron has calculated that he has lost close to $200,000 in sales opportunities due to the fact
that he did not have the cash needed to pay his vendors on time, nor to pay his employees,
which were both needed to fulfill on these commitments.
Ron was being forced to make a decision that would dictate the future success or failure of
Delta. Find a way to increase the cash flow within the company or continue to turn down
future sales/growth opportunities. Ron reviewed his options for improving his cash flow.
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First, Ron reviewed the options that were available to him without seeking financing:
1. Demand more strict payment terms from his customers
2. Increase the sale price of his products
3. Negotiate more conservative payment terms to his vendors
4. Reduce employee cash burdens (eg.... insurance, bonus, wage increases or possible layoffs)
5. Delay his payment of payroll taxes
After much thought, Ron came to the following conclusions:
Options 1 and 2 were not possible. Demanding his customers to pay their invoices faster was a
recipe for disaster as his competitors were offering more liberal payment terms now in an
effort to induce his customers to conduct business with them. Raising his prices would position
him as unattractive option to his customers. Ron was in a very competitive business, and his
customers would simply choose to buy their products from another, less expensive resource.
Option 3 was not possible. His vendors had already placed him on credit hold. Asking them to
now give him more liberal payment terms would be counter intuitive.
Option 4 was not possible: Simply put, if Ron were to increase his business, he would need all
his employees, if not more, to work for him. In order for him to either keep current or attract
new employees, he would have to offer competitive wages and benefits to bring them to Delta.
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Option 5 was an option, but, a potential “death blow” to Delta. Avoiding the payment of
employee tax burdens to the government is never a good long term solutions. Although the
impact of not paying the taxes will result in an immediate improvement in cash flow, the long
term implications could amount to tax liens and high financial penalties due.
If Ron was unable to “recover” cash by making internal changes to his business, he must now
look to outside financing to help him.
Ron viewed his outside financing options as:
1. A line of credit with a bank
2. Offering ownership (equity) in his company, in exchange for working capital
3. Factoring Delta’s accounts receivables
It is necessary to keep in mind that while Ron was considering all options, he was losing orders
(daily) with potential customers that may never return.
Ron knew that a line of credit with a bank was not a valid option, as he attempted this in
recent memory and knew that he did not have the collateral needed to secure a loan.
Ron had been approached in the past by a few potential “investors”, but this option came at a
very high price, as he would have to give up ownership and control of his company in exchange
for cash.
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Ron determined that an accounts receivable factoring line of working capital would be the best
solution to help his company strengthen his company’s financial position. This would enable
Delta to now accept new orders and to pay both vendors and employees on time. In fact, the
acceleration of cash into his business would put Ron into a position of strength with vendors in
that he could now be in a position to negotiate early payment discounts.
Ron received a 90% advance with The Factor and a discount rate of 1.9% (per 30 days). Since
Delta was now getting paid on average in 60 days, Ron budgeted a discount rate of 3.8%.
Ron then reconstructed his financial statements by adding the following:
1. The 3.8% factoring discount rate
2. The projected $200,000 increase in new business
3. Supplier discounts offered for quick pay.
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Delta Components, Inc. projected financial position (with Factoring)
Yearly Sales $700,000
(Note: Increase of $200,000 from new orders)
Variable costs (65% of sales) $455,000
(Note: 5% supplier discounts)
Factoring discount fees
(Note: 5% of sales) $26,600
Fixed Costs $50,000
Total Costs $540,000
Gross Profit/Loss (Sales - Costs) $168,400 Additional Profit of $68,400, or 60%!
Therefore, by selling his invoices and ultimately giving a 3.8% discount to the factor, Delta
gained 60% in profits - truly, addition by subtraction!
If you were the referral source that introduced this deal you would earn $26,600 x 8% =
$2,128.00 residual income each and every month thereafter that the sales transaction took
place. If you were the consultant that brought in this deal you would earn $26,600 x 15% =
$3,990.00 in residual income each and every month thereafter that the sales transaction took
place.
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