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Month: November 2009

CIT Bankruptcy Filing Highlights Importance of Factoring

News that factoring giant CIT Group Inc. filed for Chapter 11 bankruptcy protection rocked the finance industry, but the fundamentals haven’t changed: Factoring remains a lifeline for mid-to-small businesses around the world.

Account receivables factoring, or invoice factoring, is one of the oldest forms of financing. Businesses have used this type of financing for nearly 500 years. It is used by many typesof businesses, including service industries, retailers and health care companies.

A Commerical Finance Association Survey found that asset-based loans totaled $600 billion in 2008, a figure that has grown sharply since the 1970s.

It remains a popular way for businesses to obtain cash — with NO debt and NO banks.  It allows businesses to:

  • Get working capital quickly
  • Relieve stress from no-pay and slow-pay clients
  • Fill more orders quicker
  • Increase sales with flexible funding
  • Take advantage of vendor discounts
  • Fund payroll and taxes with less stress
  • Extend credit to customers on large orders
  • Buy equipment or inventory on demand

Account receivables factoring remains the best way for businesses to get cash quickly. Instead of waiting on clients to pay their invoices in 30, 60 or 90 days to pay their invoices, factoring gives businesses access to immediate cash — often in as little as 24-48 hours.

While disappointing, the CIT bankruptcy filing really illustrates just how important the factoring industry is to the economy. CIT provided financing for more than 1 million businesses, including  Dunkin’ Brands Inc.  and Eddie Bauer.

It appears that the credit crunch that has impacted thousands of small businesses also impacted CIT. Funding at the 101-year-old commercial lender recently dryed up, forcing the company to file for bankruptcy to cut $10 billion in debt. The bankruptcy protection filing followed a failed debt exchange and following  billions in U.S. bailout funds. 

CIT,  meanwhile, hopes to emerge from bankrupty quickly. It is the fourth-largest corporate bankruptcy filing.

For more information about how invoice factoring can benefit your business, visit MDS Funding at http://www.MDSFunding.com, contact MDS Funding at  866-394-4637 or email CashFlowConsultants@mdsfunding.com.

Factoring Industry Saves The Shopping Season For Retailers

It could have been a not-so happy holiday shopping season for thousands of retailers if factoring giant CIT Group Inc. did not file for Chapter 11 bankruptcy protection last week.

Millions of retailers use factoring to line store shelves — before consumers actually purchase the product. The holiday shopping season is the biggest selling period of the year for most retailers, accounting for  as much as 50 percent of their annual sales.

Luckily, most retailers already had their merchandise before the CIT meltdown.

“Most retailers have dodged a bullet,” said Craig Shearman, a spokesman for the National Retail Federation, told Bloomberg News. “Most of the merchandise for the holiday season is at least in retailers’ distribution centers, if not already on the store shelves, and we’re not expecting to see any significant disruption for the remainder of the season.”

CIT is one of the oldest invoice factoring firms in the world. The 101-year-old company works with thousands of retailers, including well-known brands such as Dunkin’ Brands Inc. and Burlington Coat Factory.

It filed for bankruptcy on Nov. 1 following a severe credit crunch and after borrowing billions from U.S. taxpayers. The company plans a quick reorganization and intends to emerge from bankruptcy protection next month. It had $10 billion in debt.

Just how big is CIT in the factoring industry? It accounted for 70 percent of the $40 billion industry, according to Credit Management Resources in New Jersey.

Operations at CIT, meanwhile,  have not ceased.  And retail industry trade groups remain “optimistic” about CIT’s ability to provide short-term financing.  Meanwhile, retailers such as Target and Nieman Marcus continue to monitor the situation and don’t expect a long-term fallout.

Many think that factoring may have already shifted to Wells Fargo & Co., a home lender that also provides factoring.  CIT’s problems had been brewing for a long time. In July, it failed to receive federal guarantees  for its bonds. That raised doubts about whether it would be able to provide funding.

In September, it asked bondholders to swap notes for new secured debt or shares.  It also asked bondholders to approve a reorganization plan.

While I don’t like to highlight bankruptcies, I do think that the bankruptcy is bringing an increased awareness of the factoring industry. If  CIT had stopped lending in September, millions of retailers might have been on the hook for merchandise.

CIT is expected to provide funding to small business and middle-market customers, according to a filing. It has $1 billion from investor Carl Icahn to fund operations during its reorganization.

For more information about how invoice factoring can benefit your business, visit MDS Funding at http://www.MDSFunding.com, contact MDS Funding at 866-394-4637 or email CashFlowConsultants@mdsfunding.com.

Wal Mart Enters Invoice Factoring Business

Wal Mart, the nation’s largest retailer, is getting into the invoice factoring business.

It plans to offer about 1,000 suppliers alternative financing, according to an article in the Wall Street Journal. On Nov. 2, Wal Mart rolled out a “Supplier Alliance Program.” It  lets about 1,000 eligible suppliers receive payment for their orders in 10 to 15 days, compared to the traditional 60 to 90 days.

The move by Wal-Mart Stores Inc. follows the Chapter 11 bankruptcy filing of factoring giant CIT Group Inc. earlier this month. CIT is the largest invoice factoring company in the world, funding thousands of small and mid-size businesses, including retailers such as Dunkin’ Brands Inc.

The Wal Mart program will work like this: 

Suppliers can sell their Wal Mart invoices to the retailer’s partner banks, Wells Fargo & Co. and Citigroup Inc.  It will offer interest rates based on Wal Mart’s credit rating and the banks will collect payments from the retailer’s customer, in this case, Wal Mart.  

Factoring A Lifeline For Retailers

The program comes at a time of high anxiety for many retailers, especially during the holiday shopping season. Retailers and suppliers around the world depend on invoice factoring to get cash for their receivables before the items are sold in stores.

CIT Group’s bankruptcy filing narrowly avoided a retail disaster. Many companies have already ordered or received their holiday merchandise.  Meanwhile, CIT plans to emerge from bankruptcy protection by the end of the year and operations have continued.

“We know that many of our suppliers are dependent upon factoring and financing companies that are reportedly in financial distress,” Theresa C. Mercado, Wal Mart’s senior director for product extension, said in a letter sent to 1,000 apparel manufacturers and supliers.

The retailer has about 60,000 suppliers.

Will Wal-Mart Corner The Invoice Factoring Industry?

Wal Mart is a retailing juggernaut that dominates the retail landscape worldwide. Now, some are concerned its latest move will dominate the invoice factoring industry as well and elbow out traditional factors.

Wal Mart’s AA credit rating is particularily attractive to suppliers, who will most likely get lower rates with Wal Mart than they’ll get elsewhere.

For more information about how invoice factoring can benefit your business, visit MDS Funding at http://www.MDSFunding.com, contact MDS Funding at               866-394-4637         866-394-4637 or email CashFlowConsultants@mdsfunding.com.

Will Wal Mart Help or Hurt Invoice Factoring?

 

News that Wal Mart is getting into the invoice factoring business sent shockwaves throughout the industry, but now that the dust is settled, it begs the question: Will the world’s largest retailer hurt or help the industry?

It could do a little bit of both.

Even though invoice factoring has existed for hundreds of years, it is still dwarfed by traditional forms of financing such as bank loans. Wal Mart gives the industry the boost of credibility and legitimacy it needs.

Businesses may be more receptive knowing that a large company like Wal Mart is in the industry. The Wal Mart brand name could make invoice factoring more appealing to businesses, who might have otherwise never thought about it as a funding option.

Wal-Mart plans to offer about 1,000 of its suppliers the opportunity to participate in its Supplier Alliance program, according to a story in the Wall Street Journal.

The program will allow suppliers to receive payment for their orders in 10 to 15 days as opposed to the traditional 60 to 90 days. It would allow suppliers to sell their invoices to Wal Mart’s partner banks, Wells Fargo and Citibank. The banks would offer interest rates tosuppliers based on Wal Mart’s credit rating and the banks would collect payment from the retailer.

 Wal Mart’s foray into invoice factoring follows the Chapter 11 bankruptcy protection filing of invoice factoring giant CIT Group Inc. earlier this month. 

Will Wal-Mart Corner The Invoice Factoring Industry?

The program is small for now, but some are worried that Wal Mart might use its retail power — it is the largest retailer in the country — to dominate the factoring industry.

The concern: Wal Mart’s AA credit rating is particularily attractive to suppliers, who will most likely get lower rates with Wal Mart than they’ll get elsewhere.

Only time will tell the effect of Wal Mart on invoice factoring.

For more information about how invoice factoring can benefit your business, visit MDS Funding at http://www.MDSFunding.com, contact MDS Funding at               866-394-4637         866-394-4637 or email CashFlowConsultants@mdsfunding.com.

Get Fast Cash With Factoring — NO Loans, No Debt

Every day, companies use invoice factoring — selling unpaid invoices to a third party at a discounted rate — to provide funds to run and expand their businesses.

It is one of the oldest forms of financing in the world, and dates back hundreds of years.  Major retailers use it every day. A Commercial Finance Association Survey found that asset-based loans totaled $600 billion in 2008, a figure that has grown since the 1970s.

But many people still don’t know about invoice factoring, how to use it, or how it can benefit their business. 

Invoice factoring is more common than you might think. Although it is thought of as “alternative financing,” it is used by many types of businesses, including service industries, retailers and health care companies.

There are many reasons businesses use invoice factoring:

*Get working capital
*Relieve stress from no-pay and slow-pay clients
*Fill more orders
*Increase sales with flexible funding
*Take advantage of vendor discounts
*Fund payroll and taxes
*Extend credit to customers on large orders
*Buy equipment or inventory on demand

I can’t think of anything that allows you to finance your business with no debt, no loans or no credit applications.If you need fund to expand your business, invoice factoring is a viable solution.

For more information about how factoring in Atlanta can benefit your business, visit MDS Funding at http://www.MDSFunding.com, contact MDS Funding at 866-394-4637 or email CashFlowConsultants@mdsfunding.com.