Bloomberg Businessweek
Go To Businessweek.com
During the past 20 years, the author has watch China move from being a developing country into an industrial superpower
Money Moves, 5/24: Chocomize Co-Founder Fabian Kaempfer talks with Bloomberg’s Deirdre Bolton about the business of customizing chocolate
The president's campaign has a new rule—no cell phones allowed
In honor of remote control inventor Eugene Polley, we recognize other influential but neglected inventors who have felt the sting of stolen glory
Forget Adderall. Traders now pop chia seeds to stay focused and energized
The Italian automaker and others are adding hybrid technology to elite cars
The storied bridge that links San Francisco and Marin County changed the face of California
Schools cultivate ties with startups before they're big successes
Dave McClure's traveling venture capital show scours the world for promising startups
(page 2 of 2)
That access isn’t cheap. Factoring may double the typical credit costs for a small business, says Bill Hettinger, author of Finance Without Fear and principal of Connecticut consulting firm the Institute for Finance and Entrepreneurship. Tom Swenson, founder and CEO of the Bank of Montana, says he’s advised small business customers considering factoring to shop prices aggressively before signing up. “Commercial financing is looked at as a caveat emptor, buyer-beware kind of situation. They figure you’re a business and you should know better—even though a lot of small businesses don’t,” he says.
Mark Deo, Torrance (Calif.)-based executive director of the consulting firm Small Business Advisory Network, says many entrepreneurs he consults with have turned to factoring, not only because they lack access to credit but also because they are having problems getting new business. “Factors are oftentimes the only source of funding for desperately needed cash, but it is very sad that business owners who have worked for years to build their businesses are entertaining factoring just to fund new purchases, equipment, or improvements,” he says.
Hettinger also worries about the long term: Companies with reduced profit margins are even less able to qualify for traditional credit. “Once you start factoring, it’s a difficult process to break. The key to a factoring or discounting decision is a complete analysis of all the financial implications of the decision. It’s more complicated to analyze than a bank loan,” he says.
Bucher didn’t have time for complex analysis when she turned to Robyn Barret, founder and managing member of FSW Funding. “I know it’s not the best solution and the cost is more for factoring,” she says, estimating that she paid $75,000 in factoring costs in 2010. “But I need the cash for payroll, parts, and supplies, and Robyn supplied it. To me, she’s the one that saved my business.”
Karen E. Klein is a Los Angeles-based writer who covers entrepreneurship and small-business issues.
