Slow-paying customers got you in a cash-flow crisis? These sites can help you bring in the moola.
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Slow-paying customers got you in a cash-flow crisis? These sites can help bring in the moola.
You're sitting on thousands of dollars in accounts receivable but don't have enough cash on hand to meet the payroll. Last year you would have gone to your bank line of credit. But this year your bank cut it back. So without the cash flowing, how will you keep afloat?
Factors are one solution -- albeit an expensive one. Factors essentially buy your accounts receivable, though at a discount of 90¢ on the dollar or less. The factor makes its profit when it later collects from your customers. You, in turn, get cash today.
Factors don't simply give you money and then go away. Most want a long-term contract with multiple clauses. What's more, factoring can be risky if you don't know the lingo.
The Internet can help find factors quickly and solicit bids on your accounts receivable. But if you do a Web search on factor, you'll find the pH factor and Max Factor long before you find even one factoring company. We homed in on five sites that can help you find factors. Some invite factors to bid on your accounts; others can help you find factors on your own. FactorBids.com and GetFactored.com are modeled on LendingTree.com, while the sites of the Commercial Finance Association and the International Factoring Association give information about their respective trade groups. Factors.com is a kind of electronic yellow pages: factors pay to be listed there.
We asked three financial experts, all with long experience helping companies manage their cash flow, to judge the sites. Our panelists liked the sites for their simple applications and for giving visitors the opportunity to find a factor that will work with small accounts. (Not all do.) But the judges were uncomfortable with sites that failed to list either participating factors or satisfied customers. From them, our judges wanted references -- and much more information about hidden costs. Asked judge Jon Steging, a Phoenix-based partner at Tatum CFO Partners LLP: "Who holds the accounts? Where do payments go? Who contacts your customers when payment is late?"
Another judge, Tom Bargsley, founder of Bargsley & Associates, in Austin, warned of hype on the commercial sites. "Try to determine if the factor can actually handle -- and wants -- your business," he said.
Our third judge, Hank J. Heath, president of On-Site Financial Solutions, in Portland, Oreg., said, "Get a local referral from your accountant or banker, and compare their programs with what you find on the Web for service and pricing."