Helping you understand factoring, how you profit, and the risks that go with the territory are what this series is all about.
The purposes of the book you are holding are to:
* Provide introductory information about the practice of factoring small receivables.
* Present the remarkable returns you can make.
* Show how this can be done on a part-time basis if you want to keep your present job, if you’re approaching retirement, or already retired.
* Show how this can be a full-time business if you desire.
* Indicate how much capital is needed.
* Provide an introduction to risks and basic risk management tools.
* Encourage you to consider your personal tolerance for risk and the tolerance for risk of those people close to you.
* Help you discern if factoring is an appropriate investment of your time and money, given your present life’s circumstances.
While this book gives you the fundamentals you need to know before entering the factoring arena, it does not provide you with the “nuts and bolts” of how to actually factor receivables day-to-day: the forms needed, procedures to follow, record keeping practices, and the like. All that information and much more are provided in detail in book 2 of this series, Factoring Small Receivables.
The third book of this series, Factoring Case Studies: Learn and Profit from Experienced Small Factors, provides real-life examples of several small factors and clients they have funded…for better and for worse. The numerous case studies come from the experiences of small factors around the country and illustrate what desirable clients – as well as those who turned out not so desirable – look and act like . If a picture is worth a thousand words, these case studies are pictures (though not literal photos) of the principles and lessons in the first two books, and relate some very educational – and quite interesting – personal stories. Used together, The Small Factor Series provides thorough instruction in the entire process of investing in receivables of small companies.
If after finishing this book you decide you want to be a small factor either part-time or full-time, Factoring Small Receivables is a must read. You’ll find yourself referring to it constantly as you start and continue to purchase small receivables to earn very high returns. Factoring Case Studies will make the forms, suggestions, and daily procedures come alive and illustrate in very human stories what you’ve learned in the first two works.
Unlocking the Cash in Your Company, the last book in the series, is written for business owners who may be unfamiliar with factoring or who have some exposure to factoring but want to learn more. It will help them understand normal procedures, see how factoring can help their cash flow, and learn the difference between factoring and traditional loans or venture capital. This knowledge will make starting a factoring relationship a bit less intimidating.
Book 4 is included in The Small Factor Series so that those providing funds for business owners can view factoring from the client’s perspective and gain a greater appreciation of factoring from its receiving end. This book can also be used by small factors in marketing and educational efforts.
So let’s begin at the beginning – with Factoring Fundamentals. You will learn in the pages that follow “How You Can Make Large Returns Investing in Small Receivables.” Time to get started!
Introduction
In 1994 I began a home based business that uses an investment method that has been in existence for literally centuries. It is practiced widely across the USA, is even more common in Europe, and is of course completely legal yet has little government regulation.
Traditional Investments
Due to the economy and very low interest rates, most people are making almost nothing in traditional investments. If your money is in CDs and money markets with rates around 1 and 2% APR (Annual Percentage Rate), you’re making at best about $17 a month on a $10,000 CD “investment.” That’s pitiful!
Maybe you’re playing the stock market, trying to make a better return. Have you followed the advice of brokers and other stock or options “experts” - only to lose more money than you’ve made? Maybe a lot more?
Consider this:
* If you have investment funds making very low returns...
* And you’re tired of the stock market’s roller coaster ride...
* And you’ve had it with commissioned brokers or self-proclaimed “gurus” selling expensive advice that’s too often wrong...
* And you’re ready to try something new where YOU make hands -on decisions...
* And you’re looking for consistent annualized returns in the middle to high double digits...
Let me introduce an alternative that may be completely new to you but has been around a very long time. Consider investing in the accounts receivable of one or a few small businesses in your area. That is, buy companies’ fresh invoices. They’re worth money: the customers have an obligation to pay them.
Now wait a minute... Why would a business owner want to sell his receivables? Most business owners probably don’t even know they can.
Simple: waiting 30 or 45 days to receive payment can put a real squeeze on a company’s cash flow. If they make a product or have to meet payroll, waiting that long can mean a cash shortfall when materials are needed for new orders, or when payday rolls around every week or two.
Maybe you’re playing the stock market, trying to make a better return. Have you followed the advice of brokers and other stock or options “experts” - only to lose more money than you’ve made? Maybe a lot more?
Consider this:
* If you have investment funds making very low returns...
* And you’re tired of the stock market’s roller coaster ride...
* And you’ve had it with commissioned brokers or self-proclaimed “gurus” selling expensive advice that’s too often wrong...
* And you’re ready to try something new where YOU make hands -on decisions...
* And you’re looking for consistent annualized returns in the middle to high double digits...
Let me introduce an alternative that may be completely new to you but has been around a very long time. Consider investing in the accounts receivable of one or a few small businesses in your area. That is, buy companies’ fresh invoices. They’re worth money: the customers have an obligation to pay them.
Now wait a minute... Why would a business owner want to sell his receivables? Most business owners probably don’t even know they can.
Simple: waiting 30 or 45 days to receive payment can put a real squeeze on a company’s cash flow. If they make a product or have to meet payroll, waiting that long can mean a cash shortfall when materials are needed for new orders, or when payday rolls around every week or two.
How can they meet these critical expenses if they haven’t been paid what they’re owed and don’t have enough cash reserves to cover these critical expenses? Answer: they can sell a valuable asset - their receivables.
Cash flow problems keep many businesses from growing like they want to and could if they only had adequate cash on hand. Selling receivables at a discount is how to get this cash quickly - and get it without creating debt, which a bank loan does...IF a bank will even consider them. And just waiting to hear if a bank loan has been approved (which most aren’t) can take months.
Cash flow problems keep many businesses from growing like they want to and could if they only had adequate cash on hand. Selling receivables at a discount is how to get this cash quickly - and get it without creating debt, which a bank loan does...IF a bank will even consider them. And just waiting to hear if a bank loan has been approved (which most aren’t) can take months.
Did You Know...
Companies often discount invoices to customers on a 2 net 10 basis. That is, if a customer pays in 10 days, they can deduct 2% from the face value of the invoice.
Many businesses gladly give this discount to get paid faster. However, most customers are not equipped or inclined to take advantage of this discount. The vast majority wait 30 or more days and pay the full amount. And therein lies your opportunity.
If you buy invoices at rates similar to or less than what many businesses are already willing to offer their customers, look what happens:
* The business owner gets the cash up front to meet payroll, purchase materials, pay taxes, and anything else he needs.
* He’s not paying more than he would with 2 net 10 terms, which he’s usually willing to give anyway.
* He doesn’t run the risk of customers taking the 2% discount and STILL taking 30 or more days to pay - which happens.
* He grows his business with excellent cash flow, and thus has more receivables to sell you.
* You get a tremendous return on investment which continues as your client grows.
Win-win all the way around!
This practice of selling receivables for less than their face value has been done for many, many years. The Romans did it. The Pilgrims did it. It’s been a standard business practice in Europe for a long time, and it’s widely done in the U.S. even though most people here aren’t aware of it.
This practice of selling receivables is called factoring. Factoring is the buying & selling of business accounts receivable. As you can see, by selling their business-to-business and business-to-government invoices to factors, companies can obtain cash quickly to run their operations and grow without a bank loan.
Many businesses gladly give this discount to get paid faster. However, most customers are not equipped or inclined to take advantage of this discount. The vast majority wait 30 or more days and pay the full amount. And therein lies your opportunity.
If you buy invoices at rates similar to or less than what many businesses are already willing to offer their customers, look what happens:
* The business owner gets the cash up front to meet payroll, purchase materials, pay taxes, and anything else he needs.
* He’s not paying more than he would with 2 net 10 terms, which he’s usually willing to give anyway.
* He doesn’t run the risk of customers taking the 2% discount and STILL taking 30 or more days to pay - which happens.
* He grows his business with excellent cash flow, and thus has more receivables to sell you.
* You get a tremendous return on investment which continues as your client grows.
Win-win all the way around!
This practice of selling receivables for less than their face value has been done for many, many years. The Romans did it. The Pilgrims did it. It’s been a standard business practice in Europe for a long time, and it’s widely done in the U.S. even though most people here aren’t aware of it.
This practice of selling receivables is called factoring. Factoring is the buying & selling of business accounts receivable. As you can see, by selling their business-to-business and business-to-government invoices to factors, companies can obtain cash quickly to run their operations and grow without a bank loan.
What about Competition?
There are many large factoring companies out there. Look in the Yellow Pages under Factors or Financing and you’ll see the big ones listed, and there are many in metropolitan areas. So where is the opportunity if there is so much competition?
Answer: the competition is for large accounts. Big factors don’t want to buy invoices of very small companies with volumes less than $10 ,000 per month. Finding factors willing to accept such small companies can be a difficult challenge for very small business owners.
Why? Big factors can’t purchase such small accounts profitably - their overhead is too high. The few that say they do purchase such small accounts usually don’t really want them, and might accept them in hopes the small client will grow into their profitability range. Most larger factors either turn away very small companies, or charge exceptionally high rates to cover their operating costs.
That creates a wonderful niche for the small factor and savvy independent investor...with very little competition...in a very, very large market.
Purchasing business accounts receivable can be a rewarding way of making consistent, excellent returns while helping small businesses with their cash flow needs. But you must know how to do it and risks are involved, of course.
This Book’s Purpose
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Chapter 1
The complete first chapter
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(© Dash Point Publishing, Inc.)
The complete first chapter
is printed below.
(© Dash Point Publishing, Inc.)
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You can do this from your home just like I do or from an outside office - and it won’t take you years to begin making consistent , high yield returns. A few months is usually enough for most people - ordinary people like you and me. You can do it full-time as a business or part-time and keep your regular job.
Let me explain.
Let me explain.