Your Small Business Financial Advocate

2020-12-09T11:04:00.004-05:00

We have been helping small businesses and individuals with their financial and cash flow issues since 1999.

Our Services -

CASH FLOW MANAGEMENT
COMMERCIAL/ BUSINESS FUNDING
BUSINESS NOTES ADVISORY
BUSINESS VALUATION ANALYSIS
PROFIT ENHANCEMENT PROFILE
COST ACCOUNTING
CERTFIED LOAN SIGNINGS

Current or Future Business Owners -

We utilize a proprietary analysis to help determine an entrepreneur's business financial needs. Whether a client is in a start-up or a mature growth phase, we can help.

We are advisers, strategists and advocates for you, the client. We will help you decide what capital structure and processes will be most advantageous for you to solve your current “financial pain”..

We fit the financial solution and product to the specific needs of your business . If business owners do not know their financial options, they have none. We are an available resource to help entrepreneurs with their piece of mind to allow them to more efficiently run the day to day operations of their unique business.

Current or Future Property Owners -

We are Certified Notary Loan Signing Agents. What this means is that we have undergone specific training to gain the NSA certification by the National Notary Association.

When a real estates property is bought or sold, an attorney or title company hires an independent Certified Loan Signing Agent to facilitate the document signing and notarizations of the required closing paperwork.

Purchase
Refinancing
FHA
USDA
VA
Reverse Mortgages

A smooth, professional, and confidential experience is our benchmark.

genoiorio@gmail.com

So You Want to Be Business Owner ?

2016-02-10T11:28:00.000-05:00

-- SO YOU WANT TO BE A BUSINESS OWNER? ---

Starting a business should be exciting - however, many budding entrepreneurs - especially those that are starting a business for the first time and have only worked in the "corporate world" do not pay attention to basic issues concerning the financial management of their new business

The vast majority of new business owners do not have formal education or training in finance (nor should they) — they are usually starting up what they hope will be the next Star Bucks. New business owners concentrate on hiring advertising, management, and super salespeople.

Usually, they’re very involved with their core product or service. However, they often neglect some of their new company's key areas - finance being one of the most critical.

New entrepreneurs know that they "should" have a working knowledge of finance, but tell themselves that they will get around to finances once they are more profitable...

5 important concepts that all business owners need to be aware of:

CASH IS KING - Always.

- Never run out of money. As a business owner, you do NOT want to have more month at the end of your money.
- Know your short term and long term burn rate. The amount of money flowing out of your business each month.
- Never run out of money. Did I mention that cash is king?

Have financial systems in place from day one. What are financial systems?
- COST Accounting spreadsheets - You should know how much net profit you are generating monthly , weekly and even daily.
- BOOKKEEPING System - ideally a software package (Quick Books is a good program) Keep in mind - garbage in garbage out. Get help setting up your accounting system
- INVENTORY Management System - Know how much 'captive profit' you have in your warehouse.

Have Metrics for EVERYTHING - How long do your employees take for lunch? Do you have a weekly cash flow report? How many unproductive hours per employee ? How long are your clients taking to pay? What is your discount rate? What is your square foot : sales ratio?, Etc...

Have a business plan in place - Your banker, your CPA and other professional advisers tell you that you should have a business plan in place if you need to borrow money. This is only the beginning. You need a Business Plan ALWAYS. "If you do not know where you are going - You WILL end up somewhere else." Be aware that a true business plan is not a static document that that you only pull out when you need to borrow money. It should be an ongoing reference continually updated as your business model evolves (and it should be customer - driven...)

Choose your business professionals wisely - Yes, I am sure that your wife's cousin's brother's stepson works for a bank, but is he really competent? or ( like many "banking relationship managers" ) just a salesperson trying to convince you to take on a loan that "every business should have" (the deal of the week) that you do not need, do not want and your business cannot afford. It may be tempting to use your wifeʼs friendʼs daughter as your CPA, because she is the local business socialite in a networking group, but, familiarity does NOT always equate with competence.

Starting a new business should be exciting and fun - and it can be - if you have competent financial advocates on your side.

More to follow on this subject in a future post...

Business Financial Pains...

2011-12-21T22:56:00.001-05:00

We utilize a proprietary analysis to help determine an entrepreneur's business financial needs. Whether a client is in a start-up or a mature growth phase, we can help. We have been helping small businesses solve their cash flow issues since 1999. We are advisors, strategists and advocates for you, the client.

We will help you decide what capital structure and processes will be most advantageous for you to solve your current “financial pain”.. We fit the financial solution and product to the specific needs of your business .

If business owners do not know their financial options, they have none. We are an available resource to help entrepreneurs with their piece of mind to allow them to more efficiently run the day to day operations of their unique business.

Our Profit Enhancement Profiles are brutally honest.

Have you ever said one or more of the following statements?

“ I have all of the business that I can handle."

" Retirement is not an option"

“ My cash flow does not allow me to do that!"

" I sold another business last year and I am still collecting monthly payments"

" My business did not do too well last year, how can I afford that new equipment?

" I'd like to be able to lower prices and increase my volume."

" I would love to pay myself what I am worth”

" A marketing campaign is too expensive for my business. I cannot get money to do that! "

" I don't have a lot of time.."

" My suppliers keep raising prices!"

" I always seem to be waiting to get paid."

" I am 'hoping' to grow this year."

" My debt is killing me!"

" I would love to offer my customers better payment terms, but, ..."

“ I would like to stop paying rent "

“ I have to put those plans on the back burner."

" I would like to be able to afford that!"

" I have always wanted to start a business doing..."

" I know I should have that type of insurance, but..."

" My business is too new to qualify for funding..."

" I would love to move into a larger place, but..."

"Expanding my business is not an option right now."

" I follow my industry's benchmarks when I price a project."

" I know, I should be offering those employee benefits, but.."

" Free time? What's that?"

" Banks don't like to work with my type of business..."

Contact us, we may be able to help!

Help, I Owe Taxes!

2011-09-19T16:06:00.005-04:00

Situation:

You recently found out that you (and your business) owe the IRS over $50,000. You went to your bank to get a loan to pay the IRS off and your bank told you they cannot help you.

Do you have any options?

Solution:

Going to your local bank should always be only your first option. I often receive referrals from bankers to help their clients...You have a wealth of options available to help you with this current financial pain.

My 1st suggestion is to immediately contact a competent "Enrolled Agent' or CPA to help represent you with the IRS, or use an attorney. Do NOT represent yourself! You need to be proactive with this issue.

Oftentimes you can arrange (with the help of a tax or legal professional) a reasonable payment plan.(Feel free to Email me for a referral list of these professionals).

Next, insure that you are (or can become) current, with all your other taxes, including state and local. Do not ignore these issues. Businesses can be forced to close because of tax issues (not to mention the day to day stress that will hamper a business owner's focus)

There are a number of options for funding even if you have IRS and other tax issues. Keep in mind that you are NOT alone in this. A good percentage of small business owners are in the same position you are.

Regardless, always investigate ALL options. 'If you do not know your options, you have none"

Please – Contact me for a no-obligation review of your cash flow needs.

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Do you know a business owner that has "dead" inventory? or equipment?

This type of inventory is called captive profit.

We have programs in place working with Marmista Inventory Solutions to help turn this "captive profit" into a cash flow solution.

Contact us today, for a FREE, no obligation consultation.

Profit-Killing Business Tactics and How to Defend Against Them (Part 1 of a series - revisited)

2011-07-25T09:46:00.000-04:00

1. Being A Bully- When A Prospect “Knows” That You Need Their Business.

Tactic: Oftentimes, prospects will “bully” sales associates to make undo, favored concessions and price cuts when they think the salesperson is desperate to close the deal (either because of a need to make quota or to make that big commission). Emotional outbursts, saying the price is outrageous, etc.. to goad the sales person to agree to additional services at lower fees.

Defense: Stay unemotional. Remember the value-added that you (and your company) put into the sale. Your company should have a S.O.P. (standard operating procedure) for all objections in the sales cycle that you may encounter. Keep a full pipeline of prospects at all times so that one rejection will not keep you from monthly commissions.

Also, if you are bullied into a lesser value deal, your company will lose that profit and may be a detriment to future sales You are the professional, act like it..

2. The Time Waster- How to Spot Them, and Avoid Them

Tactic - They are everywhere. At after-hours business meetings, at work, at business meetings, at sales presentations. They refuse to discuss anything beyond the trivial, will not (or are unable to) commit. Always changing their minds and perceived needs.

Defense- Learn how to spot them: Do they ask how much your product or service costs?, Are they vague in their needs, Are they still waffling after your second sales meeting?, Do they continue to talk incessantly about unrelated personal matters?, Do they seem to have all day to talk with you?

Once you spot them, avoid them like the plague. Be direct and polite. Explain that you have enjoyed meeting with them, but, must move on. Remember that one of the most valuable commodities is your time.

3. Bad-Mouthing - If they bad-mouth your competition, they will bad-mouth you in the future.

Tactic – A prospect immediately starts telling you that they hate your competitors. Appearing to take you into ‘their confidence” that they “know” you are not like your competitors, thereby expecting the return favor by getting a “bigger better deal” from you.

Defense - Acknowledge that you have competitors. However, explain the value that you are able to bring to the table. By keeping the focus on the end result (solving your prospect’s need), you will be less tempted to involve yourself in the back-biting. Stay professional.

If you participate in the ‘my competitors are bad’ be aware that you may get this deal closed, at the detriment of future sales and lost reputation as this client may bad-mouth you in the future while continuing to look for the “bigger better deal”.

4. The Elephant in Your Pocket – One customer generates a large percentage of your sales.

Tactic - One customer gives you more and more business each month. Soon, making onerous requests that, if you obey them, causes you to lose the resources you need to service your other current customers.

Defense - At first glance, this scenario sounds like an ideal customer. However, a standard business maxim is not to let one customer provide more than 30% of your sales. One basic reason for this is that if you have one big customer, you are essentially working for that company without all the safety nets of being an employee.

Also, when (not if) your elephant is captured by your competitor, you are left struggling to replace the huge sales revenue. Instead of going after the big elephant, concentrate most of your sales efforts on the smaller customers that not only will be easier to bag, but will also be (on a personal basis) more loyal for the long haul.

5. Give me the Low Bid – When a customer demands that you give him the lowest quote.

Tactic – A prospect tells you your competitors’ bids, and demands that your bid comes in lower or you have no chance of getting his business.

Defense – Keep in mind the maxim that if someone is dishonest for you then they will be dishonest against you. Stay above the bidding war fray. Remember the reasons that your company has that great reputation. (hint: it is not your low price).

Establish yourself as the "go to" person for value-added, not lowest price – and your profits will soar.

Please – Contact me for a no-obligation review of your cash flow needs.

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Do you know a business owner that has "dead" inventory? or equipment?

This type of inventory is called captive profit. We have programs in place working with an asset recovery specialist to help turn this "captive profit" into a cash flow solution. Contact us today, for a FREE consultation.

-What a FICO Score is and How it Can Affect Your Business

2011-05-24T16:23:00.004-04:00

Whether you are considering buying a commercial property, factoring your receivables, expanding your business, buying a business or almost any other aspect of your business financial life…

Your “FICO” {Fair Isaac and CO} credit score may affect nearly every business decision, positively and negatively. Also, your ability to get the best rates on all of your insurance needs may also be affected.

Therefore, it is very important to:

Know what your score is and how you can maximize it.

Assure that your credit score is current and accurate within the last 60 days. >> One of the many websites that you can go to in order to get your current credit scores and credit reports. <<

Have an identity theft product in place to help you monitor and correct any fraudulent items and activities in your credit report. Here is an excellent Identity Theft protection product

What a FICO score is:

FICO Scores are calculated from a lot of different credit data in your credit report. This data can be grouped into five categories as outlined below. The percentages in the chart reflect how important each of the categories is in determining your score.

These percentages are based on the importance of the five categories for the general population. For particular groups - for example, people who have not been using credit long - the importance of these categories may be somewhat different.

Payment History - Account payment information on specific types of accounts (credit cards, retail accounts, installment loans, finance company accounts, mortgage, etc.)
Presence of adverse public records (bankruptcy, judgments, suits, liens, wage attachments, etc.), collection items, and/or delinquency (past due items)Severity of delinquency (how long past due)
Number of past due items on file. Number of accounts paid as agreed.
Number of accounts with balances
Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts).
Length of Credit History - Time since accounts opened. Time since accounts opened, by specific type of account. Time since account activity
New Credit - Number of recently opened accounts, and proportion of accounts that are recently opened, by type of account Number of recent credit inquiries. Time since recent account opening(s), by type of account.
Types of Credit Used - Number of (presence, prevalence, and recent information on) various types of accounts (credit cards, retail accounts, installment loans, mortgage, consumer finance accounts, etc.)

A score takes into consideration all these categories of information, not just one or two.

No one piece of information or factor alone will determine your score. The importance of any factor depends on the overall information in your credit report.

For some people, a given factor may be more important than for someone else with a different credit history. In addition, as the information in your credit report changes, so does the importance of any factor in determining your score. Thus, it's impossible to say exactly how important any single factor is in determining your score - even the levels of importance shown here are for the general population, and will be different for different credit profiles.

What's important is the mix of information, which varies from person to person, and for any one person over time. Your FICO score only looks at information in your credit report. Your score considers both positive and negative information in your credit report.

Late payments will lower your score, but establishing or re-establishing a good track record of making payments on time will raise your score. Go to creditreport.com to order your current credit report and scores.

It is also very important to begin to establish a business credit score (sometimes referred to as your ‘Dun & Bradstreet rating’)

A good credit score is important when looking for certain types of funding, however, unlike most banks, a credit score is only one of many criteria that Capital Profit Solutions use to determine a business owner's particular funding options.

Please – Contact me for a no-obligation review of your cash flow needs.

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>> Take a look at our Updated and Revised Website! <

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Do you know a business owner that has "dead" inventory? or equipment?

This type of inventory is called captive profit. We have a program in place to turn this inventory into a cash flow solution. Contact us today, for a FREE consultation.

THE CASHFLOW CRUNCH

2011-05-10T14:50:00.001-04:00

What IS a ‘Cash Flow Crunch”?

If you are a business owner, business has been slow (non-existent) for a number of months. You have exhausted your bank line of credit, and your monthly P&Ls are not that great. You most likely have experienced a cash flow crunch many times -

Moving along with your day-to-day business and then your sales suddenly drop off.. Not enough money available to pay your overhead. Cash Flow Crunch!

Your best salesperson closes on a big order! Great! However, how are you going to pay your suppliers to ramp up for this big order with potentially huge profit potential? CFC!

You “forgot” to make last month’s deposit for your employees’ withholding taxes. You ended up using those monies for a bonus sales promotion. You are now scrambling to find the cash to deposit. CFC

Business is great; you are in increasing profit mode. Then, your largest customer has to hold off paying you for another 30 days. You were relying on that payment for your building lease payment that is coming due in 10 days. Oops. CFC!

You notice your inventory keeps growing, but, sales are flat. If you hire more salespeople to help increase sales. How are you going to pay them until sales start coming in? CFC!

June 15^th is coming up (quarterly tax payments are due).... Unfortunately, you used that earmarked cash to buy a great piece of equipment that you saw at last month’s trade show. Big CFC!

Calculating an ongoing cash flow forecast is one of the most critical jobs for a business owner to insure gets done. Income and expenses are rarely constant. A CFC needs to be planned for.

"Companies that may appear profitable, but cannot pay their bills, are, in the end, out of business."

Proper and accurate management/tracking of a business’ unique cash conversion cycle helps to prevent or offset a Cash Flow Crunch.

What is the cash conversion cycle?

Simply put, a cash conversion cycle is the period of time for a business to convert its activities requiring cash back into cash returns. This cycle consists of basically, three working capital components:

1. Accounts Receivables Aging (and payment terms for the customers to pay)

2. Accounts Payable Aging (payment terms from venders/suppliers, etc..)

3. Inventory/materials Turn Rate

More on this very important business profit enhancement issue in an upcoming post…

Contact me personally for a no-obligation review of your current cashflow issues.

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>> Take a look at our Updated and Revised Website! <

___________________________________________________________________

Do you know a business owner that has "dead" inventory? or equipment?

This type of inventory is called captive profit. We have a program in place to turn this inventory into a cash flow solution. Contact us today, for a FREE consultation.

Should you get a business loan to "save" your new business?

2011-04-13T12:21:00.000-04:00

You were laid off last year - and decided that you no longer wanted to rely on a corporate office to decide your future. You have always liked working outside so you decided to start a landscaping business 8 months ago.

Your problem - You have not been able to pay yourself more than $300/week and have been dipping more and more into your savings to afford basic living expenses.

Your personal banker suggested - that you try to get a loan to expand your business. When you can't even seem to pay yourself enough money to live on, is this a good move?

First of all, I always congratulate an individual on the courage to start a new business venture. Profits are better than paychecks…

In your old job as a middle manager in a large corporation, if you needed something done, you were able to throw money at a problem and delegate a team to work on the solution. As a small business owner, you no longer have that corporate infrastructure and capital available.

You must become a shoe-string entrepreneur. - Every dollar needs to count. (Contact me for a FREE copy of “A Bootstrapper's Manifesto”)

There are many possible reasons (and solutions) for a new business’ current cash flow crunch – Just a few:

A corporate mind-set – “I have always done it like this, so this way must work”. Not usually, for a small business. A small business owner should always be improving his systems.

Current (or non-existent) business model - If a SBO does not have a business model that is designed to increase sales (and more importantly profits) with diminishing risks (overhead and direct costs) over time, the business model may need to be re-invented. (Think R&D)

Faulty business plan - Do you even have a business plan? Most small business owners do not have a formal business plan in place because they have often been told by their “experts” that they only need a business plan when looking for funding…This cannot be further from the truth. Remember the old axiom: “If you fail to plan, you plan to fail"

Inaccurate or unfocused niche - You should have an identifiable market niche. (ie; "CashFlow Solutions for Small Business" ) Do not sell real estate and skin care products (at least not on the same website).

There are many, many other reasons for a cash flow crunch- A/R - A/P cycle, human capital, asset leveraging, inefficient capital use, etc... Contact me for a FREE consultation.

Be aware that in your current phase of your business's growth cycle, additional debt service (i.e.; a business loan) may not be the best possible solution.

Utilizing a business financial consultant is always a great investment of your time and money to help you on your business trail to success.

More to follow in an upcoming BLOG on whether today’s economic climate is a great time to start a business, or not...

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>> Take a look at our Updated and Revised Website! <

_____________________________________________________________________

Do you know a business owner that has "dead" inventory? or equipment?

This type of inventory is called captive profit. We have a program in place to turn this inventory into a cash flow solution. Contact us today, for a FREE consultation.

Business Should Be FUN...

2011-04-06T12:51:00.005-04:00

A small business should be full of your personal passion, exhilaration and excitement. However, many times you may not pay enough attention to core issues (such as financial management) that will determine whether an endeavor succeeds or fails.

Often, small business owners don’t have the training or knowledge in finance; they know how to manufacture that specific item, provide the greatest service, be the best salesperson or are able to leverage that brain-stormed idea into a business.

A business’ unique product, service and niche - Every business has a unique niche and product, however, a very critical component of enterprise success is often overlooked or breezed over- FINANCE

· Cash IS King – Do not run out of money. You need to know your “burn-rate”. Do not run out of money. Do not base your cash flow forecast on your full monthly cash inflows. What happens when that big customer does not pay you on the 30^th and your most important vendor needs to get paid on the 10^th? Do not run out of money.

· Cashflow tracking System – Set this up from the 1^st day you open your doors. (Or NOW, whichever comes first). Most entrepreneurs assume they will get around to this “detail” when they start to bring in the money… This rarely happens. This is equivalent to building a house and living in it and then deciding you need a concrete foundation. If you live in a mobile home (set-up on blocks), what happens in the first bad windstorm?

· Financial Metrics for Everything - You have a system in place, you can (and should) measure every event. How much time do your employees spend on lunch, how long does it take to drive to your customer’s place of business (how much fuel do you use…) you name it, it should have a metric. Become obsessive.

· If You DO Not Know where You Are Going - you will end up somewhere else. Create an annual plan, a quarterly plan, a monthly plan, a weekly plan. And then follow your established benchmarks…

· If it sounds to Good to be true – it probably is. Be careful of personal guarantees. Try not to co-mingle your finances. You have enough at risk; do you really want to put your personal house up for collateral? Yes, I know, banks love personal guarantees, and co-mingling. True entrepreneurs hate them. You should avoid them at all costs, if you can. You are already investing a huge amount of your personal assets and energy in your business.

· Watch out for UCC-1 Liens – Many lenders, as a standard, file a “blanket” lien. Check your UCC lien status. You may not be required to sign a lien to have one filed against you, you may have agreed to one when you signed the funding contract.

· Speaking of contracts - Do not only read it. You do not understand it. Have your attorney read and explain it to you. There is often a clause in a contract that states that you acknowledged that you have engaged legal counsel, If you haven’t, you may be in trouble. Try not to let this happen to you.

· Familiarity does not always equate with competence - It may be tempting to use your wife’s, sister’s neighbor as your lawyer, or banker, or accountant… Keep in mind that just because you will get a lower fee and you see him at church (or the bar, or etc..) every week that you will get accurate and knowledgeable results. Find professionals who know what they are doing and have a passion, and experience with entrepreneurial companies, like yours.

Business should be FUN, and it can be, if you have systems and finance professionals in place to help you on your trail to continued success!

Real Business Loans for Real Small Business

2011-03-21T21:14:00.007-04:00

If you were looking for a $300,000 business loan, would you pay an additional $67,000 over three years in order to get a two percentage point reduction in the interest rate?

Unlikely…

But that's what plenty of small business owners do because instead of going to a business finance consultant, they seek bank financing with seemingly low rates of interest, versus a loan from a non-bank lender that carries an apparently slightly higher interest rate.

How can this be?

Simple. The low rate loan is a full documentation, conventional loan. The seemingly higher rate loan, requires more limited documentation and may not require full income verification.

For small business owners, there is a world of difference. The reason is because the owner of a small and or cash based business may have a very low salary, but quite legitimately derive economic value from the business in excess of $100,000. But stating this to satisfy a bank can at the same time provoke tax authorities, and generate significantly more taxes well into the future Thus, the savings from the apparently lower rate of interest are illusory. Worse, because of potential tax liabilities, low rate loans may result in an effective interest rate that is much, much higher.

We are all brought up to believe that banks finance small businesses. And there is a myth that small banks and small businesses fit hand and glove with one another. But the truth is that banks and most small businesses are actually a tough fit. The bankers aren't bad guys. It's simply that banks - even regional and community banks that have a vested interested in funding businesses where they operate - are structurally incapable of serving the needs of most small and/or cash based businesses.

Do not blame the banks.

Banks need plenty of hard assets to collateralize loans. In addition, they are subject to scrutiny by federal regulators on their underwriting policies and practices, and have an expensive monitoring process that favor larger borrowers – those that need to borrow $500,000 to $1 million or more.

A small business owner should not change banks when their business loan application is declined.
In the highly regulated environment of a conventional bank, small business borrowers present insurmountable obstacles.

This why an honest banker should refer you to a non-bank lender or finance broker. In the more entrepreneurial driven non- bank lender environment, these borrowers present a myriad of opportunities for which creative solutions can be developed.

What is the secret of non bank lenders?

First, they operate in an under served market: small businesses seeking loans of less than $1 million. By virtue of this, non bank lenders can identify promising businesses that traditional banks would not even see. Secondly, non bank lenders are not regulated. This means they can adopt policies that while sound, would nonetheless go against the grain of federal regulators provoking questions and inquiries that bank executives would like to avoid altogether. Finally, non bank lenders believe in the value of real property as collateral. By lending prudently against the value of real property, non bank lenders need go no further in assuring the safety of their capital. For example, many traditional lenders require cross collateral agreements. These are agreements in which the borrower, after pledging all of the businesses' assets and real property as collateral, pledge their personal property as well. This arrangement can complicate loans.

Putting all these factors together means that non bank lenders offering these loan products can provide small businesses with solutions that are more consistent with the challenges they face, especially when there are multiple business owners whose active participation in the business may vary. Because these type of lenders focus on the underlying value of the businesses' real estate, in addition to its cashflow, they generally do not require cross collateral agreements. This is why customer -service driven bankers refer their business clients to business finance consultants to get the most fiscally smart solution.

These non bank lenders are also more comfortable with so called cash out loans.

For example, suppose you own a property that houses your business, and you want to leverage the value of your equity, and take cash out. Perhaps this cash will be used to expand the business. Or perhaps you might view this cash as a just reward for years of carefully managing the business and the property.

Traditional bank lenders are uncomfortable with cash out loans. They often feel that such arrangements leave them vulnerable. By contrast, non bank lenders, which again place an emphasis not only on the business's cash flow but the underlying property as well, actively seek such loans. Their appetite for these loans is a valuable source of liquidity for small business owners.

As one more example of how these lenders are more geared to the needs of small businesses, consider typical loan covenants. Traditional lenders often seek the right to audit the books of the borrower and have the borrower issue a covenant pledging that the business will perform at its current level or better. A breach of this covenant, over which the small business owner may not have complete control, can result in the borrower being in default, and the lender initiating foreclosure proceedings.

Again, there is nothing wrong with this per se. After all because banks are the stewards of consumer deposits that are insured by federal funds,( i.e. taxpayer dollars), they must avoid risk at all costs. This is why banks operate in

what is often characterized as 'an abundance of caution mode,' and adds bulk to the explanation of why banks are not built for the kinds of risks that small businesses typically present.

It also explains why there is such a void in the market for loan and credit services to most small businesses. However, these non-bank lenders have stepped into this void and are actively seeking out companies to provide loan solutions to help businesses maintain their track record of success, or take a giant step forward to the next level

Look for an upcoming BLOG post, where I will explain what a ‘hard money” loan really is, and hopefully help to dispel some the commonly held myths of a “hard money” loan…

If you ever have a need to discuss your business cashflow options, please do not hesitate to contact me!

Can Factoring Help a Small Business?

2011-02-08T13:00:00.003-05:00

Can a factoring program help a small business succeed and grow?

Here is a case study summary of one of my clients:

ABC Sign Company (naturally not the real name) is a sign company in the Triad Area of North Carolina. For a number of years they made a reasonable profit with minimally increasing sales volume each year and with substantial concentration in the real estate sector (yard signs, banners, etc...). Then, the economy began to go south.

Their largest customer (a real estate company) began demanding lower prices and began taking longer and longer to pay their invoices (a common occurrence)

This began a downward spiral, ABC signs started to lose money on this customer's business. Now, in a cash crunch, ABC Signs held off paying taxes in order to just keep the doors open.(Bad idea).. Now, the IRS and NC Dept of Revenue suddenly became interested in ABC Signs...

After setting up a factoring facility (and having the factor taking over the monthly payments due for taxes) ABC Signs begin to finally succeed.

Before they started factoring their invoices, they had monthly sales of $20,000. After setting up a factoring facility, ABC Signs had (over a few months) increased their sales to over $60,000 per month. By relieving the monthly cash flow pain and stress, ABC Signs were able to concentrate on growing their company.

Another case study summary:

ACME Manufacturing Company had $425,000 a year in sales. The company made a 25% gross margin on sales. With sales are $425,000, they can expect to make a net profit of $42,500 a year. However, their sales are limited by the amount of money the business has available to buy materials and pay employees.

Acme Manufacturing Company
Abridged Income Statement (Without Factoring)

Sales
Materials                    Payroll
Overhead
Net Profit (10%)

$425,000
$127,500     30%
$191,250     45%
   63,750.     15%
$ 42,500     10%

Note that, due to cash flow restrictions, Acme Manufacturing Company was constrained to sales of $425,000 a year. As a result, until Acme was able to accumulate more working capital, it was only able to have a net profit of $ 42,500 a year. With a factor, Acme's business would not have a cash flow restriction.

Once Acme Manufacturing decided to use factoring - they are no longer limited because of cash flow issues. Acme now markets its business without the worry of paying vendors or employees. Acme now collects cash as soon as (within 3-4 days) it produces, delivers and bills for its product. Now, Acme Manufacturing Company increased sales to $1,000,000 a year. Acme also has the cash to take prompt payment discounts from their vendors (as much as 3%). Acme sells its invoices at an average factoring discount of 4%. Now that Acme is factoring -

Acme Manufacturing Company
Abridged Income Statement (With Factoring)

Sales
Materials
Less Prompt Pay Disc.
Payroll
Overhead (min. increase)
Factoring Cost
NET Profit (15%)

$1,000,000
$   300,000     30%
     ($9,000)     (3% on Materials cost)
$   450,000     45%
$     70,000       7%
$     40,000       4% (factoring all invoices)
$   149,000

Factoring has nearly eliminated Acme’s cash flow restrictions. As result, Acme was able to double sales to $1,000,000 a year and take a 3% prompt payment discount from his vendors. Also, because overhead (building costs, etc..) do not increase at the same rate as other expenses, this helps net profit change from $42,500 to $149,000 a year. This means that Acme Manufacturing Company made an additional $106,500 a year (a 350% increase).

Over three years, (with no additional sales increase ) The owner of Acme has the potential to make an additional $319,500 !

Does this mean that factoring can help every small business? No. But, it may be beneficial to investigate this "other" funding option.

Please feel free to contact me for more information on our many factoring options...

{ Look for an upcoming post on funding dangers for small business }.

-What Should You Know when Buying a Business-

2011-01-25T10:09:00.006-05:00

A client recently told me he wants to buy a business. Here are some of the
basic steps involved -

A first step is to insure that your financials are in order. Check your credit scores (and credit report). Get your personal financial statement current. Determine what 'blood" (cash down payment) you are able to afford.

Speak with a life coach about your direction.

What type of business do you want to buy? Retail , service business, wholesaler, professional service, etc.. What is your passion? Can this passion be turned into a fiscally sound venture? (Hint: a former corporate professional probably should not buy a sub shop because he likes making sandwiches..)

Be ready to change your current lifestyle (oftentimes, drastically).

Once you find the existing business you would like to purchase, find out from the current owner how much they want for the business.

Do they also own the property that the business is operating from? If so, you have two separate transactions: the purchase of the property and the purchase of the business. It is always best to separate these two items.

Next, agree to sign a non-disclosure agreement. Now you are ready to ask for financials from the current owner.

If the current owner balks at your request for full disclosure, then he is probably just testing the waters and is not really ready to sell. Never consider a business if the current owner can not validate his profit and sales claims

If the business owner is ready, have a summary market valuation done by an unbiased neutral 3rd party.Not the business owner’s valuation OR the commissioned business broker’s estimate. A business always has an intrinsic value (positive or negative) that is not on a balance sheet.

Ask a lot of questions -Will the current owner remain on-board until you "know the ropes" ? Will the manager stay with the business? , etc...

Assemble your team- Attorney, accountant and business finance consultant (for starters)

Establish a buyer's business plan. Determine the business structure. Begin the search for funding.

A business, by definition, is a risky proposition. Traditional banks usually are hesitant to loan to a business owner without a proven track record.Ask if the current owner can offer partial seller-financing. Over 90 % of small business acquisitions today have a seller-financed component.

When you are ready for actual funding, use your business finance consultant team member.

You may face few options if you go directly to a lender without the assistance of a finance consultant. A prime duty (obligation) of a consultant is to find the funding product(s) that best match the needs of the unique prospective business owner.A prospective business owner will save substantially more time, hassles, and money in rates, terms and fees on a business purchase than it will cost in consulting fees.

Naturally, these steps are just the first few of many required. Buying a business is always an exciting and fun trip. If you are thinking about leaving the employed masses... Bon Voyage!

What is a UCC-1 financing statement?

2011-01-17T07:53:00.006-05:00

The Uniform Commercial Code (UCC) is a series of uniform regulations designed to streamline commerce between businesses across all 50 states and various territories of the U.S.

The most important UCC form small businesses are affected by is a UCC-1 form also known as a Financing Statement. A Financing Statement is filed to perfect a security interest in named collateral and establishes priority in case of debtor default or bankruptcy. All lenders in the U.S. are required to use the same form to give public notice of their interest in certain or all assets of a business. UCC-1 forms are filed in the secretary of state’s office in the state of the debtor’s business, however, it can also be filed in multiple states if the business is on a border or if the business has locations in multiple states. All information on a UCC-1 is public information. Many states offer UCC searches online for a small fee.

Before a lender makes a decision on a
secured loan in which it intends to file a UCC-1 form, it does a lien search to make sure there are no other UCC-1s filed against the piece of collateral being financed. If several lenders have filed UCC-1s against the same piece of collateral, the one that shows the oldest file date/time stamp on it is considered the 1st lien. Priority of a lien is determined by the date/time it is received at the Secretary of State’s office. Unless negotiated in advance, a lender generally will require it to be in the first lien position. Depending on the type of financing, a lien may be filed against a very specific asset (i.e. piece of equipment with serial number), or it can be what is known as a blanket assignment. Some lenders attempt to use a blanket assignment (one in which the lender has named all of a company’s collateral).

Let’s say for instance, a business borrows from a bank using an SBA loan. The SBA routinely requires a blanket lien, so that would mean a second lender would not be able to assist the borrower with working capital, because the asset of accounts receivable is part of the SBA’s blanket lien. SBA loans only have a small amount of a loan which can be borrowed for working capital, so SBA loan customers often find themselves with their long-term assets financed, but don’t have enough working capital. In order to obtain a second loan for working capital, the SBA would have to subordinate its interest in accounts receivable so the second lender could be in the first lien position on that asset. Getting lenders with existing financing agreements filed to subordinate can often be a time consuming and frustrating experience.

When it is clear a business will need both capital for equipment or other long-term asset and also working capital, it is most advantageous to negotiate both loans up front and make sure the two lenders are comfortable with each other.

Be aware that UCC-1 Financing Statements do not have to have the borrower’s signature on them. Some finance companies and banks have small print in their application document which is signed by an officer of the company granting the lender the right to file a UCC simply upon application. If you don’t end up using that lender, you may have to pay fees to get the UCC released, so be careful about reading the small print on applications and don’t grant a potential lender the right to file a UCC-1 until you have agreed to use that lender.

UCC-1 Financing documents may be assigned or amended if your loan is sold to another lender, or if the original lender is acquired. Financing statements often name a corporate name and d/b/a name if one is used, and the primary loan guarantor on the loan. In the case of a parent corporation that has multiple entities it owns, the Financing Statement may list all subsidiary companies.

When a loan is paid off, it is the borrower’s responsibility to ask the lender to terminate its UCC-1 filing. Make sure you do this in a timely manner, because with lender mergers and acquisitions, records often get lost and it may take time quite a bit of time to get the successor lender to search all their records and terminate an old “orphan” UCC that has been paid off.

Engaging a firm like Capital Profit Solutions as your business advocate may help steer you through what can often be a complicated business process.

Face to Face or Cold Calling..

2010-12-24T01:16:00.004-05:00

Is it really important to join a business network group? Many professional sales people have always been taught that if they make enough cold calls that they will succeed in sales. Sales IS a numbers game isn't it?

Sales IS a numbers game. But, it is not just
the number of people that you contact - it is the number of qualified people that you contact.

Once upon a time (when everyone drove a "Model -T Ford" ?) the best way to qualify someone was the cold call.

The world has changed. With the advent of the Internet, it is more important than ever to establish personal relationships. One of the best ways to do that may be is joining a professional networking group.

Visit a number of groups before deciding on the specific group(s) to join. Remember, the monetary cost to join a group should be a very minor reason to join a specific group.

There are FREE groups that are substantially more beneficial in relationships gained than some groups that charge $400/year.

However, be aware that if a group is losing members right and left, it may be a sign of a stagnant group, (or maybe the group has " temporarily " lost focus?)

Time is an important asset, you may want to look elsewhere until the group stabilizes. But, anything is better that "cold-walking"

There is definitely a certain mindset to have when joining any referral group. More on that subject at a later date...

Merry Christmas, everyone! More on business networking in 2011.

FACTORING - The Truth Behind the Myths

2010-12-17T16:29:00.004-05:00

Factoring...The Truth Behind the Myths.

SO, YOU’RE TRYING TO DECIDE WHETHER OR NOT to use accounts receivable financing because you’ve got a bank line of credit or it’s “too risky”…

All right, I hear you and understand, really I do. But, let me ask you,
do you have
more cash in the bank than on your books? No? Then, you could benefit from reviewing how factoring may help your company.

Things may have changed since you last inquired or maybe (just maybe?) you’ve been misinformed. In either case, let’s set the record straight.

What IS Factoring? Purchasing business (B2B) commercial receivables. This means, you, the holder of the invoice, can sell each invoice today to receive a cash advance. You can meet payroll, pay vendors, take on new clients and pay other bills.

Now the finance company waits the 30, 60, 90 days for your clients to pay. Now you wait for more orders, new clients, and cash to hit your bank account.

Dispelling the myths

“It's "a new trendy‟ financing tool”. Actually, it is one of the oldest forms of financing. The garment, apparel and furniture industry was taking advantage of factoring hundreds of years ago. They needed raw materials to manufacture and distribute their products. Suppliers expected payment before shipping goods; clients wouldn’t pay until delivery ( even then wouldn’t pay for days or sometimes months - sound familiar?) Factoring is here to stay.

“Our company has a large bank line of credit, we don‟t have any use for factoring..” Factoring works in synergy with traditional credit lines. One of our clients put it best when he said,

”My business is successful because I have always followed two very important rules: one, pick other people‟s brains and two, use other people‟s money."

Even though he has a large credit line, he benefits from having access to factoring lines. In fact, many of today’s Fortune 500 companies employ this type of financing to help supplement their working capital needs.

Factoring can reserve the bank line for ‘as needed’ basis, thereby extending the life of the line. Factoring can help pay down the line when used. And, since this is NOT a loan (an asset being purchased), this form of financing will not appear as a liability on your balance sheet. This actually strengthens your company's position when seeking new or additional bank funding. Now, both your balance sheet AND cash flow statements are more appealing to a loan officer.

The Real Truth

“It costs too much”. NOT true, anymore. Sure, long, long ago, it did cost an arm and a leg. No more! Fees are only pennies on the dollar, and we DO mean pennies. What you should be saying is “It costs too much NOT to factor” .

Think about it. You have $100,000 of receivable on your books and $15,000 cash in the bank. You get a purchase order for $36,000 (a cost to you, with a 20% margin, of $30,000 due now). You are $15,000 short. You lose the order, because you are unable to pay the vendor. You have just lost 20% profit If you had factored only half your receivable, you would have paid maybe 3%, made 20%,, grossed 17%, and still have cash in the bank. Better to pay 3% than lose 20%, wouldn’t you agree? To cut costs even more, some factoring companies may perform additional services to their clients including certain post-dated invoices and collections.

A Few Benefits of Factoring

Not worring about payroll.
Having your valuable sales reps contacting your clients to sell more, instead of trying to collect on accouts receivables.
Hire some more employees.
Expand facilities.
Pay Taxes, On-Time
Accept larger orders
Acquire more equipment.

Companies with one client or companies with 1,000 clients can qualify. Companies a week old and companies a hundred years old can qualify. Factoring can work with any company. Don’t stress--

Increase sales and PROFITS.
Improve or maintain credit rating.
Fund growth internally.
Credit screen future clients.
Extend credit terms.
Increase client base.
GAIN THE COMPETITIVE EDGE.

Costs of NOT Factoring

Unable to fulfill orders.
Lose prospective clients.
Limit growth potential.
Drain current bank lines of credit.
Decreased profit margin.
Possible tax liens leading to poor credit rating leading to low or no supplier credit.
Lower competitive edge.
Retire later rather than sooner.

Why do this to yourself? That’s right, to yourself. You may be spending too much time on collecting YOUR money and maybe not enough on providing your quality products and services to your valued clients. ...Why not let the factoring company waits the 30, 60, 90 days for your clients to pay. Now, you wait for more orders, new clients and cash to hit your bank account.

Okay, so you have decided, “Hey, factoring is not so bad after all!”. Not so scary, is it? Nope.

Factoring can help any business on the path to growth (and shouldn’t all business be growing)?

Don’t let your competition take all the working capital...

Should I Buy or Lease my Business Location?

2010-12-08T14:14:00.004-05:00

There is not a quick and easy answer to your question. There are many items to consider, here are a just a few -

What typeof business do you own? (Some types of businesses may benefit from a 'work-at-home' structure)

Does your business cash flow offer a sufficient debt service coverage ratio to profitably handle the mortgage payment?

Do you require a major interior improvement to satisfy your particular business needs. If so, are you willing to help increase the value of a property that you are only leasing, when you can buy your own?

Have you had a Profit Enhancement Profile performed on your business operations?

Do you have a qualified commercial real estate broker actively looking for you? In most cases, you should NOT use a residential broker(Contact me for a FREE report on what to look for in a commercial real estate broker)

Will you need a capital outlay for equipment, up-fit, furniture, etc.. for your new business venture? (You may be able to leverage a commercial property to roll-in these costs)

Have you found a building that would fit your business's financial goals? (Example: Try find a building that can be divided into more than one tenant space to help your current cash flow and allow for future growth, etc..

Can you afford the "blood" (down payment) required in a purchase deal? (Unlike lending avenues such as a bank that require 20-30% down payment on the property, be aware of all your options. There are other programs that only require 10% of total project cost).

This is only a very short list of a few of questions to ask before deciding on whether to buy, lease or work out of your home ( A future blog on home-based businesses will follow, soon!)

If you currently own a business or are thinking about starting a a business; purchasing a commercial building for your business may be a great wealth-building and cash-flow saving strategy.

Why use a finance consultant when a business owner can go directly to a lender?

2010-12-06T11:18:00.006-05:00

When you go to a restaurant, what if you are given a menu that has one appetizer on it (calamari), one entrée(bacon hamburger), one dessert (vanilla ice cream), and one beverage (diet root beer)? You probably wouldnot want to eat there because you have very few choices.

If you do not know your options, you have none. You may face the same lack of choices if you go directly to a lender.

A prime duty (obligation) of a consultant is to find the product (solution) that matches the needs of the unique business owner. A consultant knows the general types of funding sources that would have an interest in a project and, in many cases, will immediately know of specific investment house most likely to finance/fund the project. The consultant also knows how to present the information on the prospective client in a manner that will provide the best opportunity to get the most favorable result.

Consultants are, by definition, advisers, strategists, and advocates for the client, not just facilitators. They will help the client decide what type of financing or combination of financing vehicles will be most advantageous for the client.

A consultant will assist in preparing an in-depth review and/or a financial package and getting it ready for a prospective investor to review. A consultant fits the product to the unique needs of the business owner. The consultant remains available to advise the client throughout the process of securing accounting/audit services, appraisals, business consultants or any other professionals who are needed to complete a project because they may affect the financing parameters.

A client may save far more time, hassles, and money in rates, terms and fees on a project than it will cost in broker/consulting fees.

Unless, of course, you like calamari, vanilla ice cream and diet root beer.

Commercial Banks in Limbo - Nov 30, 2010 - CFO magazine

2010-12-01T12:10:00.003-05:00

Commercial Banks in Limbo

Although their balance sheets are recovering, banks are still hesitant to lend.

Vincent Ryan - CFO.com | US

November 30, 2010

When it came to handing out business loans, commercial banks and savings institutions continued to be ultraconservative in the third quarter of 2010. Balance-sheet problems lingered for many, especially in commercial real estate portfolios. Still, as an industry,
banks managed to
wring profits out of operations, according to the Federal Deposit Insurance Corp.'s quarterly report issued last week.
Commercial banks and savings institutions earned $14.5 billion in total last quarter, and only 18.9% of them had a net loss. But that was down from the second quarter's $21.4 billion. Excluding Bank of America's $10.4 billion goodwill impairment charge in the third quarter, FDIC-insured banks reported a modest increase in earnings.
But rising profits came from reductions in set-asides for loan losses, which are a charge against current earnings. Provisions for loan losses fell 45% in the third quarter, to $28 billion. Real sources of income, such as banking fees, fell 7.2% year-over-year, led by declines in servicing fee income and service charges on deposit accounts. The profitability of banks was also hurt by a 16% rise in noninterest expenses.
Business lending in the form of commercial and industrial (C&I) loans increased for the first time in eight quarters, but banks continued to report lackluster demand. While deposits increased, the loan-to-deposit ratio for FDIC banks fell to 86% in early November, the lowest number since 1994, says a report from CreditSights, a bond-market advisory firm.

So where are banks putting all their money? While total assets at FDIC-insured banks rose $163 billion in the third quarter, $113.7 billion of that was holdings in investment securities, which rose 13.8% compared with the same period last year. Banks are even playing it safe with these securities investments. The percentage of government securities in bank portfolios rose to 66% earlier this month, the highest level since 1994.

That, says CreditSights, indicates "a flight to quality in an uncertain economic environment" and "the pressure coming from regulatory uncertainty." Lending numbers also imply that "banks are not fully capitalizing on the benefits of the steep yield curve, which the Federal Reserve's monetary accommodation facilitated," says CreditSights.

The good news is that poor-quality assets are rolling off or being sold off the books of some banks, potentially clearing the way for new investment. Noncurrent loans and leases (those 90 days past due or not accruing interest) fell for the second consecutive quarter, and banks charged off $42.9 billion in uncollectible loans last quarter, down $8.1 billion from a year earlier. Net charge-offs of C&I loans fell 41.8%, or $3.6 billion, while noncurrent C&I loans were down 4.3%, or $1.5 billion.
A Keefe, Bruyette & Woods research report last week found $16 billion of problem asset sales by banks so far in 2010. Regions Financial, Fifth Third Bancorp, First BanCorp, and Flagstar Bancorp were among the sellers of nonperforming loans.

While the total dollar amount of loan loss reserves across the industry declined by 3.8% in the quarter, almost 60% of banks and thrifts still increased their loan loss reserves, contradicting the idea that loan losses have already peaked.

In particular, portfolios of commercial real estate loans are still deteriorating. The ratio of nonperforming CRE loans increased to 5.78% in the third quarter, from 5.26% the quarter before, according to an analyst note from Susquehanna International Group. Net charge-offs also rose. The nonperforming ratio for the most toxic type of loan — construction and development — is still at an extraordinarily high 16.94%, says Susquehanna.
In another bad sign, the number of banks on the FDIC's problem list rose from 829 to 860, the highest number since March 1993. One hundred twenty-seven banks failed in the first three quarters of 2010, and 2 more have done so in the current quarter.

The FDIC's fourth-quarter report on banks and thrifts probably won't look any rosier, analysts warn. Many banks take a loss at year-end as they try to clean up their balance sheets for the coming year.

Reprinted from CFO Magazine www.cfo.com

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Current or Future Property Owners -

PurchaseRefinancingFHAUSDAVAReverse Mortgages

So You Want to Be Business Owner ?

Business Financial Pains...

Help, I Owe Taxes!

Profit-Killing Business Tactics and How to Defend Against Them (Part 1 of a series - revisited)

-What a FICO Score is and How it Can Affect Your Business

THE CASHFLOW CRUNCH

Should you get a business loan to "save" your new business?

Business Should Be FUN...

Real Business Loans for Real Small Business

Can Factoring Help a Small Business?

-What Should You Know when Buying a Business-

What is a UCC-1 financing statement?

Face to Face or Cold Calling..

FACTORING - The Truth Behind the Myths

Should I Buy or Lease my Business Location?

Why use a finance consultant when a business owner can go directly to a lender?

Commercial Banks in Limbo - Nov 30, 2010 - CFO magazine

Commercial Banks in Limbo

Although their balance sheets are recovering, banks are still hesitant to lend.

Vincent Ryan - CFO.com | US

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