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The Case for Making Invoice Factoring the First Choice in Business Financing

In the United States, Invoice Factoring is often perceived as the “financing option of last resort.” In this article I make the case that Invoice Factoring should be the first option for a growing business. Debt and Equity Financing are options for different circumstances.

Two Key Inflection Points in the Business Life Cycle

Inflection Point One: A New Business. When a business is less than three years old, options for capital access are limited. Debt financing sources look for historical revenue numbers that show the capacity to service the debt. A new business doesn’t have that history. That makes the risk on debt financing very high and greatly limits the number of debt financing sources available.

As for equity financing, Equity Investment dollars almost always come for a piece of the pie. The younger, less proven the company, the higher the percentage of equity that may need to be sold away. The business owner must decide how much of his or her company (and therefore control) they are willing to give up.

Invoice Factoring, on the other hand, is an asset based transaction. It is literally the sale of a financial instrument. That instrument is a business asset called an invoice. When you sell an asset you are not borrowing money. Therefore you are not going into debt. The invoice is simply sold at a discount off the face value. That discount is generally between 2% and 3% of the revenue represented by the invoice. In other words, if you sell $1,000,000 in invoices the cost of money is 2% to 3%. If you sell $10,000,000 in invoices the cost of money is still 2% to 3%.

If the business owner were to choose Invoice Factoring first, he/she would be able to grow the company to a stable point. That would make accessing bank financing much easier. And it would provide greater negotiating power when discussing equity financing.

Inflection Point Two: Rapid Growth. When a mature business reaches a point of rapid growth its expenses can outpace its revenue. That’s because customer remittance for the product and/or service comes later than things like payroll and supplier payments must take place. This is a time when a company’s financial statements can show negative numbers.

Debt financing sources are extremely hesitant to lend money when a business is showing red ink. The risk is deemed too high.

Equity financing sources see a company under a lot of stress. They recognize the owner may be willing to give up additional equity in order to get the needed funds.

Neither of these situations benefits the business owner. Invoice Factoring would provide much easier access to capital.

There are three primary underwriting criteria for Invoice Factoring.

The business must have a product and/or service that can be delivered and for which an invoice can be generated. (Pre-revenue companies have no Accounts Receivable and therefore nothing that can be factored.)

The company’s product and/or service must be sold to another business entity or to a government …

How To Borrow Money Against A Shared Inheritance

An heir may have to wait months and even years in order to get their inheritance distributions. This is because of the length of the legal process involved. So, an heir is allowed, by means of cash advances or loans, to receive funds in a matter of days. It has no effect on the other heirs of the estate. A portion of the estate is assigned by the cash advance company, in exchange for the loan. Here is how you can get an advance on your inheritance.

• You need to first determine whether you have the eligibility for an inheritance cash advance or not. Advances are only typically received by the heirs from probate assets. Probate assets are bank accounts, insurance policies, real estate, company interests and other assets that were only owned by the decedent. Non-probate assets include trust, retirement accounts or any accounts that are jointly held with another person.

• You need to first determine what amount of money you want to lend from your shared inheritance. The usual range of inheritance loans and advances are from $5000 to $250000. Select an amount of loan that is less than the inheritance you expect. The amount of the loan is capped by some lenders at a certain percentage of your total expected inheritance.

• Contact a company that has a specialization in inheritance advances. Money can only be borrowed by the inheritors from their inheritance after the beginning of the probate process by the inheritors. Do not forget to ask the inheritance company that for an inheritance advances what fees will they charge. The fees vary depending on companies. Fees usually depend on the amount of the advance, the complexity of the estate and the amount of time until the estate closes.

• A cash advance has to be arranged by you from the lender. Funds can generally be distributed by the companies from advances and loans within a few days of business of the transaction. If sufficient funds are not present to pay the loan, ask the company about its consequences. The heir usually does not have personal liability for insufficient estate funds because the heir is assigned an interest to the company.

• Return the money back to the inheritance cash advance company as early as possible. When the estate closes, executor automatically pays the money to the inheritance cash advance companies as part of the transaction. However, discounts and rebates are offered by some companies for heirs that pay back the loan early.

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5 Things to Consider While Selecting a Financial Planner

Unlike someone calling himself a CPA or a physician, just about anyone can call himself a “financial planner” or a “financial advisor” regardless of their educational background and professional experience. Moreover, not all of them are unbiased in their advice and not all of them always act in their clients’ best interests.

To ensure your financial planner is well-qualified in personal finances and impartial in his advice, consider the following five things:

 

1. Planning Credentials: Having a highly-regarded credential in financial planning, such as Certified Financial Planner (CFP) or Personal Financial Specialist (PFS), confirms that the professional you intend to work with has acquired the education and experience necessary to serve as a financial planner. CFP and PFS credentials are awarded to only those individuals who have met the certification requirements of education and experience in planning for personal finances. In addition, they have to pass the certification examinations and agree adhere to the practice standards and continuing education requirements.

2. Subject Matter Expertise: Financial planners are planning professionals, not necessarily subject matter experts. For example, a financial planner will be skilled in tax analysis and planning,but unlike a Certified Public Account (CPA) or an IRS Enrolled Agent (EA) he might not necessarily be a subject matter expert when it comes to tax rules Similarly,a he could be skilled in chalking out an investment plan, but unlike a Chartered Financial Analyst (CFA) he may not be an authority in the subject of investments. Work with a financial planner who is also a subject matter expert in those areas of personal finance that are important in achieving your financial goals.

3. Client Specialization: Not all financial planners serve all types of clients. Most specialize in serving only certain types of clients with specific profiles. For example, a personal planner may build his expertise and customize his services to serve only those individuals and families who are in certain professions, or a particular stage of life with specific financial goals and net worth. Ask whether the planner specializes in serving only certain types of clients with specific profiles to determine whether he is the right fit for your situation and financial goals.

4. Fee structure: The fee structure largely determines whose interests he serves best – his client’s or his own. A Fee-Only professional charges only fees for their advice whereas a Fee-Based professional not only charges fees but also earns commissions, referral fees and other financial incentives on the products and solutions they recommend for you. Consequently, the advice from a fee-only one is more likely to be unbiased and in your best interests than the advice from a fee-based financial planner. Work with a professional whose fee structure is conflict-free and aligned to benefit you.

5. Availability: He or she should be regularly available, attentive, and accessible to you. Ask the planner how many clients he currently serves and the maximum number of clients he is planning to serve in the future regularly. This clients-to-planner ratio is one of …