Myth: If the banks turn me down, I’m out of luck.
Reality: Banks are only one financing source that’s open to small businesses.
Working capital factoring allows you to efficiently grow your business by helping ensure that you have the capital you need at your disposal. You can sell your accounts receivable to Liquid Capital and receive the cash you need. Instead of waiting 30 days or more to receive payment, you can get the cash flow necessary to buy new inventory, pay your bills, or cover other overhead expenses. Working capital factoring provides a steady flow of financing for your business.
Factoring: A Financial Solution for Small Businesses
Liquid Capital of Arizona is part of an international finance company. President Joel Gottesman explains that the company’s focus is on providing financial services for small and mid-sized businesses. One of those services is factoring.
Factoring is the purchase of commercial invoices from businesses and providing a business with immediate cash. For example, a business may sell a product or service and face a wait of 45 to 60 days until receiving payment. A factor purchases the account receivable at a discount, allowing the payment to be put back to work in the business. Factoring works like a cash accelerator for small businesses.
Gottesman says that factoring is commonly used by earlier stage companies that are not yet able to obtain bank financing. In a typical factoring transaction, Liquid Capital will advance 80% or so of a customer’s invoice to that customer. Liquid Capital charges a discount for its service. The amount of the discount depends on how long it takes for Liquid Capital to receive payment. When that payment is received, the customer receives the rest of the payment, less the discount fee.
The biggest advantage of factoring is that it makes cash immediately available to small businesses. It is available to companies not yet sufficiently established or capitalized to qualify for bank financing. Factoring permits a business to grow at an optimum speed.
The Purchase Finance Program Can Make Bank Credit Work Harder for Businesses
Liquid Capital of Arizona is part of an international finance company. President Joel Gottesman explains that the company’s focus is on providing financial services for small and mid-sized businesses. The company also has a product called a Purchase Finance Program geared to businesses that have bank lines that may not be adequate to fund growth.
As Gottesman explains it, the program works like this: Liquid Capital purchases inventory of all kinds for clients in the program. The inventory can be raw materials, parts, finished goods—anything a participating client needs to produce a sale. Liquid Capital will buy the inventory for cash from a client’s vendor. If a cash discount is received, it is passed along to the client. The client then has ninety days to produce a sale from whatever inventory was purchased for them. Liquid Capital then gets paid from the cash generated from the sale.
For example, if a client has gotten a big supply chain contract, the Purchase Finance Program enables the client to stretch its bank line further and support growth through Liquid Capital’s inventory finance program. Banks like the product because they have first security interests in all the assets of borrowing customers—including inventory—and the banks are not asked to subordinate their loans to Liquid Capital. “It works hand in hand” with bank financing.
The Purchase Finance Program was a new product for Liquid Capital, introduced in 2014. The new program has been well received and a success for clients.
Asset Based Lending: A Cost Effective Solution for Growing Companies
Liquid Capital of Arizona is part of an international finance company. President Joel Gottesman explains that, in addition to its factoring service, the company offers a loan service for larger, well-established companies—Asset Based Lending.
Gottesman explains that the companies who are prospects for the asset loan product are often fast growing companies that don’t qualify for bank loans “for any number of reasons.” Lack of capital or lack of profitability in the recent past can make a company like that a good prospect for an asset based loan.
In considering an asset loan, Liquid Capital looks at a company’s level of receivables, inventory, equipment, and other assets the company has. A growing company will generate more receivables and will need more inventory to make the business work. That’s where an asset loan comes in. It provides a company with a borrowing base geared to their level of receivables and inventory.
Gottesman says that the asset loan program is a new financial product for Liquid Capital, just introduced in 2015. Several companies who are currently using factoring services are likely prospects for the new loan program. “An asset based loan is more cost effective than factoring as a working capital solution.” A bank loan would be the most cost effective solution, but bank loans are not always available to businesses that are not well established. The asset based loan fills the niche.
Quick Pay: For Companies That Need a Fast Accounts Payable Program
Liquid Capital of Arizona is part of an international finance company. President Joel Gottesman explains that the company’s Quick Pay product, introduced in 2014, is a specialized accounts payable service that can be very valuable to the right business.
Quick Pay is a web-based accounts payable platform operated by Liquid Capital. It uses sophisticated software licensed by Liquid Capital. The Quick Pay portal is a way to pay subcontractors very quickly for payments due to them. An example of a perfect client for this service would be a transportation or logistics company that relies on independent truckers to deliver loads. Those truckers often need a quick turnaround on their invoices in order to pay for fuel and truck maintenance. “They can’t wait 30 or 45 days to get paid on their invoices to the logistics company.”
The Quick Pay program offers a payment to those truckers at a discount. Liquid Capital’s software platform manages the payment process. Once a trucker’s invoice is approved by the logistics company, Liquid Capital will notify the trucker and inquire if early payment is desired. If so, the trucker receives an electronic payment the next day. The trucker is charged a discount, and that sum is shared with the logistics company.
The Quick Pay program offers those who work with Liquid Capital clients a quick cash turnaround to provide them with working capital. Liquid Capital is working to expand the companies that can use the service, including construction companies, property managers, and other industries that rely on subcontractors to perform services.