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Are you trying to determine what bad credit finance options that are acquirable to you? You need a new automobile, but you are unsure of who will finance it due to your bad credit?

There is no need to be too concerned about financing if you have bad credit. There are several different financing methods that are acquirable to most people, regardless of their credit history. The interest rates might be higher or they might require a larger down payment, but they might be just what you need to get financing for your purchase.

Financing a Car

If you need a new or used automobile, but you have bad credit, then your ideal source for financing will most likely be a finance company rather than a bank.

There are some companies that offer people with bad credit financing. The financing usually is dependent upon the car chosen, where you buy the vehicle, and what insurance and driving records that you hold.

There are other things that the finance company will think about as well, including your income, cosignors that you can get for the loan, and any other references that you might be healthy to provide.

Financing a Home

Real estate financing is a tiny trickier to find if you have bad credit, but it is in some ways easier to finance due to the collateral being the home.

Some of the huge considerations that are looked at when trying to get a mortgage loan with bad credit include income, home or real estate insurance that you have to purchase, how much your down payment is, and any references from past landlords that you might have.

You can find bad credit mortgage financing online, at some real estate companies, and at finance companies. You only have to be willing to look for them.

Other Kinds of Financing

If you need to find financing for other items, like electronics or collectible items, then you might find that this is more difficult.

The reason why it is more difficult to find financing for these smaller items is that they are much harder to repossess and to find buyers for them after they have been repossessed. These reasons make lenders more wary of financing people with bad credit. You might need to think about other ways to get the money to buy these kinds of times if they are needed.

It might be doable to find a lender that will finance these items, even if you have bad credit. If you are rejected, however, you should ask them if they have some suggestions of where you might get financing.

There are often situations when small, medium and even massive companies find themselves in a tough spot as far as revenues are concerned. They are at a loss of funds or finance to undertake a project that is expected to give good results. In such a scenario the option acquirable for financing is accounts receivable financing.

Accounts receivable financing is a secured loan for which accounts receivables are pledged as collateral with financial organizations. For small businesses it acts as a boon to help improve their cash flow. Generally small businesses find it hard to receive finance from a bank as they have less credit rating to show because they are yet in a developing stage. Unless finance is available, it is not doable for business to grow at a good pace. A timely finance from finance companies or even banks proves to be helpful for their growth. They often have customers who do not pay before 30-60 days. In such cases the accounts receivable are given as security to a financial organization and finance is received.

Any company can opt for accounts receivable finance. It is very favourite with transport or trucking companies, construction companies, manufacturing companies, textiles, staffing and engineering and other small businesses. It benefits medium business and any other business that needs finance on a regular basis. These companies would need to have accounts receivable in hand. The companies who can remember for such finances would need to have accounts receivables from credit worthy customers.

Moreover, aging of accounts happen to very massive extent. They might have regular contracts with organizations with good credit history or government organizations. Some financial organizations also think about the period for which the credit is given, which they like should be within 30- 60 days. Companies which are experiencing modest speed of growth and find it hard to keep the cash flow constant find the accounts receivable finance very beneficial.

These finances ensure growth and stability of a company. The process is very swift and you can get the finance in a very short period of time. As finances are acquirable on a timely basis, the companies might be healthy to get some advantage of reduction of overheads. The processing time of this type of financing is very less. Some of the companies also have online submission, and invoice submission systems which are then verified and checked and finance is wage in less than 2 days also which is a very timely help for these companies which need finance to undertake their regular activities. One more benefit that you get from such a finance function is that the accounts of the companies are managed superior as proper records and collection on the due date is very important. For the small companies it is an additional benefit that the business in itself is well organized to make the entire process cost effective.

Accounts receivable financing is acquirable to all those organizations that are in important need of finance or cash and are caught up in tricky situations wherein customers make payments very late. Companies find this financing highly beneficial to keep the growth of their organization on track.

Many business opportunities come with an associated challenge. For most entrepreneurial businesses, the greatest challenge is financing the business opportunities created by your income efforts. What are your options if you have a income opportunity that is clearly too massive for your normal scale of operations? Will your bank wage the necessary financing? Is your business a startup, or too new to meet the bank’s requirements? Can you tap into a commercial real estate loan or a home equity loan in adequate time to conclude the transaction? Do you decline the order? Fortunately there is an substitute way to meet this challenge: You can use Buy Order Financing & Letter of Credit financing to deliver the product and close the sale.

What is buy order financing?

Purchase order financing is a specialized method of providing structured working capital and loans that are secured by accounts receivables, inventory, machinery, equipment and/or real estate. This type of funding is excellent for start companies, refinancing existing loans, financing growth, mergers and acquisitions, management buy-outs and management buy-ins.

Purchase order financing is based upon bona fide buy orders from reputable, creditworthy companies, or government entities. Verification of the validity of the buy orders is required. The financing is not based on your company’s financial strength. It is based on the creditworthiness of your customers, the strength of the commercial finance company funding the transaction, and in most cases a letter of credit.

What is a letter of credit?

A letter of credit is a letter from a bank guaranteeing that a buyer’s payment to a seller will be received on time and for the correct amount. If the buyer is unable to make payment for the purchase, the bank is required to cover the full amount of the purchase. In a buy order financing transaction, the bank relies on the creditworthiness of the commercial finance company in order to issue the letter of credit. The letter of credit “backs up” the buy order financing to the supplier, or manufacturer.

Is buy order financing appropriate for your income program?

The perfect paradigm is a distributor buying products from a supplier and shipping directly to the purchaser. Importers of completed goods, exporters of completed goods, out-source manufacturers, wholesalers and distributors can effectively use buy order financing to grow their businesses.

Is buy order financing appropriate for growing your income orders?

Purchase order financing requires you to have management expertise- a proven track record in your particular business. You must have bona fine buy orders from reputable firms that can be verified. And you must have a repayment plan; often this is from a commercial finance company in the form of accounts receivable or asset-based financing.

You should have a gross margin of at least 25% to benefit from buy order financing. Sellers of services or commodities with low margins, such as lumber or grain, will not qualify.

The bottom line decision for buy order financing:

It can take two or more years to develop a profitable business. Banks generally base their lending limits on a business’ performance for the past two or three years. Buy order financing, combined with letters of credit and/or accounts receivable or asset-based financing can give you adequate funds to cover your operating costs, financing costs and still realize significant profits. If you remember for buy order financing, you can grow your business by taking advantage of massive buy orders and eventually remember for bank financing.

The very terms “software leasing” and “software financing” are confusing to many businesspeople. This is due to the fact that software is typically not seen as something that is bought over time.

This view is shared by both end-users, and the developers of software. Companies who think nothing of financing a car or a new personal system will stress over how they will pay for pricey new business software. And the producers of software see no need for offering a software leasing or a software financing option.

But times are changing.

Third celebration equipment finance companies – companies who offer small and medium size businesses equipment financing and working capital – have responded to a need for software financing and software leasing. Thus, they are starting to include software amongst the equipment they finance or lease. There is one large overriding reason for this shift:

The High Cost of Buying Software

The easy fact is this: Software can be very, very expensive. Oftentimes more pricey than the hardware that runs it.

Now, keep in mind that when we are speaking about software in this way, we are generally speaking about “vertical software”. Vertical software is software that is written for a specific, narrow industry (this can include industry-specific point-of-sale software, ERP systems, specialized databases, etc). It is not software that’s acquirable on the shelf at your local office supply store (the software you see there, even the business programs and operating systems, are “horizontal software” – they can be used crossways a variety of industries, and are relatively affordable. )

A good, clear example of vertical software is an auto parts store – they use software that’s specifically written for the auto parts industry. Another example is your local jewelry retailer – they likely use a point-of-sale system specifically prefabricated for the jewelry industry.

To comprehend how software financing and software leasing can positively affect a business, it is important to comprehend the advantages of vertical software first.

For most businesses, Vertical Software usually means far more efficient business processes. In the case of an auto parts store, for example, the software will already expect the thousands of vehicle makes and models. And will nearly certainly be updated each year. The jewelry store’s software will differentiate the subtle differences between two diamonds by any number of categories. And so on.

In fact, these “vertical” software programs are so effective, and become so crucial to day-to-day operations, that businesses often need this type of software to remain competitive. In many cases, it’s not an option to do without.

However, since the software is so narrowly focused, it usually comes with a hefty price tag. The developer will sell relatively few duplicates as opposed to a word processing program (which will sell in the millions), so they must get a premium for their work. Vertical software can sometimes reach five figures for a single license.

This brings an obvious problem: “Businesses need the software, but it’s very pricey to buy outright. “

And that’s where software leasing and software financing come in – business don’t have to “buy” it upfront.

The Advantage of Software Leasing and Software Financing

The advantage of financing or leasing software is clear:

Software leasing and software financing take the large up-front cost of new software out of the equation. Like most other business equipment, software is now beginning to be seen as a tangible quality (this was not always the case. ) This means software can largely be treated as any other equipment buy in the case of financing or leasing. A business can finance that new ERP system instead of having to budget a large cash outlay.

This can be very beneficial to the bottom line, as software generally pays for itself over time. In fact, since “vertical” software nearly always reduces the cost of doing day-to-day business, leasing or financing stated software can actually create a positive cash flow right away.

But Who Offers Software Financing or Software Leasing, and how does it Work?

It’s true that software developers have been very slow to embrace the business model of software financing or software leasing. They would like to be paid up front for their software.

Likewise, banks, being part of an “older” industry, are also largely reluctant to finance software.

However, third celebration equipment finance companies who specialize in small and medium sized business equipment financing often offer captivating software lease and software financing packages. What happens is the equipment finance company pays the developer in full, and then provides the software to the end individual under a finance or lease agreement, often at very captivating rates. In all actuality, it’s fundamentally the same as financing or leasing most other equipment.

Of course, like any other financing, the agreements can (and will) vary from traditional fixed rate financing to a “software lease” with a buyout at the end, etc. And the rates and terms also vary – your individual equipment finance company will have more details.

All in all, software financing and software leasing have definitely entered the business consciousness, and because it is so friendly to the bottom line, it is a business model that is here to stay.

Many a time, a company or business organization needs to purchase pricey automobiles for the purpose of meeting the various business requirements. Business car financing is a viable option in such cases. The construction companies, sanitation companies and several other companies require business car financing to meet the various stipulations of their work.

The world of business car financing, at times is quite confusing. Therefore you need to give vital importance for getting loan to purchase business vehicles. There are some reliable financing companies that wage you superior terms for business car financing through easy application procedures and fast approval of applications.

There are number of business automobiles that require financing. Ambulance financing might be required by medical industry. An ambulance should ideally contain the latest medical equipment. Since the cost of ambulance is near to six figures, it is often essential to go for loans. However it is important to choose a reliable financing company that offers immediate loan approval without any cumbersome procedures.

Business car financing is essential in case the company wishes to purchase a garbage truck. A recycling garbage truck is often essential for collecting specialized wastes like glass, paper, aluminum, asphalt and plastics for the purpose of recycling. These trucks are essential for some industries that need to recycle the wastes of the manufactured products. The recycling trucks are very pricey and thus help of financing companies is essential.

Business car financing is also essential for buying hearse if your business is providing services for funeral purposes. Driving a hearse down the road followed by automobiles always brings respectful feeling. But you might not have even heard the word ‘Hearse financing’ since hearse is a limited use vehicle. However some reputed financing companies wage hearse financing too. You can get one or many hearses from such companies without any tiring procedures.

Boom truck financing is required for a business that provides tree trimming services or loading and unloading tasks. Boom truck is far superior than heavy cranes. However it is pricey and so it is important to go for loan to get the boom truck for your business purposes.

Business car financing is particularly important in the construction industry. Mixer trucks are used in the construction business for mixing and pouring concrete and so on. They are very pricey and so mixer truck financing is a must. However, it gets very difficult to acquire financing for buying mixer trucks as they are used for very limited purposes. But some legitimate financing companies wage loan for mixer trucks too.

Commercial car financing is essential for the purpose of buying buses, vans, dump trucks and bull dozers for meeting the various business requirements. One needs an expert’s help to get financial help for acquiring commercial vehicles. Commercial, recreational automobiles are often pricey and so they require the assistance of financing companies. Before going for a loan, make sure that the financing company has been in existence for longer period of time. Also ensure that there is no cumbersome procedure for getting the financial help. Fast approval of procedures and lower interest rates characterize good business car financing companies.

Chris Fletcher is an Account Executive at a national equipment finance company providing new and used Business Car Financing at http://crestcapital. com/catalog/Business_Vehicle_Financing as well as financing for many other equipment types and industry verticals.

Whenever one invests in real estate the most important thing that they have to look for are the finances. Any real estate property be it apartment or other requires large amounts of money and hence the need of apartment financing. The choice of a particular financing option largely affects the investment outcomes and hence one must tread cautiously in the matter of apartment financing. There are many financing options that one can go for in apartment financing such as banks and private lenders. There are also some prerequisites that one can think about before going in for apartment financing. The traditional methods of apartment financing do not grant much flexibility but with the growth of private lenders there is much flexibility which one can think about in apartment financing.

Apartment Financing Options

Before considering the different financing options one must make sure how long one is going to hold the property and whether the investment is long term or short term because this has important implications in the choice of finance one can get. When one is considering owning the apartment for a short period then one can surely go in for the adjustable rate mortgage or the ARM for short. The ARM apartment financing option offers an interest rate that changes with the index. The initial interest rate in the ARM is more competitive than other apartment financing options. Interest rate fluctuations in the future impact the finances and hence the ARM is important in this regard. Also the maximum interest rate also works as endorsement for those who hold the mortgage. For those wanting to remain long in the business there is the fixed rate mortgage apartment financing. The rate of interest for the borrowers in this apartment financing remains the same for the whole period of the mortgage and hence it offers the borrowers cost effective apartment finance.

When one goes for the fixed interest rate apartment financing when the interest rates are low all the advantage is for the borrowers since they remember for the same interest rate until all the loan is repaid. The opposite happens when the interest rates are higher in the market. First time investors must also look for the value of the apartment because it affects the type of finance they will receive. Generally higher the value of the apartment the ideal interest rates will be got from direct lenders or investment companies. However when the value of the property is smaller one can think about the financing options from ones local banks.

Apartment financing from smaller banks or direct lenders is another important option that one can think about in apartment financing because they offer flexible apartment loans as compared with other reputed banks and lenders. One can have finances like non-recourse as well as partial-recourse loans from the small banks and the direct lenders who are always on the look out for borrowers. In the event of non-repayment of the amount the traditional lenders can claim the property and recover their loan while in the conventional loan the lender can't claim the apartment for which finance is given but they can claim the property that has been mortgaged as the security for their finances.

Find out more at Learn Apartment Financing

Buying a business investment without real estate requires specialized business opportunity financing. Even though this kind of business financing is available, there are several potential problems which should be anticipated and avoided by prospective buyers.

In order to buy a business, a commercial borrower is likely to need business financing. If the business includes commercial real estate, the borrower will need a commercial mortgage. If the business buy does not involve real estate, a business borrower must use a business opportunity loan.

When obtaining a business opportunity loan, borrowers will discover that many lenders simply do not wage business loans that do not include real estate as part of the business purchase. There are several other important business financing issues to examine prior to buying a business without commercial property.

The level of interest for buying a business opportunity investment has increased due to the reduction of activity involving residential real estate investing. However, because there are so many critical differences between financing residential real estate and business financing, it is important for potential business owners to educate themselves before proceeding.

This summary is designed to address the one-of-a-kind business financing stipulations involved when real estate is not involved. Our recommended approach to business opportunity financing is provided below.

Prospective business owners should start business opportunity investment financing plans by formulating a realistic assessment of cash acquirable for a down payment and desired maximum business buy price. In most business financing scenarios, a total down payment approximating 25% of the buy price is advisable. Usually seller financing is permissible for a portion of the down payment, but a potential buyer generally needs to plan on investing a minimum of 10% or more of the buy price from their own funds even if the seller is providing 20% or more.

Purchasers should evaluate whether a Small Business Administration loan is relevant for their particular business financing and investing circumstances. This step is both important and somewhat complicated, and the involvement of an SBA loan expert is strongly advised. Among the issues to explore are whether collateral is acquirable for SBA financing and how important refinancing is to your overall business opportunity financing process.

Buyers should make an primeval determination concerning the length of lease to be arranged in conjunction with buying the business. As noted previously, business opportunity financing and investing does not involve the buy of commercial real estate, so arrangements must be prefabricated for a long-term lease. The length of the lease is important because the normal business finance terms will restrict the length of business financing to the period covered by the lease (although buyers should expect a ten-year maximum for investment business loans). For example, with a seven-year lease, the commercial loan is likely to be for seven years, and even with a fifteen-year lease, the commercial financing will probably expire in ten years.

Even though real estate is not included in a business opportunity transaction, buyers should nevertheless investigate whether including real estate is a viable option or not in order to buy a business. With the inclusion of commercial property, you can obtain a longer business loan and the interest rate will be lower. However, improved business financing terms should not be the sole bourgeois you look at, since the absence of a commercial mortgage can establish to be a significant advantage in a declining real estate market that currently exists in many areas of the country.

Investors and buyers should discuss business finance options with a business opportunity loan expert before making any offers to buy a business investment. These discussions should include issues such as down payment possibilities, potential buy price, seller financing, tax return requirements, buyer credit scores and collateral options.

As a final precautionary note, in most circumstances the availability of business opportunity financing is more restricted than commercial real estate financing. There are also some problems one-of-a-kind to business opportunity loans, and commercial borrowers should make each effort to refrain these potential business financing complications.

Introduction

A venture financing can be structured using one or more of several types of securities ranging from straight debt-to-debt with equity features (e. g. , convertible debt or debt with warrants) to common stock. Each type of security offers certain advantages and disadvantages to both the entrepreneur and the investor. The characteristcs of your situation and current market forces will impact the type and mix of security package that is right for you.

Types of Securities
Senior debt: Which is usually for long-term financing for high-risk companies or special situations such as bridge financing. Bridge financing is designed as temporary financing in cases where the company has obtained a commitment for financing at a future date, which funds will be used to retire the debt. It is used in construction, acquisitions, anticipation of a public understanding of securities, etc.
Subordinated debt: Which is subordinated to financing from other financial institutions, and is usually convertible to common stock or accompanied by warrants to buy common stock. Senior lenders think about subordinated debt as equity. This increases the amount of funds that can be borrowed, thus allowing greater leverage.
Preferred stock: Which is usually convertible to common stock. The venture’s cash flow is helped because no fixed loan or interest payments need to be prefabricated unless the preferred stock is redeemable or dividends are mandatory. Preferred stock improves the company’s debt to equity ratio. The disadvantage is that dividends are not tax deductible.
Common stock: Which is usually the most costly in terms of the percent of ownership given to the venture capitalist. However, understanding of common stock might be the only feasible substitute if cash flow and collateral limits the amount of debt the company can carry.

While apiece of these securities has one-of-a-kind characteristics, they can be grouped into two categories: debt or equity. In structuring a venture financing, the primary question is whether the financing should be in the form of debt or equity.

Disadvantages of Debt to a Company

From a company’s viewpoint, there are two potential disadvantages to debt.

An excessive amount of debt can strain a company’s credit standing, thereby reducing its flexibility in meeting future long-term financing stipulations on a favorable basis. It can also negatively affect a company’s capability to obtain short-term credit. Of course, the form of debt the venture financing takes makes a difference. For example, subordinated debt will have less impact on borrowing capacity than senior debt.
The venture capitalist has the option of calling his loan if the company is in default of the loan agreement. This remedy, which is not acquirable to him under other financing agreements, puts him in a superior position to influence the company’s affairs when it is in default.
Advantages of Debt to a Venture Capitalist

From the venture capitalist’s viewpoint, there are three principal advantages to debt.

There is a greater likelihood that the venture capitalist will get his principal back and, at least, a small return. Many of the companies in the average venture capitalist’s portfolio are referred to as “the living dead. ” Needless to say, their performance has turned out to be disappointing. In some cases, these companies are healthy to repay principal with interest but have limited appeal to potential acquirers or the public. As a result, a venture capitalist with an investment in such a company’s common stock might be unable to recover his investment within a reasonable period, if at all.
As previously discussed, under certain circumstances the venture capitalist is in a superior position to influence the company’s affairs.
The venture capitalist has a senior claim. However, it should be emphasized that the meaningfulness of a senior claim depends on the marketability of a company’s assets and the amount of equity it has to cushion its creditors’ position. For example, in the case of a start-Lip situation with tiny or no equity, a senior claim means tiny or nothing.
Percentage Ownership Needed

While the difference might not be great, depending on the particular circumstances of the company, a debt position involves less risk than an equity position for the venture capitalist. Accordingly, a company should not have to relinquish as much ownership when a financing is in the form of debt. However, this advantage must be weighed against the disadvantages of debt.

No matter how the venture financing is structured, it must be priced so that it is captivating to the venture capitalist. There is no clear-cut answer as to how much ownership a company will have to relinquish to make a financing attractive. Broadly speaking, the greater the potential return perceived by the venture capitalist, the less ownership he will demand. In other words, if a company has a patented product which a venture capitalist thinks is revolutionary and highly marketable, he will undoubtedly settle for less ownership than he would in the case of 4 company with a relatively less captivating product. Thus, his eventual position will be a business judgment based on his potential return.

Before you enter negotiations with the venture capitalist, you should determine what your company is worth and how much of your company you want to sell. The following procedure can be used to get a rough intent of how much ownership you will have to give up to make the financing attractive.

Estimate the risk associated with the venture financing. If the investment is very risky, the venture capitalist might be looking for a return as high as 15 times his investment over five years. Conversely, if a relatively low degree of risk is involved, the venture capitalist might be satisfied with doubling or tripling his investment over five years.
Make a reasonable estimate of the price/earnings ratio applicable to comparable publicly held companies. The market value of the company can then be projected by multiplying forecasted annual earnings by the estimated price/earnings ratio for comparable companies.
Divide the estimate of the total dollar return the venture capitalist wants by the projected market value of the company. This yields the percentage ownership the venture capitalist will need, as oil the future date, to realize his desired return. It is important to note that any equity financing required during the interim period must be considered in making these calculations.

Case Study

Suppose XYZ Company, Inc. , a start-up, needs $500,000. The company’s product appears to have excellent potential. However, because the product is new and unproven, an investment in the company would be extremely risky. Accordingly, it is reasonable to estimate that a venture capitalist would want a potential return of at least ten times his total investment in five years. Management estimates that the company should be healthy to “go public” at 20 times earnings in five years. Projected after-tax earnings for the fifth year is $1,250,000. Additional long-term financing of $500,000 will be needed at the beginning of the third year.

Scenario I

In the calculations below it is assumed that the venture capitalist who provides the initial financing ($500,000) also provides the subsequent financing ($500,000), and that he wants a return equal to ten times both. However, it should be noted that if the company prefabricated satisfactory progress during the first two years, it would be reasonable to adopt that the venture capitalist would be satisfied with a lower return on the subsequent financing since it would involve less risk.

Estimate of Total Dollar Return Required Total Investment $ 1,000,000 Estimate of Return Required X 10
$10,000,000
V. Projected Market Value in Fifth Year VI. VII. Projected Earnings $1,250,000 VIII. Estimate of P/E Ratio x 20
$25,000,000
Percentage Ownership Needed in Fifth Year Estimate of Total Dollar Return quired $10,000,000 Projected Market Value of Company in Fifth Year 25,000,000
40% Scenario II

In this set of calculations it is assumed that a second investor provides the subsequent financing ($500,000). The calculations show that the venture capitalist who provides the initial financing ($500,000) would need 20% ownership as of the fifth Year to realize the return he wants. However, since the ownership to be given up for the subsequent financing will reduce his ownership position, he will want more than 20% ownership initially. For example, if it is assumed that 15% ownership will have to be given up for the subsequent financing, the venture capitalist who provides the initial financing would need 23% ownership initially to end up with 20% ownership in the fifth year.

Assume the same facts as Case I, except a second investor provides the subsequent financing for 15% ownership.

Estimate of Total Dollar Return Required Total Investment $ 500,000 Estimate of Return Required X 10
$5,000,000
Projected Market Value in Fifth Year Projected Earnings $1,250,000 Estimate of P/E Ratio x 20
$25,000,000
Percentage Ownership Needed in Fifth Year Estimate of Total Dollar Return required $5,000,000 Projected Market Value of Company in Fifth Year 25,000,000
20%

Thus, it appears that the investment ($500,000) might be captivating to an interested venture capitalist if the principals of XYZ Company, Inc. are willing to give up approximately 23% ownership.

Conclusion

It must be emphasized that the above procedure is highly subjective. And, you should remember that what really matters is how the venture capitalist views the relative attractiveness of a company. Typically, venture capitalists are satisfied with a minority interest. Even though a venture capitalist might demand a majority interest, generally they are not interested in operating control. Some of them like to tie the amount of ownership they finally get to the performance of the company. For example, a venture capitalist who wants a majority interest initially might give the principals the opportunity to acquire part of it back. Such an arrangement can be used to compromise on pricing when there is a significant disagreement between the principals and the venture capitalist.

To entrepreneurs unfamiliar with venture capital, it might appear that the venture capitalist is seeking an breathtaking high return on his investment. However, it is important to comprehend that, even under the ideal of circumstances, only a minority of the companies in which the venture capitalists invests will be successful. He is well aware of this, and must make a adequate return of his successful investments to come out with an acceptable return overall.

Whether you are starting an import business or have an established importing business, it can be a very profitable venture if you have the right financing to grow your business. Imports are defined as: a good that crosses into a country, crossways its border, for commercial purposes; a product, which might be a service that is provided to domestic residents by a foreign producer; or a combination of the two.

Starting or running an import business has never been more profitable because of computers, the internet, and the availability of low cost imports from countries such as China and Mexico. These imports might be resold for up to ten times their cost depending on the competition in your field of operations.

It is essential that you have good, honest suppliers plus creditworthy customers with buy orders for your imports. If you have the right financing, your business can grow exponentially. But how do you finance growth if your own resources or bank lines of credit are not adequate to take advantage of huge opportunities? A combination of buy order financing, accounts receivable financing with inventory financing might be the solution.

Definitions:

Purchase Order Financing

Purchase Order financing is the assignment of buy orders to a third party, a commercial finance company, who then assumes the obligation of billing and collecting. Buy order financing can be used to finance all current and subsequent orders to improve your company’s cash flow. The process works as follows: 1) Your company obtains a buy order for products to be sold another company; 2) A letter of credit might be issued, based on a finance companies’ credit, to guarantee payment to suppliers or factories producing the goods; 3) The order is shipped, delivered and accepted by your customer; 4) The customer receives an invoice for the goods; 5) The Buy Order Company pays the supplier/factory; 6) a commercial finance company or Accounts Receivable Finance Company pays the Buy Order Financing Company after the products are delivered to your customer; 7) The customer pays the commercial finance company for goods received; The accounts are settled and the profit is paid to you.

Accounts Receivable Financing

Accounts Receivable Financing is the selling or pledging of your company’s statement receivable, at a discount, to a Factor, a Commercial Finance Company or to an Accounts Receivable Financing Company who might adopt a risk of loss. You receive a portion, usually 80% to 90% of the grappling value of your receivables in advance of payment from your customers in return for a fee, or interest, to be paid to the commercial finance company. When the commercial finance company is paid by the customer, the appropriate fees are deducted and the remainder is rebated to you. “Accounts receivable financing” is also called accounts receivable factoring, factoring financial services, invoice factoring and cash flow factoring. The terms are used to convey the same meaning.

Inventory Financing

Inventory financing is a loan secured by the inventory of your business. Inventory finance enables import companies to hold more stock without cash flow strain and to generate more sales. Inventory finance is often part of a Buy Order and Accounts Receivable Financing commercial finance package.

These three types of financing can enable an import business to increase purchasing abilities dramatically; you can accept larger orders and grow your business exponentially. You can use your inventory to leverage your purchasing power. You can use your customer’s credit to obtain these three types of financing; and you can use the commercial finance company’s credit to obtain a letter of credit.

The concept of financing your import company with “other people’s money” is part of a innocuous and sound business plan. Add strong product calibre controls, inventory controls, and good bookkeeping to maximize the success of your import company.

Copyright © 2007 Gregg Financial Services

www. greggfinancialservices. com

There is a reason why accounts receivable financing is a four thousand year old financing technique: it works. Accounts receivable financing, factoring, and quality based financing all mean the same thing as related to quality based lending- invoices are sold or pledged to a third party, usually a commercial finance company (sometimes a bank) to accelerate cash flow.

In easy terms, the process follows these steps. A business sells and delivers a product or service to another business. The customer receives an invoice. The business requests funding from the financing entity and a percentage of the invoice (usually 80% to 90%) is transferred to the business by the financing entity. The customer pays the invoice directly to the financing entity. The concurred upon fees are deducted and the remainder is rebated to the business by the financing entity.

How does the customer know to pay the financing entity instead of the business they are receiving goods or services from? The legal term is called “notification”. The financing entity informs the customer in writing of the financing agreement and the customer must concur in writing to this arrangement. In general, if the customer refuses to concur in writing to pay the lender instead of the business providing the goods or services, the financing entity will decline to advance funds.

Why? The main security for the financing entity to be repaid is the creditworthiness of the customer paying the invoice. Before funds are advanced to the business there is a second step called “verification”. The finance entity verifies with the customer that the goods have been received or the services were performed satisfactorily. There being no dispute, it is reasonable for the financing entity to adopt that the invoice will be paid; therefore funds are advanced. This is a general view of how the accounts receivable financing process works.

Non-notification accounts receivable financing is a type of confidential factoring where the customers are not notified of the business’ financing arrangement with the financing entity. One typical situation involves a business that sells affordable items to thousands of customers; the cost of notification and verification is excessive compared to the risk of nonpayment by an individual customer. It simply might not make economic sense for the financing entity to have several employees contacting hundreds of customers for one financing customer’s transactions on a regular basis.

Non-notification factoring might require additional collateral stipulations such as real estate; superior credit of the borrowing business might also be required with individualized guarantees from the owners. It is more difficult to obtain non-notification factoring than the normal accounts receivable financing with notification and verification provisions.

Some businesses worry that if their customers learn that a commercial financing entity is factoring their receivables it might injured their relationship with their customer; perhaps they might loose the customer’s business. What is this worry, why does it exist and is it justified?

The MSN Encarta Dictionary defines the word worry as:

“Worry

verb (past and past participle wor•ried, present participle wor•ry•ing, 3rd mortal present singular wor•ries)Definition: 1. transitive and intransitive verb be or make anxious: to feel anxious about something unpleasant that might have happened or might happen, or make somebody do this

2. transitive verb annoy somebody: to annoy somebody by making insistent demands or complaints

3. transitive verb try to bite animal: to try to wound or kill an animal by biting it

a dog suspected of worrying sheep

4. transitive verb

Same as worry at

5. intransitive verb proceed despite problems: to proceed persistently despite problems or obstacles

6. transitive verb touch something repeatedly: to touch, move, or interfere with something repeatedly

Stop worrying that button or it’ll come off.

noun (plural wor•ries)Definition: 1. anxiousness: a troubled unsettled feeling

2. cause of anxiety: something that causes anxiety or concern

3. period of anxiety: a period spent feeling anxious or concerned…”

The opposite is:

”not to worry used to tell somebody that something is not important and need not be a cause of concern (informal)

Not to worry. We’ll do superior next time.

no worries U. K. Australia New Sjaelland used to state that something is no trouble or is not worth mentioning (informal)”.

Query: if a business is financing their invoices with accounts receivable financing, is this an indication of financial strength or weakness? Query: from the point of view of the customer, if you are buying goods or services from a business that is factoring their receivables, should you be concerned? Query: is there one answer to these questions that fits all situations?

The answer is it’s a paradox. A paradox is a statement, proposition, or situation that seems to be absurd or contradictory, but in fact is or might be true.

Accounts receivable financing is both a sign of weakness with regard to cash flow and a sign of strength with respect to cash flow. It is a weakness because, prior to financing, funds are not acquirable to wage cash flow to pay for materials, salaries, etc. and it is an indication of strength because, subsequent to funding cash is acquirable to assist a business’ needs for cash to grow. It is a paradox. When properly structured as a financing tool for growth at a reasonable cost, it is a beneficial solution to cash flow shortages.

If your entire business depended on one supplier, and you were notified that your supplier was factoring their receivables, you might have a justifiable concern. If your only supplier went out of business, your business could be severely compromised. But this is also true whether or not the supplier is utilizing accounts receivable financing. It’s a paradox. This involves matters of perception, ego and character of the personalities in charge of the business and the supplier.

Every day, each month thousands of customers accept millions of dollars of goods and services in contracts that involve notification, verification and the factoring of receivables. For most customers, “notification” of accounts receivable financing is a non-issue: it is merely a change of the study or addresses of the payee on a check. This is a job for a mortal in the accounts payable department to make a minor clerical change. It is a mainstream business practice.

Bobby McFerrin wrote and performed a song called “Don’t Worry, Be Happy” for the motion picture “Cocktails” starring Tom Cruise. The song was a number one U. S. pop hit in 1988 and won the Grammy for Ideal Song of the Year. Here are the lyrics:

”Here is a tiny song I wrote

You might want to sing it note for note

Don’t worry be happy

In each life we have some trouble

When you worry you make it double

Don’t worry, be happy. . . . . .

Ain’t got no place to lay your head

Somebody came and took your bed

Don’t worry, be happy

The land lord state your rent is late

He might have to litigate

Don’t worry, be happy

Look at me I am happy

Don’t worry, be happy

Here I give you my phone number

When you worry call me

I make you happy

Don’t worry, be happy

Ain’t got no cash, ain’t got no style

Ain’t got not girl to make you smile

But don’t worry be happy

Cause when you worry

Your grappling will frown

And that will bring everybody down

So don’t worry, be happy (now). . . . .

There is this tiny song I wrote

I hope you learn it note for note

Like good tiny kids

Don’t worry, be happy

Listen to what I state

In your life anticipate some trouble

But when you worry

You make it double

Don’t worry, be happy. . . . . .

Don’t worry don’t do it, be happy

Put a smile on your grappling

Don’t bring everybody down like this

Don’t worry, it will soon past

Whatever it is

Don’t worry, be happy”

The bottom line: “notification” should not be an issue in most situations involving accounts receivable financing; non-notification factoring is another option that is acquirable for businesses concerned with confidentiality that meet minimum credit standards for quality based lending. Bobby McFerrin was right: “Don’t Worry, Be Happy”.

Copyright © 2007 Gregg Financial Services

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