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Written by Gregg Elberg
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Thursday, 03 May 2007 |
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Word Count: 1057 Accounts Receivable Financing- HOT
The word “hot” has over forty different meanings, according to the
Merriam-Webster Online Dictionary. As used in this article, the word “hot” is
used to mean:
“6 a : of intense and immediate interest <some hot gossip> b : unusually lucky
or favorable <on a hot streak> c : temporarily capable of unusual performance
(as in a sport) d : currently popular or in demand <a hot commodity> e : very
good <a hot idea>”. The words eager, zealous and fresh are second place synonyms
for the hot idea of accounts receivable financing.
When a B2B business suddenly needs financing fast, it is hot. It is hot because
it is on fire with potential business: money is needed to power this growth.
According to the Wikipedia, “"Money (That's What I Want)" was a 1959 hit single
by Barrett Strong for the Tamla label, distributed by Anna Records. The song was
written by Tamla founder Berry Gordy. It became the first hit record for Gordy's
Motown flagship label.” The song was hot. It has been recorded by over twenty
different artists; it reached number 23 on the Rhythm and Blues Charts. The
lyrics to “Money (That’s What I Want)”, as recorded by the Beatles, go like
this:
“ The best things in life are free
But you can keep 'em for the birds and bees
Now give me money (that's what I want)
That's what I want (that's what I want)
That's what I want (that's what I want), yeah
That's what I want
Your lovin' gives me a thrill
But your lovin' don't pay my bills
Now give me money (that's what I want)
That's what I want (that's what I want)
That's what I want (that's what I want), yeah
That's what I want
Money don't get everything, it's true
What it don't get, I can't use
Now give me money (that's what I want)
That's what I want (that's what I want)
That's what I want (that's what I want), yeah
That's what I want…”
The Beatles were hot. It is an interesting fact that it took the Beatles many
years to personally make substantial money even though they were the hottest
band on the planet. For years they sold more records than any other group, but
the profits did not find their way into the individual Beatle bank accounts.
When in the course of a B2B business’ development does the business get “hot”?
Here are a few examples:
1) A video game developer labored for years to create novel technology and
interesting new types of multi-player Xbox And Xbox 360 Games You Want">games for the internet. They were almost
put out of business one year when a burglar broke into their office and stole
all of their computers and office equipment. A major corporation in the video
game business offered them a contract to develop a new game; substantial
progress payments were offered for meeting the contract milestones; the
challenge was to meet a very tight production schedule. All of a sudden, the
business was hot; they needed to hire thirty new game developers. How could they
meet the increased payroll requirements and accomplish the goals in the
contract?
2) A small distributor of novelty products from Australia established a
California corporation to sell their products throughout the United States. They
introduced their product to many major department stores. After of several years
of marketing they landed several new contracts for five times their previous
year’s sales. All of a sudden, the business was hot. How could they pay for the
product and provide the items to the department stores?
3) A manufacturer of products for the military struggled to survive for five
years. They invented a terrific product. Unfortunately, they were involved in
patent litigation and other disputes that burdened them with substantial
attorney’s fees. After years of struggling, the disputes were settled and the
attorney’s were paid. The manufacturer was “cash poor”. They negotiated an order
for their products that was several times their previous year’s sales. All of a
sudden, they were hot. How could they manage their cash flow to take advantage
of the new opportunities?
If these businesses could sing, “Money (That’s What I Want)” could be their
anthem. Accounts Receivable Financing may be the answer to their universal cash
flow issues and requirements for substantial growth. Time is of the essence
because these businesses, all of a sudden, are hot.
In five to ten working days, or less, accounts receivable financing may be
obtained to make these businesses ready for prime time. The process is
relatively simple. The business completes an application for financing. They
give the appropriate accounting information and details regarding their
customers to the finance entity. The finance entity conducts a due diligence
review regarding their financial condition, and the strength of their customers.
If there are no issues, a process is started whereby the businesses deliver
their products or services to their customers and the finance entity advances
80% to 90% of the contract amounts. When their customer pays the finance entity
it pays itself back the funds that have been advanced, deducts the agreed upon
fees, and the business receives the difference. This accelerates their cash
flow. It eliminates the wait of thirty to ninety days to receive payment from
their customers.
Sometimes there are other complicating issues such as tax problems, UCC-1 lien
priority matters, subordination of pre-existing financing, the need for purchase
order financing to pay for costs of production, or letters of credit to
guarantee international trade- all in addition to accounts receivable financing
to make financing a hot business work correctly. Often these issues will be
overcome successfully.
The bottom line: if your business is ready for prime time and your sales are
hot, if you feel like singing “Money (That’s What I Want)” like the Beatles,
Accounts Receivable financing may be the cash flow solution for your business’s
success.
Copyright ©2007 Gregg Financial Services
www.greggfinancialservices.com
Mr. Elberg is a licensed attorney and licensed real estate broker. Gregg Financial Services is a full service brokerage for commercial finance companies and banks that fund B2B businesses. Mr. Elberg arranges funding from $25,000 to $50 million per month at competitive pricing. For more information about GFS, please visit our website:
www.greggfinancialservices.com
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