BCA

By John Riley

Acquiring and managing the financial resources of a company has always been, and will continue to be, the greatest challenge for management. It is even more critical for start-ups and small businesses whose needs are great and their financial assets limited. As a result, when a small company does qualify for financing, it often requires paying higher interest to banks or giving up a bigger slice of company equity to venture capitalists, but if you can’t qualify, factoring may be the solution.

Factoring is one source of funding that is attracting more attention these days. An example is Liquid Capital of Arizona, a major player in the field. They are looking to partner with small businesses without taking equity, sharing in profits or making business decisions. While they are ready to provide working capital to most entities, their focus is on business-to-business companies.

“We offer five basic services to help small business,” says President Joel Gottesman, “ and over time we have found more and more companies wanting to know more about factoring.
Our focus now is to try to provide more information about what we offer and where we think our services can best serve our clients”

Full factoring is one of those services. The way it works is straight forward. All of a business’s approved accounts are sold to Liquid Capital. Then Liquid Capital typically advances 80% in cash up front and the balance as they collect on the acquired accounts’ outstanding invoices, less their discount fee.

Another option is spot factoring. In this scenario, the same services as full factoring are employed except only a portion of the business’s approved accounts, chosen by the client, are sold to the factoring company.

Purchase order finance is another service, but it is different in application. Liquid Capital finances purchase orders for the purchase of presold inventory. Factoring the accounts receivable on delivery of the goods to the manufacturer funds the payment to the manufacturer.

The factoring company can also act as the business’s outsourced accounts receivable department. Their specialists underwrite the customer’s credit, provide collection services, process payments through a lock box, and provide a full on-line reporting system. The cost is very economical compared to staffing a credit department in-house.

Finally, the factoring company provides credit insurance. It is an economical way for a business to help insure selected invoices against loss from a customer’s insolvency.

There are several ways a factoring company can help according to Gottesman, “ We can fund growth opportunities, the sale of a business, delay the need for additional equity, help avoid equity dilution, fund ineligible receivables on a bank line and fund Chapter 11 reorganizations. And the process of helping a client get started is made easy by the experience and customer focused attitude of our people.”

With the many financial problems facing businesses today, factoring can be one of the tools management can fall back on when things are most difficult. It can be the right solution at the worse time.

By Steve J. Jackson

When you are trying to resolve a personal debt problem it can be very frustrating if you feel that your debt management company is providing a bad service. We consider what your options are if you find yourself in this situation. Thousands of people start debt solutions each month and most people are very satisfied with the service they receive from their debt management company.

However, if the service you are getting is poor, this can be extremely frustrating. If you find yourself in this situation your options will really depend on the type of solution you are using.

I am in a debt management plan

A debt management plan (DMP) is an informal agreement with your creditors to reduce the amount you repay each month so that this fits into a budget that you can afford.

The most important thing to understand about a debt management plan is that there is no legal contract between you, your creditors or your debt management company. This means that any of the parties can change the agreement at any time.

Often this flexibility can work against you because it means that your creditors can demand that you increase your monthly payments or start charging interest on the outstanding balances without warning.

However, it can also work for you. If you want to increase or decrease your payments or you are getting hassle from your creditors but feel that your debt management company is not responding, there is nothing to stop you moving to another company.

You can simply stop making payments to your old debt management company and start making the payments to one that you feel more comfortable with. There will be no penalties.

I am in an Individual Voluntary Arrangement

An individual voluntary arrangement (IVA) is a formal legally binding agreement.

Once an IVA is in place your creditors make a commitment to you that they will add no further interest or charges to your outstanding balances. They also agree to write off a certain amount of the debt you owe. These are of course significant benefits. However, unfortunately once you are in an IVA, you cannot change your IVA provider.

Even if you are unhappy with the service you are receiving, the only way you can come out of an IVA is if you stop making your monthly payments. However, you must understand that if you simply stop paying your IVA, it is likely to fail.

At best this would mean that you would be back at square one with any remaining unpaid debts still outstanding. But if you are a home owner, your IVA provider could very well then make you bankrupt.

Choosing the right company

The best thing is of course to pick the right company to work with in the first place. Follow the recommendation of a friend if you can. Failing this you need to do plenty of your own research.

The internet is a great place to start looking for the right debt management company. Have a look at the quality of information that they provide and familiarize yourself with the different options available.

Also have a look at some debt management forums where you can ask questions anonymously and judge the quality of the answers you get. Then speak to 2-3 different companies and choose the one that you feel most comfortable with. The bottom line is that if you decide to do a DMP or you are already in one, it is possible to change your debt management company.

If you want to do an IVA however, changing the IVA provider is not possible once the arrangement is in place. As such, making the right decision about which company to work with at the beginning is very important.

Steve Jackson is a debt adviser from BeatMyDebt.com in the UK. For more quality and unbiased information on Debt Management Plans, visit our website at http://www.beatmydebt.com

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