Receiveables financing

February 24, 2005 10:40 AM

Have any of you guys worked with a reputable invoice factor / someone that does receiveable financing?

I run a small business that is experiencing some pretty healthy growth, but we've reached a momentary snag with one of our clients, as his Accounts Payable area seems to be hung up. I have heard of invoice factoring, and there are a number of companies on line that offer this service, but I'd be reluctant to move forward with any of them without a decent recommendation. Have any of you MeFi small biz folks ever used such a service and can you recommend one?

posted by Flem Snopes to work & money (3 comments total)

According to this booklet by the US Comptroller of the Currency, "As the structure of ARIF [accounts receivable and inventory financing] loans has been modified, the availability of ARIF has also expanded. Once the province of a small group of specialized lenders, ARIF is now offered by most large and mid-sized banks and many community banks." [emphasis added]

In other words, rather than looking at online offerings, you might want to talk to nearby banks, particularly those that offer a wide range of services to small businesses.

And if you have a customer who represents a large part of your sales and isn't paying, you might want to see a lawyer rather than (or in addition to) a banker.
posted by WestCoaster at 12:37 PM on February 24, 2005

The problem is not so much that our customers are not paying, it's really that we are taking on two large new projects that entail us to hire up very quickly. Because we're very early along in both, we haven't built up the working capital reserves yet to be able to handle glitches in Accounts Payable. ARIF finacing seems to be just the thing to bridge the gap, though I'd like not to use it any more than I have to, since it can be expensive.
posted by Flem Snopes at 2:30 PM on February 24, 2005

Step 1:
All company principals must subordinate their interest to the company's debt. This will grease the wheels tremendously, and is often the first thing you're asked to do.

The sort of thing you're looking for is refered to as contractual factoring. I only know about this in relation to the garment industry, and my knowledge is from the mid 80's. (my first partner was a credit analyst with a major factor).
posted by Goofyy at 10:50 PM on February 24, 2005