In another bold move to assist the economy the US Government released its intention to start Factoring US Auto suppliers invoices to the automotive sector.

As seen in today’s NY Times (03/19/2009):

DETROIT ” The Obama administration moved on Thursday to stabilize the American auto industry by creating a $5 billion fund to support troubled parts suppliers.

The program will provide supply companies with much-needed access to liquidity to assist them in meeting payrolls and covering their expenses, while giving the domestic auto companies reliable access to the parts they need, the Treasury announcement said.

So what does this mean for the industry? Until the details are rolled out is hard to say specifically, but the announcement to get into the Accounts Receivable Factoring business is the latest installment of how far the US Government will go to get the economy back on track.

I had predicted that Accounts Receivable Factoring is going to be a major financing method of our economy revival and this proves how accurate that is.

For those of you that are not familiar with Accounts Receivable Factoring it is essentially a Line of Credit for Businesses that use the Invoices that are outstanding as security for the advances received by the company which generated the Invoices.

In an average Accounts Receivable Factoring facility, the company that is financing their receivables will be eligible to receive between 80% and 90% of the invoice face value. One the end customer pays they will receive the balance of the funds less the finance fee,

Most Factoring facilities will charge from 2% to 4% per month depending on the industry, credit rating of the customer and the advance rate,

A counterpart to the Accounts Receivable Financing is Purchase Order Finance. This is essentially Factoring or borrowing against future orders. There are strict guidelines to how this works, but if you sell a product that you purchase in finished condition and then sell it to a third party you may be a candidate for Purchase Order Finance.

This option works best for distributors but Accounts Receivable Factoring can work for companies in nearly any sector. If your company needs financing like this, the best option is to speak to a Professional Commercial Finance Broker because they will be up on all the trends and latest programs available through the various lender channels.

Best of all, in most cases the services of a Professional Commercial Finance Broker will not cost you a fee because the Broker will be compensated by the lender for them preparing the deal for them so it really is in your best interest.

Imagine this: You are the Ops Manager at a Trucking company doing about $1.0 million dollars in sales per month, you have kept your receivables under 60days for the most part, you are making your financial obligations and you get a registered letter from your bank calling your Line of Credit.

This is a real event for a Texas based Freight Carrier recently. After a brief panic attack, the CEO called his bank and the account manager told him that due to revisions of the banks risk structures are laid out, he has no choice but to pull the financing. He has 2 weeks from the receipt of the letter to repay the loan of $1.0 million. Upon dealing with a Professional Commercial Finance Broker, not only was the loan paid off at the bank on time, but the trucking company had a new Line of Credit of $1.75 million now.

This is a popular scenario today with the tightening restrictions on lending today. Even with the announcement of Presidents Obamas grand plans, banks are still pulling the plug on companies that are making it, forcing some to close down and put people out of work.

Most companies do not need more debt; they usually have enough of that. What they do need is cash flow. If this sounds similar to your situation, please, speak to a Commercial Finance Broker. They are trained professionals whose career is based on keeping on top of the new finance options coming out and knowing which lender does what deals the best.

It really does not matter if you are in Canada or United States; it is the same story all over. Commercial Lenders do vary in regards to the products they carry and the strengths they posses in the various industries. Just because a lender is good in Commercial Equipment Loans does not mean they can handle you Line of Credit in your trucking company. Commercial Finance Brokers have the experience to know who does what the best.

Commercial Finance Brokers are up to date with the latest changes and options available. Many Commercial Finance Brokers can handle Financing options ranging from Accounts Receivable Factoring, Purchase Order Finance, Export Finance, Commercial Equipment Loans or Commercial Mortgage.

The weekend is here and the President has been busy all week.

AIG execs received their bonuses, and then lost them; new rules being developed for bailout takers, more funds available for small and medium sized business and the US Government has entered the Accounts Receivable Factoring Industry.

Our President has really been busy this week and I will be very interested to see what the survey say about the confidence level in North America now that all this has been happening.

The President has done more in the last week than I have seem most elected officials do in an entire term of office. I am sure there will be more to come and quickly because the work that Mr. Obama has put into motion has just started and there is no end in sight to what has been going on in the US politics recently.

I have not met one person that is not impressed by the results of the AIG bonus issue (since I do not personally know any AIG execs). Most people are impressed by President Obamas strength and determination to get the economy back on track.

In regards to the additional funding for small and medium sized business, this has been a long time coming. I must say it is not a surprise to see this developing but most people in the Commercial Finance Industry are very pleased to see it. The economy need stimulation and the best place to do this is not with the major corporations but rather the small to medium sized companies as these are the employers of most people in North America.

The US Government getting into Accounts Receivable Factoring did come as a shocker thoughnever saw that coming. I have always said that the economy is going to see a major increase in the use of Accounts Receivable Factoring and Purchase Order Financing but for the government to handling the invoices from the parts suppliers to the automotive makerwow. That being said, not all companies will have access to the government funding however, but the use and acceptance of the government in using the Accounts Receivable Factoring method will make other companies use this type of financing and will help diffuse the stigma sometimes associated with Factoring.

Can not wait to see what happens next week

In another bold move to assist the economy the US Government released its intention to start Factoring US Auto suppliers invoices to the automotive sector.

NY Times (03/19/2009):

DETROIT ” The Obama administration moved on Thursday to stabilize the American auto industry by creating a $5 billion fund to support troubled parts suppliers.

The program will provide supply companies with much-needed access to liquidity to assist them in meeting payrolls and covering their expenses, while giving the domestic auto companies reliable access to the parts they need, the Treasury announcement said.

So what does this mean for the industry? Until the details are rolled out is hard to say specifically, but the announcement to get into the Accounts Receivable Factoring business is the latest installment of how far the US Government will go to get the economy back on track.

As I mentioned in a prior article that I predicted that Accounts Receivable Factoring is going to play a major role in the rebuilding of our economy ended up to be quite accurate.

Not everyone is familiar with Accounts Receivable Factoring so I will give you a quick overview. In it basic form, Accounts Receivable is a Line of Credit for Businesses which advances companies funds based on their Invoices that are outstanding.

In an average Accounts Receivable Factoring facility, the company that is financing their receivables will be eligible to receive between 80% and 90% of the invoice face value. One the end customer pays they will receive the balance of the funds less the finance fee,

The Factoring fee will vary depending on the advance rate and the days the funds are outstanding but the average is around 2% to 4% per month.

What is often used with Accounts Receivable Factoring is Purchase Order Finance. If you do get Purchase Order Finance you will need an Accounts Receivable Factoring line to go along with it in 99% of the cases I have seen.

This option works best for distributors but Accounts Receivable Factoring can work for companies in nearly any sector. If your company needs financing like this, the best option is to speak to a Professional Commercial Finance Broker because they will be up on all the trends and latest programs available through the various lender channels.

Generally speaking, the service of the Professional Commercial Finance Broker will not cost you anything as they are paid by the lender.