Article Summary: There is plenty of negative business news in the papers and on TV lately. But you cannot paint each state with a broad, national brush. There are some anomalies of the positive kind here and there, and Texas is one of them.

As we all know, the US economy is in slowdown mode and while we are debating the depth of the slowdown, the following are contributing factors are slowing the national economic train down:

• High Oil Prices - A “parabolic” spike in the price has occurred, and some even say that a bubble has been created. Naturally this leads to uncertainty, and what might be called the “uncertainty premium.” Political instability and weather are driving prices higher. Inflationary pressures and the weak dollar are not helping matters. Oil needs to break downward to give the dollar a reason to rally.
• Weak Housing Prices - Housing prices are down from coast to coast. We have seen a 14% drop in the first quarter of 2008.
• Credit Crisis Concerns - We are seeing a 16-year low in consumer confidence. As a result of this and other factors, banks are focusing on serving existing clients to conserve capital, as opposed to reaching out to new clients.

Nationally, the conclusion we can all come to is that we are in a protracted mess that will linger on for 12 to 18 months as we work our way out of the problems.

Doing Business in Texas - What’s Next?

Now that you’ve had the doom and gloom, let’s talk about the bright spots here in Texas. In many areas of business and economy, Texas has outperformed the nation as a whole. Let’s take a closer look:

• Growing Output - Texas is the top exporter in the country, with exports rising over 40% in the last three years. Location helps, as do the good ports and airports in Texas. This state also enjoys a good product mix and is not as oil-dependent as in the past.
• Statewide Economic Development - Texas Legislators got busy in 2001 with House Bill 931. There are also more Fortune 500 companies headquartered in Texas than any other state.
• Energy Prices – They are not so bad when you own a lease or two in the Barnett Shale. We are watching for the next Rolls Royce dealership in Midland, Texas.
• Real Estate & Construction - We did not overbuild as we did in the 1980s. Inventories are relatively “in-check” and builders learned their lesson from last time. We gain about 400,000 people per year, so we can absorb the current inventory. House prices in Dallas actually rose in the first quarter of 2008, which was an anomaly on the national scale.
• Job Growth – Texas is number one in the nation for job growth, as of February 2008. Of the Top 15 MSAs in the country, Texas had four of them.
• We Can Say YES - The workers are here in Texas. We have an educated workforce with companies that are willing to train. Thanks largely to the Hispanic population, Texas has a high birth rate. Low regulations – we can build houses on a lot of open spaces. We enjoy low taxes in many regards and have no personal income tax.
• Nationally - Our economy will take off again, as it always has in the past. It’s just going to take some time. As for technology, we ain’t seen nothing yet! Think of all our advancements — nanotechnology, the mapping of the human genome — and then think of all the things your Grandparents saw. The pace of change and improvement is just getting faster.

Globalization will continue. Outsourcing will not stop and it will continue to raise everyone’s standard of living, despite all of the current screaming from some political corners. Texas will be in the center of it all, right now Texas is a great place to be, no matter who wins the White House.

Are we in a recession or aren’t we? Depending on whom you ask, you’ll get several different answers to this question. The White House calls it “tough times” while many economists call it a recession.

Regardless of the semantics, one thing is certain. Business financing is getting harder to come by, and will likely remain that way until the economy starts to swing upward again.

As a result of this, many business owners are looking into alternative forms of business financing — “alternative” meaning ways to obtain business financing aside from traditional lending channels.

Cash flow factoring is one of these alternate forms of business financing, and it is being used by an increasing number of business owners who have accounts receivable operations. Actually, cash flow factoring goes by several names:

• Accounts Receivable Financing
• Small Business Factoring
• Business Invoice Funding
• Invoice Factoring
• And so on…

But regardless of the terminology used to describe this financing model, the principles behind cash flow factoring remain the same. Essentially, you are converting invoices or other types of assets into much-needed cash flow through a process known as factoring. Hence, when you put the pieces together you get cash flow factoring … and it’s something that a lot of business owners rely on these days.

How do you know if cash flow factoring might be useful for your business? Here are some of the basic criteria:

• Your business has some form of accounts receivable / invoicing process in place.
• Your business is in a growth mode.
• You need working capital to continue your growth.

Of course, there are more considerations than these when evaluating cash flow factoring as a potential financing tool. But this gives you a general idea of the types of businesses who can benefit from cash flow factoring services (like the ones that we provide).

If you would like to learn more about this topic, or about the cash flow factoring services that we offer, please contact a representative.

Some working capital finance companies (and commercial finance companies in general) use phrases like “service with a difference” and “a different kind of company” … but then they fail to explain what makes them so different.

We would like to offer you a refreshing change of pace by explaining what, exactly, makes Far West Capital different from other commercial finance companies:

• We customize the relationship for each individual company. We offer a Non-Notification Factoring product, which means the accounts receivable we are buying [i.e., your customers] are unaware Far West is involved. This is less intrusive to your business. More benefits of A/R financing.
• On the other end of that spectrum, we can provide full-service factoring, whereby Far West Capital sends invoices, makes collection calls, and handles all credit decisions for you. We do not have a “cookie cutter” deal, we listen and shape the product specifically for the client’s needs.
• We can offer inventory financing along with a factoring deal.
• We can offer purchase order financing along with a factoring deal.
• Customer Service is our most important strategic focus. We encourage anyone looking for this type of working capital to do their homework when choosing a provider. If you cannot get a long list of satisfied clients to speak with, then you should ask yourself “why” you are doing business with this Factor. We can provide anyone who asks with a long list of current and past satisfied clients.
• You have direct access to decision makers. We do not shuffle you to inexperienced “business development” personnel. Your account will be handled by experienced professionals capable of structuring and negotiating your deal directly. This increases the speed and efficiency of getting your deal done and will make you more confident about the relationship from start to finish.

If you are in need of working capital finance services, and you’d like to experience a true difference in service, please contact us today.

… and if it were only a silly comedy staring Rick Moranis, we would be okay. But as it turns out, our economy may actually shrink in the coming months (which is part of the textbook definition for economic recession).

Federal Reserve Chairman Ben Bernanke warned Congress on Wednesday that the U.S. economy could shrink over the next few months.

“A recession is possible,” Bernanke told Congress. “Our estimates are that we’re slightly growing at the moment, but we think that there’s a chance that for the first half as a whole there might be a slight contraction.”

Of course, the alternate view of this situation is the one that comes from the White House, where softer phrases like “slowdown” are used to describe our poorest financial health in decades.

Is there any good news to go along with this?

Well, for one thing it’s important to remember that our economy is an endless cycle of ups and downs. While we don’t know how long it will be down, it’s destined to rally and rise at some point in the future. Bernanke thinks that upswing could come as early as the latter half of this year and into 2009.

Of course, Bernanke is one man. But it’s still nice to hear a note of optimism once in a while!

Accounts receivable (AR) financing is one of the key services that we provide to our clients. And while it’s not for every business, it can certainly benefit the business owner who wants to turn accounts receivable (invoices) into work capital.

AR Financing Benefits

Here are some of the primary reasons businesses use accounts receivable financing to sustain their growth:

• It generates working capital – The primary purpose of accounts receivable financing is to convert your accounts receivable into capital that you can use for a variety of purposes, such as material / supply purchases. For companies with a lot of capital tied up in their invoices, AR financing can help liquidate that capital.
• It’s a quick path to financing — In most cases, you can secure capital through AR financing / factoring without having to provide as much documentation as you would provide for a traditional small business loan. Thus, it’s a quicker path to much-needed cash flow.
• It lifts a collection burden – When you transfer invoices to a factoring company (which is the most common form of accounts receivable financing), it allows you to refocus your attention on other things that are important to your business. The customers owing the invoices would now send payments to the factoring company that assumed your invoices. So in this regard, accounts receivable financing can reduce some of the collection burden from your company.

Is AR financing right for your business? Well, that depends on several factors. But if you operate accounts receivable as part of your business model, and you need a way to convert some of your invoices into working capital, then accounts receivable financing could be exactly what you need.

If you would like to learn more about the AR financing services of Far West Capital, please contact us at your convenience.

Related articles:

• Factoring Receivables for Cash
• Factoring Companies Explained

The factoring services we provide can serve many different types of businesses. This is part of the reason we had to open two new offices recently, one in El Paso and the other in Richardson, Texas.

The Richardson office will serve the entire Dallas / Fort Worth area, and will be managed by Brian Center (see staff page). Jodie Rodgers will be managing the El Paso office.

With that being said, please keep in mind that we still serve businesses all across the United States. If you operate an accounts receivable type of business model, and you think you could benefit from the working capital finance services we provide, please contact us today!

More company news

Article Summary: An explanation of factoring for small business owners, and how it relates to the current state of the economy.

The financial landscape continues to change in the United States, with tighter credit and lending restrictions spawned by the mortgage breakdown. We have already outlined the history of these changes in our “Ripple Effect” special report (see blog sidebar below). So I won’t belabor that point here.

Instead, I’d like to use this blog post to explain how the economic changes mentioned above have increased the need for alternative financing, such as small business factoring services.

How Factoring Fuels Small Business Growth

By way of definition, factoring is a process through which small business owners can convert accounts receivable (invoices) into much-needed working capital. Thus it is also referred to as invoice factoring for small businesses.

Let’s say I operate a small business that uses an invoicing system to bill clients. At any given time, I have a good deal of capital in the form of outstanding invoices. These invoices represent future revenue, but it does not help me much here in the present.

Now let’s imagine that April is going to be a big month for material / supply purchases, but much of my capital is tied up with invoices. This is a scenario where a small business factoring company can help me transform my invoices into working capital … capital I can put toward those necessary purchases next month.

So as the business owner, I would work with a factoring company to transfer some (or all) to the company. The factoring company would advance me a portion of the invoice total — let’s say 80% for this example.

Now I’ve converted 80% of my outstanding invoices into capital I can use to make my supply purchases. My customers who owe the invoices will now send payments to the factoring company (instead of sending them to me). This is the crux of small business factoring and how it can benefit your growing business.

A Much Needed Tool in Today’s Economy

Our current economic troubles only make this kind of financing all the more important. As federal regulators increase their scrutiny of lenders, the number of financing options for small businesses declines. Thus, there is more need for alternate financing methods such as invoice factoring and other forms of working capital finance.

If you’d like to learn more about this subject, you should check out “The Ripple Effect” — our special report on the state of the economy and how it affects business finance. You can download your copy simply by subscribing to our email newsletter.

If you think small business factoring might be what your company needs, and you would like to learn more about it, please contact us today.

We have created an e-booklet that explains the financial ripple effect that started last year, with the rapid rise of home foreclosures. As you are probably well aware, this still-ongoing crisis spread to the world of business credit as well.

But you may not be aware of how, exactly, the crisis has affected business owners — mainly in terms of limiting finance / credit options for business owners. That’s why we have created this special report, to explain what all of this means to businesses that are actively seeking financing for their continued growth.

An excerpt:

Businesses have fewer options today when seeking financing, thanks largely to the ripple effect we have just discussed. But there are options, and as a modern business owner it’s important that you understand what they are. Most of the “off balance sheet” financing vehicles for banks have all but dried up. Banks that previously could “unload” risk by selling off the loans they made can no longer do so under the same terms, if at all. Thus, they are going to have to make loans the old fashioned way, by underwriting a loan as if it were going to stay on their books.

Get Your Copy Today

This is an electronic publication that comes in PDF format, and you can download your copy today. If you haven’t done so already, just sign up for our working capital newsletter.

Not only will you get useful finance information sent to you by email each month, but you’ll also be able to download The Ripple Effect (our e-booklet) after signing up for the newsletter (a download link will be sent to you automatically after subscribing).

There has been so much in the news lately about business credit and finance that it’s hard to keep up with it all. But much of this information is important for business owners to read, so we have decided to do a regular “roundup” of business and financial news.

Risky Business Gets No Love
No, I’m not talking about Tom Cruise’s teenage shenanigans in the 1980’s hit movie Risky Business. In this sense, I’m referring to businesses with risky profiles, as viewed by lenders. According to a recent article in the Wall Street Journal, many of the major lenders in this country are investing in what they see as “less-profitable but steadier” types of businesses.
Read the full article at WSJ

Like Sands Through the Hourglass - Subprime Drama Continues
Many other lending giants are posting major losses that can be tied back to the subprime meltdown of last year (and this year, and next year?). Wells Fargo posted a 38% drop in the fourth quarter, largely due to credit losses associated with the mortgage fiasco.

Consumer Spending Down, Naturally
Recent rate cuts by the Fed are not having the desired effect (desired by the Fed, anyway). It’s also unlikely that any tax rebate program is going to spur consumers and stimulate the economy. The New York Times spells out the scenario, and what it means to business credit and finance in general. Here’s my question … how much stimulus will a $300 rebate check produce when it costs nearly that much to fill up your car with gas two or three times?

But It’s Not All Bad News
Companies like Far West Capital are in a position to help many businesses with accounts receivable systems in place, even while other lending channels are drying up. We are an asset-based financing company, which gives us a certain amount of flexibility that many lending channels no longer have. We use this flexibility to find the best financing option for our customers.

If you operate your business under some form of accounts receivable system — and you’d like to learn more about our A/R financing programs and how they might help you — please contact us.

The latest installment in the subprime mortgage meltdown: Bank of America purchases the ailing Countrywide.  

In previous blog posts, we have talked about the subprime mortgage meltdown and how it created a ripple effect that spread through our economy (even affecting business credit).

As of this morning, we have seen the latest development in the ongoing “shuffle” of mortgage companies. It has been public knowledge that Countrywide — like so many other mortgage lenders — was struggling financially. Financial analysts expected that the mortgage giant would have to declare bankruptcy at some point.

But instead of folding completely and losing billions, Countrywide was sold to Bank of America — to the tune of around 4 billion dollars.

This is just the latest in an ongoing string of mortgage company collapses. Ameriquest, formerly one of the biggest subprime mortgage lenders in the country, now has what equates to a “Sorry We Are Closed” message on their website.

Thus the economical cycle continues, with its many ups and downs. We have seen it before, and we will no doubt see it again.

But how does all of this affect you, as a business owner? This is the subject of a free booklet we are preparing, aptly titled “The Ripple Effect.” It should be online sometime in February, and we will announce it here on the blog and also through our newsletter.

So if you haven’t signed up for the free newsletter yet, now is the time.