Factoring can meet the cash needs of seafood processing companies looking to expand. Contact Chris at Versant Funding to learn if your seafood client is a factoring fit
Chris Lehnes | Factoring Specialist | 203-664-1535 | chris@chrislehnes.com
This podcast episode, hosted by Bob Shultz, publisher and co-founder of TCLM, and featuring Factoring Specialist, Chris Lehnes provides an in-depth exploration of factoring as a financing solution for businesses seeking improved liquidity.
Factoring is explained as the sale of a company’s accounts receivable to a third-party factor, which enables immediate cash flow without incurring debt. Lehnes outlines how the process works, from invoice verification to advancing 75 to 90 percent of its value and later releasing the balance upon customer payment, while also discussing the operational benefits, such as the factor handling collections. The conversation covers critical distinctions between recourse and non-recourse factoring, cost structures, and flexibility in factoring arrangements, including selective factoring by customer or invoice. The fees, typically 1.5 to 3 percent per month, are examined alongside aspects that influence pricing, such as credit risk, invoice volume, and payment timelines.
The discussion also offers practical guidance for businesses considering factoring, highlighting its applicability primarily for B2B and B2G companies with strong customers and urgent funding needs not being met by banks. Lehnnes addresses common concerns about customer perception, explaining that large enterprise clients are accustomed to factoring arrangements, and he emphasizes good receivables management practices to improve eligibility. The episode concludes with insights into Versant Funding’s unique position in the market, emphasizing its true non-recourse model, lack of reliance on traditional borrower qualifications, flexibility in factoring older receivables, and willingness to work with high customer concentration. This positions factoring not only as a cash flow solution but also as a strategic tool for growth, bridging financing gaps, and providing operational stability
Contact Factoring Specialist, Chris Lehnes
Factoring can provide the working capital needed to survive in an era of increasing tariffs.
Contact me today to learn if your client is a factoring fit.
Contact Factoring Specialist, Chris Lehnes
In the complex and often volatile world of international trade, tariffs emerge as a powerful, yet double-edged, sword. These government-imposed taxes on imported goods, while ostensibly designed to protect domestic industries, often send ripple effects far beyond national borders, especially into the delicate financial ecosystems of small businesses. For these agile, yet often financially lean, enterprises, tariffs can significantly strain their working capital position – the lifeblood that fuels daily operations, manages short-term obligations, and seizes growth opportunities. Understanding this impact is crucial for small business owners seeking to navigate an unpredictable global economy.
Working capital, simply put, is the difference between a business’s current assets (like cash, accounts receivable, and inventory) and its current liabilities (such as accounts payable, short-term debt, and accrued expenses). A healthy working capital position indicates liquidity and operational flexibility. Conversely, a depleted or negative working capital can signal financial distress, limiting a business’s ability to pay suppliers, meet payroll, or invest in expansion. Tariffs, by their very nature, directly attack this critical financial metric in several profound ways.
The most immediate and discernible impact of tariffs is the increased cost of goods and materials. Small businesses that rely on imported raw materials, components, or finished products for their operations suddenly face higher acquisition costs. For instance, a small furniture maker importing specialized wood from a country subject to a 25% tariff will see the cost of that wood jump by a quarter. This additional expense is a direct drain on cash flow, as businesses must find the money to pay these tariff fees to clear customs before their goods are even released. For many small businesses operating on thin margins, this unexpected and substantial outlay can create an immediate cash crunch, diverting funds that would otherwise be used for payroll, marketing, or other operational necessities.
Beyond the direct cost, tariffs trigger a cascade of challenges that further erode working capital. Supply chain disruptions are a prevalent consequence. Established trade relationships can be upended as suppliers in tariff-affected regions become less competitive or, in some cases, unable to continue supplying at viable prices. This forces small businesses to scramble for alternative sources, which often come with higher prices, longer lead times, or different quality standards. Delayed deliveries due to customs complications or supplier adjustments mean slower inventory turnover and a longer cash conversion cycle. If products sit in transit or customs longer, the capital tied up in that inventory increases, exacerbating working capital pressure. Moreover, product shortages can compel emergency purchases from new, more expensive suppliers, further straining cash reserves.
The ripple effect extends to inventory management. To mitigate the risk of supply chain disruptions and future price hikes, some small businesses may consider increasing their inventory levels as a buffer. While seemingly a protective measure, this strategy ties up more capital in goods that haven’t yet been sold, potentially leading to excess inventory and increasing storage costs. Conversely, if tariffs make certain products prohibitively expensive, businesses might be left with unsold, high-cost inventory, leading to write-downs and further losses.
Furthermore, tariffs introduce a significant degree of uncertainty and planning challenges. The unpredictable nature of trade policies, with tariffs being imposed, adjusted, or removed with little notice, makes long-term financial planning a formidable task for small businesses. This volatility discourages investment in new equipment, technology, or hiring, as businesses become hesitant to commit capital in an unstable environment. Lenders, too, may view tariff-impacted businesses as higher risk, potentially leading to reduced credit lines or a reluctance to extend new financing, further constricting access to crucial working capital.
Historical examples highlight these impacts. The U.S. steel tariffs of 2002, while intended to protect domestic steel producers, led to higher input costs for downstream industries, such as construction and manufacturing, affecting their profitability and working capital. Similarly, the trade disputes of recent years, particularly those involving tariffs on Chinese goods, have seen anecdotal evidence of small businesses in sectors like sexual wellness and home goods struggling with increased costs, supply chain recalibrations, and the difficult decision of raising consumer prices or absorbing losses. Companies like Dame Products and Bambu Home, as seen in recent case studies, have directly experienced the strains on cash flow and the necessity of reevaluating their financial and pricing strategies.
While the challenges posed by tariffs are substantial, small businesses are not entirely without recourse. Proactive strategies can help mitigate their impact on working capital:
In conclusion, tariffs represent a significant exogenous shock to the working capital position of small businesses. They directly increase costs, disrupt supply chains, complicate inventory management, and intensify competitive pressures, all of which strain a business’s liquidity and operational capacity. However, by adopting proactive strategies such as diversifying suppliers, optimizing cash flow, and seeking appropriate financial support, small businesses can enhance their resilience and navigate the turbulent waters of global trade, protecting their vital working capital and ensuring their continued viability and growth.
SaaS companies are often challenged to obtain the working capital needed to continue to innovate, increase revenue and expand their customer base, but raising equity prematurely can unnecessarily dilute founder’s equity.
By factoring, SaaS companies get quick access to the funds needed to leverage their technology for success without giving up equity.
Accounts Receivable Factoring
We are a great match for businesses with traits such as:
Contact me today to learn if your Software client is a factoring fit.
Discover how accounts receivable factoring can transform your small business by providing the essential working capital you need to grow and thrive. In under 60 seconds, learn how selling your unpaid invoices to a factoring company can improve cash flow, reduce financial stress, and empower you to seize new opportunities. Featuring inspiring visuals of successful retail owners, this quick guide highlights why factoring is a smart solution for managing finances without taking on debt. Whether you’re looking to expand inventory, cover payroll, or invest in marketing, factoring offers a flexible and reliable cash flow boost. Don’t miss out on unlocking your business’s full potential today!
Contact Factoring Specialist, Chris Lehnes
Factoring: The Fuel Small Businesses Need to Grow
If your clients are like many small business owners, they have probably faced the frustrating gap between sending an invoice and actually getting paid.
Our Non-Recourse Accounts Receivable Factoring Program offers a smart solution.
Instead of waiting for customers to pay, factoring provides immediate access to the funds tied up in unpaid invoices. That means more money to meet payroll, restock inventory, invest in growth, or simply keep operations running smoothly.
Program Overview
We specialize in difficult deals:
We focus on the quality of your client’s accounts receivable, ignoring their financial condition.
This enables us to move quickly and fund qualified businesses including Manufacturers, Distributors and a wide variety of Service Businesses in as few as 3-5 days. Contact me today to learn if your client is a fit.
Contact Factoring Specialist, Chris Lehnes to learn if your client is a fit.
Introduction – Food Producers need working capital too
In the fast-paced and highly competitive food production industry, maintaining adequate working capital is not just a financial strategy but a critical necessity. Food producers often operate on thin margins, face seasonal demand fluctuations, and must manage a complex supply chain that includes perishable inventory. To stay agile and responsive, they need reliable and flexible access to cash. One financial tool that has emerged as particularly useful in addressing these challenges is accounts receivable factoring.
Accounts receivable factoring allows businesses to convert their outstanding invoices into immediate cash. For food producers, this can mean the difference between seizing a growth opportunity or missing it, between meeting payroll or delaying production. This article explores how food producers can use accounts receivable factoring to meet their working capital needs, examining the mechanics of factoring, its benefits and drawbacks, and how to strategically integrate it into a broader financial strategy.
1. Understanding Working Capital in the Food Production Industry
Working capital refers to the difference between a company’s current assets and current liabilities. It represents the liquidity available to a business for day-to-day operations. In the food production industry, working capital is vital for purchasing raw materials, paying labor, managing transportation, and investing in production equipment.
Common challenges food producers face include:
2. What is Accounts Receivable Factoring?
Accounts receivable factoring, often simply referred to as factoring, is a financial transaction where a business sells its outstanding invoices to a third party (a factoring company) at a discount. The factor then assumes the responsibility of collecting the invoice payment from the customer.
Key Components of Factoring:
There are two main types of factoring:
3. Benefits of Factoring for Food Producers
3.1 Immediate Access to Cash Factoring turns invoices into cash within 24 to 48 hours, enabling food producers to respond quickly to operational needs.
3.2 Improved Cash Flow Management By smoothing out cash flow irregularities, factoring helps food producers plan and budget more effectively.
3.3 Flexibility and Scalability Factoring grows with sales. As a food producer issues more invoices, they can factor more receivables, aligning financing with business growth.
3.4 No Additional Debt Factoring is not a loan; it doesn’t appear as a liability on the balance sheet. This preserves credit ratings and borrowing capacity.
3.5 Outsourced Collections The factoring company often takes on the role of collecting payments, saving administrative time and effort.
4. Practical Application in the Food Production Sector
4.1 Meeting Seasonal Demand A fruit canning company may face high production costs during harvest season but won’t receive payments from distributors for 60 days. Factoring their invoices ensures they have the cash to pay suppliers and seasonal workers.
4.2 Managing Supply Chain Costs A bakery supplying national grocery chains may need to pay flour suppliers and logistics providers upfront. Factoring their receivables from the grocery chains allows continuous operations without debt.
4.3 Funding Expansion A frozen food producer landing a new contract with a supermarket chain can use factoring to fund increased production without waiting 90 days for the supermarket to pay.
5. Selecting a Factoring Partner
Choosing the right factoring company is critical. Food producers should consider:
6. Risks and Considerations
6.1 Cost Factoring can be more expensive than traditional financing. It’s important to compare costs and ensure margins can absorb the fees.
6.2 Customer Relationships The factor communicates with customers for collections. Ensure the factor treats customers professionally to preserve relationships.
6.3 Dependence Over-reliance on factoring without a broader financial strategy can lead to challenges. It should be one tool among many.
6.4 Contract Terms Some factoring agreements include lock-in periods or minimum volume commitments. Businesses must review terms carefully.
7. Integrating Factoring into a Financial Strategy
7.1 Strategic Use Use factoring to manage peak seasons or bridge specific gaps rather than as a permanent solution.
7.2 Combine with Other Tools Factoring can complement lines of credit, inventory financing, or equipment leasing to create a balanced working capital strategy.
7.3 Monitor Metrics Track the cost of factoring relative to the benefits—e.g., increased sales, timely payroll, supplier discounts from faster payments.
8. Regulatory and Ethical Considerations
Food producers must ensure compliance with industry regulations. Factoring does not absolve a company of its responsibilities:
9. Case Studies
Case Study 1: Organic Dairy Producer An organic dairy company supplying health food stores across the country used factoring to meet growing demand. With 60-day payment terms from clients, they faced a cash crunch. Factoring enabled them to invest in new cows and expand production without debt.
Case Study 2: Small Snack Manufacturer A startup snack brand received a large order from a national chain. Lacking the capital to fulfill the order, they used factoring to fund production and delivery. The move helped them scale and build credibility.
Case Study 3: Family-Owned Produce Distributor This business faced extended payment terms from supermarkets. Factoring their invoices provided consistent cash flow, helping them pay farmers promptly and negotiate better supplier terms.
10. Future Outlook and Trends
The factoring industry is evolving, with digital platforms offering quicker and more transparent services. For food producers, this means:
Sustainability and ethical sourcing trends may also influence factoring policies, as lenders consider Environmental, Social, and Governance (ESG) factors.
Conclusion
In the dynamic landscape of food production, where timely access to capital can make or break operations, accounts receivable factoring offers a practical and powerful solution. While it may not replace traditional financing or internal cash flow management, it serves as an effective complement. By converting receivables into working capital, food producers can maintain liquidity, scale operations, and weather the seasonal and market-driven fluctuations inherent in the industry.
With careful selection of a factoring partner, clear understanding of the costs, and strategic integration into broader financial planning, factoring can be a game-changer for food producers striving to thrive in a competitive and capital-intensive environment
How Small Businesses can use Factoring as Bridge Financing
In the world of small business operations, managing cash flow can often be one of the biggest challenges. Business owners frequently find themselves in situations where they need immediate working capital to cover expenses, purchase inventory, pay employees, or invest in growth—long before customers pay their invoices. In such scenarios, accounts receivable factoring emerges as a powerful financial tool that can act as bridge financing, helping businesses stay afloat and even thrive.
This article explores the concept of accounts receivable factoring, how it works, the benefits and risks, and why it can serve as an effective bridge financing solution for small businesses.
Accounts receivable factoring, often simply referred to as “factoring,” is a financial transaction in which a business sells its accounts receivable (unpaid customer invoices) to a third party, known as a factor, at a discount. In return, the business receives immediate cash—typically 70% to 90% of the invoice value—while the factor takes on the responsibility of collecting payment from the customers.
The factoring process generally follows these steps:
Bridge financing refers to a short-term funding solution used to cover immediate cash flow needs until a business secures more permanent financing or receives expected income. It’s often used to “bridge the gap” between a financial need and a future event, such as:
Bridge financing is crucial in time-sensitive situations and often carries higher costs or stricter terms due to the short-term risk for lenders.
Small businesses often experience erratic cash flows. Even profitable enterprises can run into short-term liquidity crunches. Here are some common scenarios where bridge financing is necessary:
For many small businesses, traditional loans or lines of credit may not be available, especially if they have limited credit history or lack collateral. This is where accounts receivable factoring can fill the void.
Accounts receivable factoring fits the definition of bridge financing because it offers immediate liquidity based on income that is expected in the near future. Here’s how factoring acts as a bridge:
When a business issues an invoice with net 30, 60, or 90-day terms, the funds are essentially locked up for that duration. Factoring unlocks that value immediately, allowing the business to maintain operations or capitalize on opportunities without waiting.
Factoring provides funding until longer-term solutions are realized. For example, a business awaiting a loan approval can use factoring to maintain cash flow in the interim. Once the loan is secured, the business can rely less on factoring.
Bridge loans often come with interest and increase the business’s debt burden. Factoring, on the other hand, is not a loan—it’s a sale of assets. This makes it a particularly attractive option for businesses that want to preserve their balance sheets.
Unlike bank loans with rigid terms, factoring is inherently flexible. The more invoices a business generates, the more capital it can access. This makes it an ideal bridge for growing businesses scaling their operations.
Factoring companies can often approve applications and release funds within a few days. This speed is critical in time-sensitive scenarios where traditional financing may take weeks or months.
By converting receivables into immediate cash, businesses can better plan and manage their operational expenses without delays.
Factoring is based on the creditworthiness of a business’s customers—not the business itself. This makes it viable for new or struggling businesses with strong accounts receivable.
If a business receives a large new order but lacks the funds to fulfill it, factoring can provide the necessary capital. This allows businesses to say “yes” to growth rather than turning down opportunities due to cash constraints.
Some factoring arrangements include credit checks and collections, saving the business time and resources in chasing down payments.
While factoring offers many benefits, it’s not without downsides. Business owners should consider the following:
Factoring fees can range from 1% to 5% or more per month. Over time, this can be more expensive than traditional financing.
Some customers may view factoring negatively, especially if they are contacted by the factoring company. This can affect customer relationships if not handled properly.
Not all invoices are eligible. Factoring companies typically only accept invoices from creditworthy customers, which may limit the amount of capital available.
With non-recourse factoring, the factor assumes the risk of non-payment. However, with recourse factoring, the business must repay the advance if the customer fails to pay—introducing additional risk.
Understanding the different types of factoring is important when considering it as bridge financing.
A toy store generates most of its revenue during the holiday season. In the fall, the business needs to order large quantities of inventory. Since customer invoices from previous sales are still unpaid, the retailer sells them to a factoring company and receives immediate funds to stock up. By December, customer payments are in, and the business is flush with cash again—making factoring a perfect seasonal bridge.
A small construction firm wins a contract to build a commercial property but needs to pay subcontractors and buy materials upfront. Bank financing is unavailable due to limited credit history. The company factors its receivables from a previous job, receives 85% of the invoice value in cash, and uses it to fund the new project while awaiting customer payment.
A software development company with several corporate clients faces a funding gap between seed and Series A investment rounds. Though it has solid contracts and invoices pending payment in 60 days, it lacks cash for payroll and rent. Factoring those receivables helps the startup survive the interim without taking on high-interest loans or diluting equity.
Factoring may be a strategic bridge financing option if:
Not all factoring companies are created equal. When choosing a partner, small businesses should consider:
Accounts receivable factoring is a powerful and flexible tool for small businesses facing short-term cash flow challenges. As a form of bridge financing, it offers quick access to working capital without the burden of debt or the wait for customer payments. While it comes at a cost and involves handing over some control, the benefits—especially for businesses with steady receivables and creditworthy customers—can far outweigh the downsides.
In an economic landscape where agility is often the key to survival and success, factoring can be the bridge that helps small businesses cross from financial uncertainty to stability and growth.
Is your client experiencing a working capital shortfall, unable to meet immediate funding needs for essential expenditures. With Spot Factoring, they can quickly obtain funding against a single invoice, providing vital liquidity without ongoing factoring obligations.
Program Overview
We fund tough deals:
In about a week, we provide qualified businesses the funds to meet working capital needs.
Contact me today to learn if your client is a fit.
| Chris Lehnes 203-664-1535 chris@chrislehnes.com A Recent Spot Factoring Deal |
Factoring: Working Capital to Survive a Summer of Tariffs
Are supply chain disruptions causing your clients to become hungry for working capital going into the summer months?
Our non-recourse factoring program can quickly advance against Accounts Receivable to provide the funds needed to help absorb the impact of tariffs on all of America’s trading partners.
Factoring Program Overview:
We specialize in challenging deals :
Contact me today to learn if your client can use factoring to survive a summer of tariffs.
Factoring Specialist | Chris Lehnes | 203-664-1535 | chris@chrislehnes.com
Key Themes and Ideas:
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Further Considerations:
While the source is brief, it effectively communicates the value proposition of Lehnes’ factoring program for businesses under pressure from tariffs and supply chain issues. It specifically targets companies facing financial or operational challenges, positioning factoring as an alternative funding source when traditional options may be unavailable. The emphasis on “non-recourse” is a crucial selling point for potential clients. The document is primarily promotional and would require further inquiry to understand the specific terms, fees, and application process.
Factoring: Working Capital to Survive a Summer of Tariffs Study Guide
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