While the last post introduced Receivables Exchange and the new concept of bidding to be the factor for a company’s receivables, the same Wall Street Journal article presented another factoring related service presented by FTrans Corp. in Atlanta.

FTrans is addressing an issue which keeps many banks from participating in receivable factoring and that is evaluating the invoices being presented for factoring. The article mentions that most banks are not set up to monitor and evaluate the invoices presented for factoring. The way it works is that a company seeking to receive a line of credit from its bank posts its invoices on FTrans. The invoices are evaluated and confirmed and the bank then has the information it needs to determine whether to provide financing against these receivables.

What FTrans does, essentially, is to open the door to banks to pitch another service to their business customers without having to staff an entirely new department. Based on the feedback provided by FTrans, the bank determines what percentage to advance against the invoices and what fee to charge.

This goes back to some of my earlier comments that banks are taking notice of the amount of business out there for receivables factoring. Companies like FTrans are making it easier for them to become involved which just increases the amount of competition for the factoring industry.

Next up… how smaller companies can get lower rates on their receivables financing.

Shame on me! I don’t know how I missed this but an article in the Wall Street Journal online edition just introduced me to Receivables Exchange, LLC. This company is described as the eBay of receivables financing and it may be a serious and threatening entry into the world of factoring.

The article describes the plight of a company called Data Drive Thru, Inc, a software company that had introduced a successful product but was having trouble generating the next round of capital funding due to the banking crisis. The company decided to leverage its hefty portfolio of receivables from some very well-known and reliable office supply retailers. But instead of shopping around for a factoring company, Data Drive Thru turned to Receivables Exchange where they posted their invoices and let anonymous lenders bid on the receivables.

Whoa, daddy! Anybody but me see some pretty significant implications for the receivables factoring industry here?

There were a couple statements that caught my attention in this article. First, the title of the web page is “Borrowing Against Receivables Gets Cheaper, Easier.” I think after reading about Receivables Exchange I don’t need to comment further.

Here’s another one…“Borrowing against receivables isn’t new… But with interest rates sometimes exceeding 30% or 40% annually and tales of unsavory business practices, this small corner of finance is considered by many to be a funding source of last resort.”

Translation - “Factoring receivables is really expensive so avoid it at all costs”

There are a couple more innovative programs with implications for the receivables factoring industry profiled in this article. I’ll get into them in the next two posts.

” ‘Cause I’m the tax man,
Yeah, the tax man.”

Well, here we are in June and I’m reminding you of the unpleasantness of taxes via the lyrics of the late George Harrison. Thought you were over that tax hump, huh?

I’m only reminding you because G. M. Filisko reminded me in a piece over at Bankrate.com. The article provides 6 methods that small business owners can utilize to pay the IRS for taxes due. Some of them are what you would expect to hear like “take out a home equity loan” or “put it on your credit card.” Great, just what we need…more debt!

But, wait a minute. There it is at #6. “Sell your receivables.”

Now that is novel. A small business owner avoids incurring more debt by leveraging existing assets. Seems to me that all we hear is that we are in this mess because we have incurred too much debt and saved way too little. But by factoring receivables, the small business owner can pay off “the man” and keep the business afloat at the same time. No debt. No payments. Complete solvency.

Small business factoring can address a variety of debt and cash flow scenarios. Even Mr. Harrison might take advantage.

“And my advice to those who die,
Beware the pennies on you eyes.
‘Cause I’m the tax man,
Yeah, the tax man.”

I like to present information about receivables factoring that is not simply another explanation of what asset based factoring is. I prefer to find out what is going on in an industry that is global in scope and integral to the profitable operation pf businesses large and small. Trust me, it ain’t easy!

I skim through article after article and blog post after blog post authored by the same self-promoting factoring experts practicing search engine optimization by getting the term “invoice factoring” or “factoring receivables” linked to their website as many times as possible. It would be nice to see a fresh approach to the topic though maybe there just is not that much interesting to say.

That being said, I know that there are thousands of business owners out there who may or may not be familiar with factoring or may be under a misconception about the pluses and minuses of invoice factoring. Tracey Z. Rewey is forced to go through the exercise of explaining, once again, what factoring is in an article appearing on Entrepreneurs Community titled “Recession Proof Your Business – 10 Benefits of Factoring Invoices.” This is one of those lists that a business owner can pin up on their office bulletin board and when they find themselves thinking, “Now why should I be thinking about factoring my invoices?” they can simply look at this list and answer, “Oh yeah, that’s why!”

One question I have though. Is it really possible to “recession proof” your business by factoring? After all, isn’t the ability to factor contingent on having receivables to factor? And aren’t these receivables contingent on a sales transaction? And isn’t a sales transaction contingent on a customer having the financial wherewithall to actually make a commitment to purchase?

Hmmmmm? Kind of makes your head hurt doesn’t it?

Two factoring industry veterans have expanded their invoice factoring services to other asset-based financing vehicles as they capitalize on the reduced number of funding source for small businesses. The pair has launched a new website at BusinessFactors.com.

This is just one more example of the ability of factoring companies to bring solutions to business that were either misunderstood or below the radar. As the big boys of the credit industry look to government to keep them afloat, the stalwart members of the receivables factoring industry keep plugging away by building awareness of the value of assets already owned and the advantages that these assets present. As a matter of fact, I’ll bet a lot of companies are gaining a whole new appreciation for the existence of “accounts receivables.” For the most part, these have been viewed as money owed rather than as assets due. Now those assets can be applied to keep a company afloat.

A whole new appreciation of what’s on the P&L isn’t it?