Many companies are unable to obtain bank financing against their assets, making numerous companies in Northeast Florida non-bankable for a myriad of reasons:

• The company is too new.
• The company is under new ownership and/or is a new venture.
• The company is too small.
• The company is at its maximum capacity with the bank.
• The company is in the “wrong” industry, making it undesirable for the bank.
• The company is having financial problems.
• The company's growing too rapidly for the bank.

Whatever the reason, it often means the company’s application will be declined.

Many of these companies will continue to endure–but without reaching full capacity and hiring strength. Others will not be able to survive a financial crisis–resulting in closed businesses and lost jobs. To stay afloat, many companies must either take in an equity partner, diluting the ownership of the business, or look for venture capital, a timeconsuming and often long and fruitless search.

But enough "gloom and doom." Factoring can be a means of cash management for non-bankable companies. Factoring is a form of accounts receivable (A/R) management where the factor purchases the accounts receivable. A factor can deal with companies that don’t meet bank requirements; structuring programs with annual utilized funds as low as $15,000 monthly (and no ceiling). Factors deal primarily with manufacturers, wholesalers, distributors and service companies.

Factoring greatly shortens the company's "cash cycle”–the time a product or service is out and waiting for the payment (cash) to come back in. By making better use of cash capabilities through factoring, companies grow and profit, leading to
the emergence of a bankable company; a goal for nonbankable businesses. The local community also wins with more bankable businesses, growing with the increased revenues, higher employment and prospering companies.

Sophisticated, tier-two factoring offers additional features including credit protection, non-escalation of rates and non-advancement of fees. Credit protection is non-recourse factoring, which protects both the client and the factor from nonpayment. The nonescalation of rates program permits the factor to keep the original rate, even as the invoice ages.

Many factors "share the wealth" with companies for referrals and factors don't normally compete with bankers. In fact, it’s estimated more than 80 percent of all factoring referrals come from bankers.

Bottom Line: Factoring is a proven solution to a non-bankable company's cash flow problems.

Jerry Mayes is vice president of business deveopment at ICC
Business Credit, Inc. and can be reached at (386) 575-1403
or via Email at jmayes@iccfinancialgroup.com.