A report in Home Furnishings Business indicates that furniture manufacturers are the latest business segment gain access to industry specific receivables factoring opportunities. The publication announced that Eagle Capital has designed an invoice factoring program that will allow furniture manufacturers to receive advanced payment on invoices issued for processed orders. Typically these invoices would not be paid for at least 30 days and possibly more.

Eagle Capital has its roots in the transportation industry where factoring invoices is commonplace. Truckers need positive cash flow in order  to cover daily expenses of keeping trucks on the road to compensate for outstanding invoices which tie up the much needed cash. Now the home furnishings industry will benefit from the same program as Eagle Capital advances cash to the manufacturer while awaiting payment from customers. Eagle Capital actually collects the payments and even provides credit checks on prospective customers for their clients to see if they are a worthwhile credit risk.

Typically, receivables factoring requires the factoring agent to advance anywhere from 70-90% of the face value of invoices presented by the manufacturer right up front. When the balance of the invoice is collected by the factoring agent, the client then receives the balance less a fee for services typically running in the range of 1-5% of the total invoice value. In many cases, the infusion of cash allows the manufacturer to meet immediate expenses such as payroll and in some cases may even provide the capital for expansion projects.

One motivation cited by Eagle Capital for offering the factoring service to the home furnishings industry was to level the playing field with foreign manufacturers who already have the benefit of cheap labor.

You can read the entire article about home furnishings receivables factoring here.

At the recent annual meeting of the International Factors Group (IFG), the Polish company Pekao Faktoring was named as the #1 factoring company in the region. The IFG meeting was held in St. Petersburg (Russia, that is) in October.

Of course, the company was thrilled with their recognition and the president,  Mirosław Jakowiecki, declared, “I am proud of these realizing that such a position covers not only Poland. It means, Pekao Faktoring is the best Factor in Central – East Europe as well.”

Of course, my fascination with the international factoring community led me to explore the Pekao Faktoring company website to see what this firm is about. Fortunately, the website has an English translation version and I was able to review the entire site in my native tongue. The website is attractive though a bit lacking in substantive information about factoring and the services provided by Pekao. Naturally, I’m comparing this to the sometimes terribly wordy and overblown sites that many U.S. factors present online.

There was, however, one very unique statement that appeared right on the About Us page of the Pekao Faktoring website. It reads as follows:

“Pekao Faktoring is a company fending for employees helping to develop professional skills and guarantying workplace for mothers with child. The team grows, within last two years in the families of Pekao Faktoring employees 25 children were born.”

Now I dare you to find me one other major finance company that boasts of the birth-rate of its employees. Apparently, Pekao is looking for a few good women and is willing to create a family friendly workplace to attract them. So Pekao is not only the #1 receivables factoring company in the region, it is a factoring company that factors in the well-being of the families of its employees. And that is a strong factor in their favor.

Na zdrowie, Pekao! Stolat!

We hear a lot these days about companies that are too big to fail. Appears that CIT is not too big to fail but is too big to go into bankruptcy without causing a lot of chaos for its factoring clients. (Image courtesy of European Pressphoto Agency)

According to an article in the Wall Street Journal online edition, the

upcoming restructuring and likely bankruptcy of CIT may have a serious impact on the thousands of small-to-medium size companies that make up the factoring client base of CIT. The reason? Cash flow.

Apparently, the very issue that receivables factoring is designed to address is the problem CIT may have after restructuring. After all, invoice factoring for small businesses provides the cash flow that would not be forthcoming quickly after invoices are issued. If CIT doesn’t have cash after settling with its debtors, then how can it purchase the invoices of its factoring clients and provide the needed cash?

There is something utterly ironic here, don’t you think? So who factors for the factors?

In a press release issued today, Homex, one of Mexico’s leading home builders, announced their satisfaction with FOVISSSTE, a Mexican mortgage company, for implementing a factoring program with Mexico’s National Development Bank.

The CFO of Homex stated that the factoring initiative “will help us realize important efficiencies in our collection process.”

Now I’m not quite sure what the CFO is referring to here or what exactly the structure of the factoring program is. It is not really clear who is receiving financing. It appears that Homex is able to factor receivables through this program but receivables from whom? If consumers are purchasing directly from Homex and they are receiving mortgages from FOVISSSTE, then that is merely a mortgage loan. Somehow, payment is expedited in this process but the details are pretty murky.

So, I would advise the Homex PR team that, if they want to maximize the impact of an announcement such as this, it would help to give more details as to exactly how this benefits them. It appears that the financial and investment community is the target of this release but I’m not quite sure what the analysts are supposed to glean from this type of statement.

If I come across anything else I’ll publish it but if anyone else can shed some light on this let us know with a comment.

Sounds like growing pains to me.

As I scan the financial news I come across more and more announcements that some major financial institutions are expanding their services to include receivables factoring. This morning I read that Punjab National Bank (PNB) is adding investment services and invoice factoring to its menu of financial product offerings. The general manager of PNB stated that the target for the factoring service would be “small vendors and MSMEs which I now know stands for Micro, Small and Medium Enterprises.

But even as receivables factoring services expand around the globe,  back here in the states, two well established factoring companies were bilked out of $4 million by a U.S. Army officer and two accomplices in a bogus defense contracting scheme. Allegedly, the three set up fake communications contracts supposedly with the U.S. Armyand then convinced Federal National Payables Inc. of Bethesda, MD and Associated Receivables Funding Inc. of Greenville, SC to fork over about $4 million dollars against these contracts.

I’m not sure the author of the story about the asset factoring fraud really understood the role of the two factoring companies or how they really operate. The reporter states that the companies “hand out the dollars for federal contracts.” Just goes to show you how little understood the factoring industry is outside of certain circles. I’m sure that what really happened was that Federal National and Associated Receivables were essentially providing a factoring service to the phony federal contractor based on the assumption that the Army would be reimbursing them.

I find it ironic that on Federal National’s website, the company states the following:

“Federal National’s slogan, “Service, Value, Trust” summarizes its approach to doing business. In an industry not known for these qualities, Federal National is known for it’s professionally delivered, reliable and reasonably priced financing, fairness and strong ethical conduct.”

Whoa! That’s a ringing endorsement for the factoring industry. But in this case, the factoring company wasn’t the screw-er, it was the screw-ee. (See photo with previous post)

First of all, who the hell is CIT Group and why are we paying so much attention to them? This is one of the beautiful side-benefits of the current economic woes – we are finding out who controls the money and credit in this country. Who would have ever expected that AIG is an economic linchpin of the U.S. economy? Not until their involvement in the so-called toxic assets did I have a clue that AIG did anything but provide insurance.

Now we are finding out that there are hundreds of companies that will be in big trouble if anything happens to CIT Group. Why? Because CIT is one of the largest receivables factoring agents in the U.S. As a matter of fact, an article in the Los Angeles Times about CIT indicates that a whole pile of companies that supply Target and Walmart will be in deep doodoo if CIT declares bankruptcy. CIT keeps many of these manufacturers afloat with invoice factoring and some major retailers will suffer if CIT isn’t there to keep the cash flowing.

Another thing that I learned about CIT is that they are heavily involved in the home furnishings industry. I was a former marketing manager in this industry and really had no idea that CIT was a player. But, according to Furniture Today, a lot of domestic furniture manufacturers rely on CIT for factoring services and financial problems for CIT mean financial problems for the home furnishings industry.

As I’ve said, the economic problems we are facing have plopped factoring squarely in the spotlight as a critical financing resource. Too bad that so much damage is being done as awareness grows.

Well, bust my buttons! Here I was cattily pointing out the incongruity of having a marketing person for a factoring company admit that they didn’t have much in the way of actual knowledge about economics, finance and, well, factoring.

Well I must recognize a quick study when I see one because this same marketing person at Universal Funding has put up a blog post about the actual cost of invoice factoring that I can truly appreciate.

Frankly, a lot is written about the cost of factoring that would lead you to believe that receivables factoring and loansharking occupy the same level of credibility within credit and financing circles. The post at Universal Funding’s blog does a good job of outlining the costs and putting the costs in perspective with other practices.

This is an informative read and I recommend it. Not that this will carry much weight.

Shame on me! I haven’t posted in way too long. I’m sure that I have been missed terribly by the visitor that may have accidentally stumbled upon this blog while looking for information about factoring polynomials or some such unrelated topic.

Anyway, true to my catty and petty self, I came across a blog post about receivables factoring that I thought was quite interesting, if not a bit too honest.

A recent post on a blog titled “Factoring Vibe” introduced the background of the post author which was, to say the least, incongruous with the profession which the author now inhabits. The author is quite forthcoming about her lack of knowledge of the world of finance, economics and asset-based financing. In fact, I am wondering if she is not a bit too forthcoming.

The post author identifies herself as a highly-educated writer, acting enthusiast and all-around artsy-fartsy type. But we soon discover that, not only is the author not just some hired-hand writer, designated to churn out relevant blog posts targeting the factoring industry, she is the company’s marketing manager.

“So what?” you ask. Well, consider the following statement:

“So here I am, in charge of marketing for a financial company, with very little understanding of this industry.”

And this:

“Being a writer by trade, the company I work for, Universal Funding, thought it would be a good use of my skills for me to write a blog about topics relevant to the financial industry. Sure, no problem, other than the fact that I know nothing about the subject.“

It sets me to wondering about the hiring process for this position. What in the world was the interview like?

Universal: So, can you tell me about your experience in the financial sector?

Candidate: Well, I was treasurer for the drama club at my college. Oh, and I accidentally balanced my checkbook once!

Universal Funding: Balanced? To the penny?

Candidate: Yes, to the penny!

Universal Funding: Damn! You’re hired.

Forgive me, but I can’t help notice things like this. Perhaps I am evolving into the Perez Hilton of the receivables factoring industry. But let’s face it. This industry could use a little personality.

And speaking of personality, check out these two personalities from Universal Funding. Henry D. Wozow is the President and Founder of the company. His bio states that “as a young man, Henry was the California Amateur Welter Weight Boxing Champion, with 168 fights under his belt, and 19 fights as a professional.”

Ouch! In other words, don’t make Henry mad. He’ll kick your ass.

Another interesting character is Senior Vice-President and Sales Manager Deron Nicholson. Frankly, I don’t ever remember seeing a corporate photo representation of an executive in a really cool, low-set “jeff cap.” Upon reading that Deron is a former U.S. Marine, I am starting to appreciate that he and Mr. Wozow are 3,000 miles away. They could hurt people.

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.

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?