BETHESDA, MD--(Marketwire - August 16, 2010) - The Interface Financial Group (IFG), North America's largest alternative funding source for small businesses, knows that during these economic times of tightened credit, small businesses are looking not only to financial institutions, but also to their suppliers, as sources of funds. A recent Small Business Association (SBA) Office of Advocacy study documents trade credit as almost as pervasive as bank credit in both incidence and volume. The study examined small businesses' use of types of credit including bank credit, or loans, and supplier credit, also known as trade credit. There are also alternative sources such as factoring which allows a company to provide credit to its customers while at the same time obtaining cash for business operations and expansion.
The study compares firms that use credit, known as leveraged, with those that do not use credit, or unleveraged, looking at which kind of credit leveraged firms use -- bank credit, loans, known as lines of credit, or trade credit from suppliers, or both. The study found that bank and trade credit are often used simultaneously by small firms. In addition, three-fifths of the small firms that use credit use trade credit.
"As policymakers continue to focus on how to get banks to increase lending to small businesses, this study proves that they should also address the equally important trade credit channel of funding," said IFG Chief Executive Officer George Shapiro. "While the study provides a better understanding of the credit used by small business, alternative forms of financing such as invoice factoring allows a company to provide credit to its customers while at the same time obtaining cash for important business operations and expansion."
Every day during normal operations businesses of all sizes extend credit to one another in the form of accounts receivables. For example, a firm might submit an invoice with the terms of trade being "2/10 net 30" meaning that a two percent discount would be given for payments made within 10 days or the full amount is due in 30 days. This practice is referred to as "trade credit" -- an instrumental tool for business financing.
Accounts receivable factoring benefits businesses that do not get paid for 30 to 60 or 90 days by advancing up to 90 percent against invoices. A bank loan involves two parties, whereas invoice factoring involves three parties, and while banks base their decisions on a company's credit worthiness, factoring is based on the value of the receivables. Factoring is not a loan -- it is the purchase of financial assets, or a company's receivables.
IFG's popular private label factoring solutions include Export Factoring, providing factoring services for companies who export from the United States and Canada; P.O. Funding to finance purchase orders when a company receives a purchase order and needs to purchase supplies to fulfill the order; and Inventory Financing, a solution promoting a company's growth by funding them when they must expand and purchase inventory. Invoice factoring has been around for more than 4,000 years, while today IFG is finding that single invoice factoring is a popular new tactic allowing companies to factor one invoice at a time.
Factoring starts with due diligence that typically takes one to two business days, and after this has been completed the client is at liberty to offer invoices to IFG for purchase. IFG does not expect to buy 100 percent of a company's receivables, and there are no minimum or maximum sales volume requirements. Upon receipt of invoices, IFG checks the credit of the debtor named on the invoice and makes sure that the sale represented has been satisfactorily completed. Once this is done the debtor is advised of the purchase by IFG and the client receives their funding.
IFG's professional rates are competitive because each client's circumstances vary, which may have an impact on the fees charged. The program allows choices of invoices to be factored, enabling customers to retain most of their money, while spending the minimum fees to guarantee adequate cash flow.
About The Interface Financial Group (www.ifgnetwork.com)
The Interface Financial Group (IFG) is North America's largest alternative funding source for small business, providing short-term financial resources including invoice factoring (invoice discounting). The company serves clients in more than 30 industries in the United States, Canada, Singapore, the United Kingdom, Australia, and New Zealand, and offers cross-border transaction facilities between the U.S. and Canada. With more than 140 offices across North America and over 35 years of experience, IFG provides innovative invoice factoring solutions by offering short-term working capital to growing businesses. Single invoice factoring, or spot factoring, is an extremely fast way to turn receivables into cash.
IFG was founded in 1972 to provide short-term working capital to help small to medium-sized businesses grow. The IFG organization operates on a local level, providing clients with local knowledge and experience and business expertise in numerous diverse areas in addition to accounts receivable factoring, including accounting, finance, law, marketing and banking.
Source: SBA Office of Advocacy (www.sba.gov/advo) study, "Bank Credit, Trade Credit or No Credit: Evidence from the Surveys of Small Business Finances," by Rebel A. Cole.
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