Archive for July, 2012

Pros and Cons of Incentivizing Angel Investors

Monday, July 30th, 2012

We at The Factoring Blog feel that the following issue is of some significance for prospective small business factoring clientele, or for any business owner in need of funding.

A debate earlier this year on The Wall Street Journal’s website explores at length the importance and influence of informal, affluent investors. Angel investors may be without institution, but they are not without tremendous significance in the world of financing start-ups and small businesses.

This has led some legislators to question whether angel investors ought to be given tax credits for their services to small businesses. After all, they, more than many other financiers, have to expect long delays in acquiring returns on the start-ups they decide to fund.

The generosity behind enduring these delays not only reveals the source of their namesake; it also makes becoming an angel investor an understandably unappealing undertaking. This fact, however, does not stem the need for their services.

The Journal does a nice job of prefacing the debate by offering opposing perspectives on the effectiveness of tax breaks for angel investors.

Proponents of the idea say it could work on two fronts: First, it would generally encourage angels to invest in start-ups. Second, the measure would provide them with more working capital, so they can better serve their communities.

On the other hand, critics worry about the potential for tangible, concrete results that can be quantified in terms of real “evidence that credits increase investment levels or create jobs.”

In the meantime, don’t wait around for angels to swoop down with pots of gold to help your business grow. Factor your receivables and claim the gold you’ve already earned. A small business factor will make no attempt to claim neither debt nor ownership from your company. Your debt to the factor is hoisted on your customers, and the only ownership your factor will claim is over individual invoices bought for cash.

Sound angelic? Then try factoring today.

Uncertain Future of Big Banks as Investment Banking Institutions

Friday, July 27th, 2012

Taking power from the hands of big banks may necessitate the empowerment of small businesses and banks. Though it does not seem that a big bank breakup is likely to take place within the near future, the invoice factoring professionals at The Factoring Blog felt it would be important for small business factoring clientele and prospective factoring clients to know the state of big banks and their futures…

What would happen if Henry Ford came back to life and decided to tell all of us to dismantle our automobiles because the whole idea was a huge mistake? It would seem that, no matter what his intentions, the term world-class hypocrite might suffice to describe a man in a similar course of action.

Consider the example of Sanford Weill: Recently, the former longtime Chairman and CEO of Citibank decried the ethical foundations behind the financial institution that had been his life’s work. Weill had managed to convince Congress in 1998 to end a sixty-year ban on the legality of commercial banks’ ability to take part in investment banking. Weill, who capitalized on this change with Citi, declared on Wednesday that America’s banking behemoths ought to dissolve for the safety and security of the American taxpayer.

“I am suggesting that they be broken up so that the taxpayer will never be at risk, the depositors won’t be at risk… Mistakes were made.”

Weill’s mistakes may in fact be at the root of the global financial crisis. Since massive banks with massive sums of money are able to wield their cash so openly with minimal liability, the results have been catastrophic for taxpayers and small business owners everywhere.

According to Big Bank Pioneer Seeks Breakup, (an article in The Wall Street Journal), “Weill had spent years working for the repeal of federal laws that prevented banks from branching into investment banking and stockbrokerage.” When Weill lobbied heavily for the repeal of the Glass-Steagall Act, so much so that he even called President Bill Clinton one night, late in the evening.

The bill that repealed the Glass-Steagall Act came to be known as the “Citigroup Authorization Act,” and Mr. Weill continues to defend the repeal. ‘”I think the earlier model was right for that time,” he said. “I think the world changed with the collapse of the real-estate market and the housing bubble and what that did because of leverage in certain institutions. So I don’t think it’s right anymore.”

Temp Staffing Agencies Can Help Small Businesses Grow

Thursday, July 26th, 2012

With June’s national unemployment rate at about 8.2%, it should be very difficult to imagine a shortage of human resources in any workforce. This hypothesis is disproven in the “Marketplace” section of Thursday’s Wall Street Journal, which tells us that many “Small Firms Seek Skilled Workers but Can’t Find Any.

The Journal polled 811 small business owners and chief executives. 31% reported that “they had unfilled job openings in July because they couldn’t identify applicants with the right skills or experience.” Furthermore, an astounding 41% of 154 small manufacturing firms surveyed reported being unable to find skilled and experienced workers. This figure is markedly different from the 30% of services business surveyed and 29% of retail businesses.

“We could grow a lot faster if we could find the right people,” one business owner lamented. Many businesses are forced to turn away new business for fear of being unable to provide sufficient service and support. Simply hiring one or two additional skilled workers could have a deep and long-lasting effect on growth in a small business.

So why not train employees? Unfortunately, one of the pitfalls of owning a small business can be a shortage of reserves for training new employees.

Staffing agencies can provide a remedy to the problem of skilled labor shortage, but what happens when staffers are unable to train their employees? These problems are merely symptoms of a greater cause: a lack of funding. Training-whether for a staffing firm or a small business-is an investment. How can you expect to invest in your employees’ skills if your cash flow is nearly stagnant?

If you cannot find the funds to train employees, your best option may be to factor your temporary staffing receivables. This is an easy way to access the cash you need to spur the growth you want. Skilled labor may be hard to come by, but a skilled small business factor or a skilled staffing factor may be right before your eyes.

Report from Robert Half International Inc. Could Spell Further Growth for Staffing Industry

Tuesday, July 24th, 2012

Who would have known that a single company could comprise an economic indicator? Staffing giant, Robert Half International Inc., posted earnings and revenues for a successful second quarter, which ended on June 30, 2012. Here’s what their success means for your staffing firm and for future employment figures nationwide:

It means we can expect growth in all aspects of staffing. According to Harold M. Messmer, Jr., Robert Half International’s chairman and CEO, “Demand for our specialized staffing and consulting services remained strong during the quarter, particularly in our U.S. staffing operations, which grew 17 percent versus the prior year.”

Robert Half International is composed of a variety of staffing divisions, all of which are experiencing growth. According to a report from DailyMarkets.com, “The company’s specialized staffing divisions include Finance & Accounting staffing, Management Resources staffing, administrative office staffing (back office), IT staffing, legal personnel staffing, and creative staffing, for “interactive, design, marketing, advertising and public relations professionals.”

Click here for more information: Robert Half International Reports Second-Quarter Financial Results

Small Business Owners Flock to Business ‘Accelerators’

Friday, July 20th, 2012

Small business factoring clients may be interested in a controversial new style of financing and consulting that the invoice factoring experts at The Factoring Blog recently came across in The Wall Street Journal: Start-Ups Crowd ‘Accelerators’.

Small start-ups in particular have been applying in droves for “seed capital and advice” from brand-new business “accelerators”.

There are more than 200 of these 12-week “boot camp” programs available worldwide. They each offer their own degrees of “funding and one-on-one mentoring to help develop their businesses.” In return, the accelerators receive 6% stakes in start-ups they take as clients.

The model has its critics. Without question, credibility is a key factor in determining an accelerator’s effectiveness, and given the novelty of these programs, that quality may be hard to come by.

According to this article in The Wall Street Journal, many question “whether some of the programs… have enough access to the right mentors and investors to boost an entrepreneur’s chances of success.”

Often, accelerators’ services can lead business owners toward “false hope,” instilling quixotic optimism, rather than encouraging bold realism. It is often outside of their incentive to prime businesses for success. Businesses at risk become a mere liability on an accelerator’s spreadsheet.

According to the Journal, “If an accelerator gives $25,000 in capital to participants, takes a 5% equity stake, and graduates 40 companies in a year, he says, it can break even if just one gets acquired for $20 million.

Factoring asks for no share in your business’ equity and makes no effort to leech on your success. Small business factoring offers no false promises; it simply offers fast access to the money you and your associates have already earned. Credit is not taken into account, nor is the very structure of business model. Your business is yours to run, and accounts receivable factoring can fit seamlessly into your daily operations.

Swipe Fees Threaten Merchant-Customer Relationships Nationwide

Thursday, July 19th, 2012

Did any of the small business owners who regularly read The Factoring Blog see the article in The Wall Street Journal today, entitled: The Swipe Fee Conundrum?

We thought our small business factoring readers and Americans everywhere should be concerned about a recent court settlement against major credit card companies that may open “the way for millions of businesses to add checkout fees when customers pay with plastic.”

This surcharge comes as the result of 1-3% charges burdened on businesses by credit card companies. This fee may be passed on to customers, who may remain entirely unaware that they are being charged extra for credit card companies’ profit.

Of course, though most business owners would rather be transparent in dealing with swipe fees, “many don’t want to run the risk of alienating credit-card users” by exposing swipe fees to the public.

The fees, which have been deemed by merchants and customers alike as “petty” is undermining the relationships that business owners have with their clientele, as well as the hard-won credibility that make those relationships work.

According to this article in The Wall Street Journal, “The proposed settlement sets aside $6.05 billion,” and “the biggest portion of the money will likely go to large retailers.”

Small business owners may be fortunate to even receive several hundred dollars from the settlement, making this lawsuit a purely corporate affair.

Financing Options Available to Entrepreneurs in Cleveland

Thursday, July 19th, 2012

Our small business factoring readership may have generally come to consider most developments in twentieth century microfinance as taking place in the field of wide-reaching global funding. Fortunately for struggling business owners in Cleveland’s minority communities, innovation in local, small business microfinance is enjoying an unprecedented resurgence.

This development comes according to Robert L. Smith of The Plain Dealer, Cleveland, OH. His article’s title claims that “With Microloans, Cleveland Hopes to Jumpstart Businesses in Minority Communities.” Smith attributes the lack of small businesses in minority communities to a shortage of capital, rather than a “lack of ambition and ideas.”

Furthermore, the Economic and Community Development Institute, “a 501(c)3 non-profit economic development organization located in Columbus, Ohio” plans to open an office in Cleveland in order to “invest in people to create measurable and enduring social and economic change.”

This mission statement, from ECDI’s website, is the ideological cement by which Cleveland will be revitalized and rebuilt.

“The aim is to launch more businesses in neighborhoods that need them and to expand opportunities for low-income entrepreneurs,” says Smith.

According to analysts from Friedman Associates, an Iowa-based economic development company, loans to Cleveland businesses dropped sharply from 2007 to 2009. Their study apparently “revealed an unmet need for about $38 million in loans under $50,000.”

Organizations like ECDI, Friedman Associates and the Cleveland Foundation are doing everything in their power to jumpstart business practice around the world, but-for any community-good business practices begin locally.

Per Reuters, Expect Further Dips in Job Creation

Tuesday, July 17th, 2012

Bad news from Reuters: Fewer U.S. companies planning to hire in the near future.

The title says it all, but the statistics are even more revealing. A mere 23 percent of companies polled by the National Association for Business Economics (NABE) in June have definite plans to hire additional staff within the coming six months. Hiring has reached a dramatic slowdown in the past few months, due to the mounting debt crisis in the Eurozone.

Still, March and April’s numbers are significantly higher than May through July’s. Forty-seven percent of companies that took part in the survey responded with the feeling that the European crisis precipitated their difficulties in sales.

What is most startling is that 40 percent of these firms have more than 1,000 employees. When big hirers stop hiring, what about the small ones?

More and more companies have stopped hiring full-time. Now, more than ever, is the time for temporary staffing companies to sell their services. Temporary staffing can allow companies to test the waters with temporary workers rather than committing to full time relationships.

Keep in mind that while you’re expanding and cultvating your temporary staffing agency, there is no reason why you should fall behind the curve because of delinquent invoices. Try temporary staffing factoring so that you ca better accommodate the demands of your industry.

Banks are Still Rejecting Small Business Loan Applicants

Monday, July 16th, 2012

According to an article on PRWeb.com, Biz2Cred recently conducted a study on 1,000 small businesses that had been in operation for two or more years. Each of these companies had credit scores of 650 or higher, and was involved in a banking relationship at the time the study was conducted. Biz2Credit then recorded the results of loan applications the companies made in 2012.

The overall finding?

Small business customers of Bank of America, JP Morgan Chase, Wells Fargo, and TD Bank were the most frequently rejected applicants for funding.

Morveover, Rohit Arora, CEO of Biz2Credit, this survey affirms the fears and suspicions of small business owners everywhere: that “big banks have been unwilling to lend to them.
Here are the percentages of viable candidates were rejected by banks with $10 billion or more in assets:

• Bank of America 13.5%
• JP Morgan Chase 11.6%
• Wells Fargo 11.2%
• TD Bank USA 2.9%
• PNC Bank 2.3%

Note from The Factoring Blog: Since a small business owner’s risk of rejection has been elevated, it might be a  better idea of him/her to factor their receivables.

Employment Trends Index Takes a Dip in June

Friday, July 13th, 2012

Here’s some news we thought would be helpful for any of our temporary staffing invoice factoring readers:

Who would have thought that the summertime blues could refer to job growth? Though the U.S. economy is not hemorrhaging jobs like it did a few years ago, the rate of growth has stalled in recent months.

According to this press release, “The Conference Board Employment Trends IndexTM (ETI) dipped to 107.47 in June.” Though this number is 5.6 percent higher than June of last year, and 19.54 percent higher than three years ago, it marks a fall from May’s number, 108.23.

The drop was caused by negative developments in four of eight categories that comprise the index. Three of these components are listed in the article:

1. The “Ratio of Involuntarily Part-time to All Part-time Workers”
2. “Percentage of Firms with Positions Not Able to be Filled Right Now”
3. “Initial Claims for Unemployment Insurance”
4. Percentage of Respondents Who Say They Find Jobs “Hard to Get.”

The other four categories that are weighted towards the Employment Trends Index include:

1. Number of employees hired by the Temporary Help Industry
2. Job Openings
3. Real manufacturing and Trade Sales
4. Industrial Production.