The Weight of a Personal Guarantee

The weight of a personal guarantee, what does it hold anymore?

My Associates and I sat pondering this today, after a potential client called in. His dilemma was simple; he needed about $300k of Accounts Receivable Financing for his business, and conveniently, he called Lenders Commercial Finance.

We have been discussing doing asset-based lending with companies like this recently. These are the new trend of web-based businesses, that are doing either advertising, marketing, SEO, or what seems to be a limitless list of options. Our dilemma is this: We have a company that has a Pro Forma that is almost unbelievable, or is it? If you can simply find build a market share for someone on the internet, or gets traffic directed to adds, and continue to expand the horizons of that business, it is believable.

The problem with some financiers today, is that they are on the uphill side of the technology curve. Their experience was on pen and paper, or a typewriter, and they cannot wrap their arms around a concept of a webpage making a huge amount of money. Fortunately, we at Lenders Commercial Finance, are not on that learning side of the curve. We have a very informative and educated staff, where we share ideas, create ideas, and sift through other's ideas, to make profitable business decisions.

Our big point at hand in this article, is the fact that we are discussing ideas of financing online businesses, and with this idea, we need things like a personal guarantee to back up our decision to finance them. So if you are looking for a chunk of financing, with a somewhat "exponentially profitable" business, why can you not offer us a personal guarantee?

It reminds me of the days when a handshake sealed a deal over cocktails and a meal. Now paperwork, credit checks, and a cadre of other pre-requisites are needed to have anything be finalized. If you are blazing trails for an entrepreneurial business, there shouldn't be a reason that you, the person on this venture, wouldn't back it whole-heartedly.

What does a personal guarantee stand for anymore? Does it say, yes, I am a businessman, and my life and soul is this business, or does it say: sure I'll agree to whatever you would like, as long as you just hand me that check?

As Bob Dylan said, Times They are a Changin'

Invoice Discounting with Lenders Commercial Finance

How does Invoice Discounting with Lenders Commercial Finance differ from other business financing arrangements?

Unlike traditional bank financing (where the focus is on clearing very specific financial hurdles), the focus with Invoice Discounting is the strength of your business model and the creditworthiness of your buyers.

Unlike traditional accounts receivable factoring where the factor takes over your accounts receivable, with Invoice Discounting by Lenders Commercial Finance you remain in control of your customer relationships.

How does Invoice Discounting work?

Once we establish an “Invoice Discounting Line Of Credit” for your company we partner with you in establishing Invoice Discounting Limits for each of your buyers. You submit the invoices you wish to finance via our secure internet-based invoice management system. Invoices representing goods that have been delivered or work that has been completed are funded within 24 hours by wire to your account.

How much do I receive for my discounted invoices?

We typically advance 90% of the net invoice amount up front and the balance when the invoice is collected.

Do I have to discount all my invoices?

No. We want to give you as much flexibility as possible in managing your cash flow. Not all buyers need to be discounted. You can hold invoices on buyers approved for discounting up to 10 days after delivery of goods (or work completion).

Can I payoff discounted invoices before they are collected?

Yes. You can “buy back” all or any part of your discounted invoices at any time and for any reason.

Is it expensive to discount my invoices?

We take a normal trade discount when you receive funding (typically 1% for each 10 days on original credit terms). Invoices that pay beyond terms are charged a convenient daily rate. The cost is higher than with bank financing but is in line with industry accepted trade discounts and discounts paid on credit card transactions.

Are charges based on the total invoice value or on the amount advanced?

With Lenders Commercial Finance all charges are based on the actual amount advanced to you. Other than pass-through wiring fees, there are no hidden fees or add-on costs as with most other financing programs.

Who is a good candidate for a Lenders Commercial Finance line of credit?

If you are a small or mid-market business (SMB) with B2B trade A/R you can use your assets to qualify with LCF. You can generate funding now to grow your business, pay down other loans or obligations, and to take advantage of new business opportunities. 

Finding Capital

Finding Capital

Understanding Asset-Based Lending

For businesses seeking working capital to run their operations effectively and to finance growth, asset-based lending may be an excellent solution.

In its simplest form, asset0based lending involved a loan or line of credit secured by business assets under which the financial institution will advance funds based on a formula. The formula is usually a percentage of the current value of the  eligible assets. The assets usually consist of the borrower's accounts receivable and inventory, but sometimes other assets may be used. The advance percentage will depend on the assets being pledged. For accounts receivable and inventory, the percentage will typically range between 75 to 85 percent and 25 to 60 percent, respectively, and each is subject to certain eligibility criteria. A lender will usually conduct periodic audits to determine the  current value and eligibility of the assets. In addition, borrowers typically are required to provide a lender with various reports, such as accounts receivable agings and inventory valuations.

 Asset-based lending typically provides a low interest rate and favorable repayment terms. For the most part, asset-based lending is typically structured as a revolving line of credit that businesses can draw upon when needed, allowing them to avoid making fixed payments of principal and interest and incurring unnecessary interest. Because of the nature of asset-based lending, business usually use such loans for day-to-day cash flow needs rather than for purchases with a set dollar amount, such as equipment or other property.

It is important to bear in mind that a business must maintain the value and eligibility of each asset to ensure that it remains available for financing under the advance formula. For example, in the case of accounts receivable, the receivables in an account which remain unpaid after a certain period become ineligible for financing.

"Borrowers also need to make sure they are getting the maximum amount of advance they can get on the asset," says Barry Sloane, CEO of Newtek, a company that provides business services to small and medium-sized companies throughout the United States. "They should be aware of market rates or consult with an a experienced adviser."

Most small or medium-sized businesses can benefit from asset-based lending as long as they have appropriate assets to secure the loan or line of credit. Before approaching al lending institution, business should be prepared to provide two to three years of financial statement as well as business projections for the next tow to three years. It is recommended that a business also hire legal counsel with experience in asset- based lending to assist in negotiating the terms and structure of the transaction. Obtaining financing typically takes about 45 to 60 days, so businesses should apply to their financial institution as soon as they know they are going to need it.

Aset-based lending can be an effective tool for a growing business.

"The most important aspects for the borrower are negotiating the advance and the interest rates," he says. "OTher than that, the most important thing is making sure the asset is not impaired."

This article was supplied by City National Bank

Be sure to ask us about your Accounts Receivable Financing

Finding Clientelle for Factoring...

So you thought about opening up a small-time or a fully operational factoring business, well where do I start?

This may not be everyone's cup of tea, but there are many options that can be helpful towards finding people.

Some exploratory options may be:

• Word of Mouth
• Snail Mail
• Email
• Email Blasts
• Social Media
• Directories
• Classifieds
• CraigsList

Now you may say, well thanks for the info Captain Obvious, but how do I go about doing this?

Since this can be a timely matter, I will make a multi-post piece out of this story.

For now, we can start with Word of Mouth and Snail Mail.

So you are trying to find some new clientele, start with the basics of K.I.S.S.

Keep It Simple Stupid.

Talk to your friends, relatives, businesses, forums, anything that may help you in the local neighborhood. Some of the tricks I have learned to get into the local business flow is to find social clubs. Whether it be the Elks Club, Rotary Club, AmVets, VFWs, Church Groups, Business Groups (check restaurants, coffee shops, grocery stores,  for flyers), local smalltown papers, community websites, sporting leagues. These are all viable options to talk to people who are local that may own, or work for a company that uses asset-based  loans for buying their receivables. Never be afraid to ask, or to get some feelers out when looking for business.

The second topic was Snail Mail, it may be a dying art, but a bulk mailing still shows a personal, physical touch in business. Visit a website like GotPrint? , Overnight Prints , PS Print and get some postcards, flyers, or anything that you want made. It is cheap, easy, and efficient. Never be afraid to send a mailing, it may cost more than an email, but someone has to actually pick up the mailing.

We can continue this on another post, if you have any questions, feel free to ask. I am always open to suggestions about what to write about, or how I am writing.

Until Next Time

Factor ya later.