alternative funding · asset based financing - factoring “factoring”, or “accounts receivable...
TRANSCRIPT
Alternative Funding
Alameda County SBDC
Fremont Library
February 6, 2018
Our Panelists
Name Organization
Jenny Kassan Jenny Kassan Consulting
Carlos Quintanilla Opportunity Fund
Bruce Taylor East Bay Factors
Hon Wong Tech Futures Group
Lee Lambert Alameda County SBDC
Asset Based Financing - Factoring
“Factoring”, or “Accounts Receivable Financing” is a
transaction in which a business sells its invoices, or
receivables, to a third-party financial company known as a
“Factor”
1. The business is paid 75-90% of the invoice upfront.
2. The Factor then collects payment on those invoices
directly from the customers (possible arrangements
can be made to make it look like they are paying the
business directly)
3. The Factor remits the payment to the business less a
fee.
Asset Based Financing - Factoring
Why Factor?
Can be a relatively fast way to access cash through
tight periods
Does not require good credit – the credit quality of your
customers is more important
Can operate as a credit line to be used only when
needed
Does not appear as debt on your balance sheet
Asset Based Financing - Factoring
US factoring market is estimated at $125 billion/year
Fees and rates vary – generally in the 3% per month
range
Company is usually responsible to “make good” if the
invoiced party does not pay its full amount due
Asset Based Financing
Industries that are heavy users of factoring include:
Freelancers (marketing and creative)
Staffing Companies
Distributors
Small Manufacturers
IT Services and Software Development
Shipping and Transportation
Construction and Contractors
Asset Based Financing
Important Terms:
Recourse
Reserve Account
Reserve amount
Rebate
Verification
Notification
Online “Fintech” Lenders
Very dynamic area, changing constantly
Great convenience, but most often at much higher rates
than if you went through a longer process with a
traditional lender – know your rate!
Beware! There are lenders charging 40-100% APR –
you don’t have consumer protections as a business –
this is not a suitable long-term solution
However, some lender are streamlining the process
using technology and web-based solutions, so not all
are at the high rates
Online Lender Models
Online Lending
Huge number of choices, continuing to change and
evolve at a rapid pace
Many new VC and privately funded start-ups still
entering the market
For business loans, need 1-2 years in business to
qualify
Rates range 6% - 99%
More established lenders:
Lending Club, Funding Circle, Prosper
Direct Lenders: OnDeck, Kabbage, Fundation
(Note: Very expensive – APRs can approach 100%)
Online lenders can save you time
In the vast majority of cases, a bank, credit union or
SBA loan will be lower cost if you qualify
SBIR/STTR Participating
Agencies DOD SBIR/STTR
HHS SBIR/STTR
NASA SBIR/STTR
DOE SBIR/STTR
NSF SBIR/STTR
DHS SBIR
USDA SBIR
DOC SBIR
ED SBIR
EPA SBIR
DOT SBIR
TOTAL ~ $3B
THANK YOU!