Funding Growth Can Be a Balancing Act

By October 3, 2018CFS Blog

Alternative Funding May Be Your Solution:

Small business owners are feeling more optimistic than ever according to a Wells Fargo/Gallup Small Business Index poll released in August 2018. The index score hit +118 and those polled said they are feeling good about their current financial situation, cash flow, and future business outlook.
It is the best index score in the survey’s 15-year history. Earlier this year it was around +106. The previous record was back in 2006, when the score reached +114. Most small business owners feel they are on good footing financially.
Alternative Funding Offers Flexibility to Grow.
That’s all good news for companies maintaining the status quo, but when it comes to growth, the ability to step out of your comfort zone and seek new growth opportunities can be challenging. Alternative funding offers companies a way to optimize a growth strategy in order to realize its full potential.

So, is alternative funding really the right avenue for you to grow your business?

While it isn’t the answer for every small business, it’s the right direction if you intend to evolve, bring on more business, keep up with innovation, and gain a competitive edge to increase your market share.
If you find yourself in this situation (a need to grow and not sure where to find the capital) consult with a alternative funding specialist to review the options.
Click here to see an example of how a growing staffing company leveraged its factoring facility to increase its profits by more than 1 million dollars.
If You Use Factoring to Grow, Understand the Fees.
We get asked all the time about percentage rates in factoring and have to explain that it is not a loan, simply a fee-based service to free up your cash flow until a debtor pays its invoice.

The major appeal tied to factoring is it will not show up as debt on your balance sheet.

Prior to signing a factoring agreement, it is important for you to know your debtor’s payment habits, it can save you money in fees.
Here’s an example of how to calculate an actual factoring fee on an invoiced amount of $10,000:
Factoring Fee Offer Sample #1: 

1.5% for each 30-day period an invoice is open

Days for Invoice to be Payed: 30
Invoice Value $10,000
Fee Calculation: 1.5%
Actual Fees: $150
Days for Invoice to be Payed: 40
Invoice Value $10,000
Fee Calculation: 1.5% x 2 = 3.00%
Actual Fees: $300
Days for Invoice to be Payed: 50
Invoice Value $10,000
Fee Calculation: 1.5% x 2 = 3.00%
Actual Fees: $300
Factoring Fee Sample Offer #2:
0.3% for each 5-day period an invoice is open
Days for Invoice to be Payed: 30
Invoice Value $10,000
Fee Calculation: 0.3% x 6 = 1.80%
Actual Fees: $180
Days for Invoice to be Payed: 40
Invoice Value $10,000
Fee Calculation: 0.3% x 8 = 2.40%
Actual Fees: $240
Days for Invoice to be Payed: 50
Invoice Value $10,000
Fee Calculation: 0.3% x 10 = 3.00%
Actual Fees: $300
It’s also good to know that there can be a fee-based component of a factoring deal that covers your net funds employed. This is tied to the Wall Street Journal published rate that is associated with the prime rate. This should all be transparent in your contract, so make sure you read it carefully.