Small business is finally feeling a little bullish about the economy. From a year ago, there is an increase in small business owners’ perceptions about revenues, financing, hiring, credit access and cash flow, among other measures.
The Company supplies fine linens (towels, sheets, etc.) to businesses all over the world. After years of success overseas from their Switzerland base, the Company wanted to expand domestically and incorporated in the U.S. They quickly landed a large contract with Carnival Cruise Lines in Miami. International law required them to finance the linen shipments through Cash Against Documents (CAD) financing, so the linens would be delivered to a port in the U.S, and not released until the manufacturer was paid.
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Big banks are attempting to lure in the small business owner with generous rewards on their business credit cards. Banks see these types of loans as less risky with fewer consumer protections. Small business owners need to be careful because these credit cards can affect their own personal credit score.
Small business is struggling with middle-class Americans not spending as the economy limps along. Yet the vast majority of purchasing power resides outside the US. American small businesses could increase their growth by tapping into this outside consumer base if they only had better access to financing.
This past week Paragon Financial provided a $500,000 accounts receivable financing facility to a construction company working with county and city government contracts. We also provided a $250,000 accounts receivable financing facility to a company that repairs and maintains industrial machinery.
Jon Anselma of Paragon Financial Group talks about factoring companies role in business financing on PBS’ Nightly Business Report
The Company had won a $2 million one year self-renewing contract from the U.S. government to provide security personnel. These personnel would require high end security clearance, which meant higher pay, putting pressure on the Company’s cash flow. The bank was not willing to provide funding. Without financing, the Company would have to pass on the contract and the chance for growth.
Your business has closed the first round of funding. But what happens in the months it can take to get the cash? (btw, with factoring, the wait is days, not months)
Small business learned a lot in 2011. It was certainly a challenging year for many.
Bank loans to small business fell to the lowest level in more than 10 years. Whether your business is struggling or successful in this economy, it will still be hard to find bank financing.