The following article appeared in Business Investor - Atlantic Canada

"Financial Light Burns On"

Contrary to popular belief - the light at the end of the tunnel has NOT been turned out!

The light in the window at the bank, however, is another story.

If your bank is holding back your growth plans, what can you do?

In a country where the secondary financial market is very thin, entrepreneurs share a common problem - how do they raise working capital to fuel their business expansion and growth?

In the past months we have heard only "gloom and doom" from the small business sector as they seem the hardest hit group of business people when it comes to securing funding for expansion. By no means are all companies stagnant, the majority in fact are in expansion mode - there is business to be done and orders to be taken. Many companies are in the midst of a growth cycle that will create good earnings, proving they can ensure a regular and constant funding source to complement their own resources.

So often when the banks say "No" or "No more" the average business person accepts that as the status quo and tries to live within those constraints - this often means turning away business.

It doesn't have to be that way. There are other alternatives to the bank as a source of outside working capital. It's just a case of knowing who to call for the particular need.

One quick and easy method of enhancing cash flow and working capital levels is to look closely at an invoice discounting facility. Invoice discounting is NOT factoring, although it does provide many of the positive features found in a conventional factoring relationship. However, invoice discounting does not carry long-term obligations or cost areas that the user invariably does NOT need.

In its simplest form invoice discounting puts a business on a C.O.D. basis. This literally means that as a company invoices for goods sold or work completed, they get paid.

Any business that operates on a Cash-on-Delivery basis immediately eliminates the majority of their day-to-day cash flow problems. They also create immediate cash that can be profitably used to start or complete the next order, and so on.

Not all businesses produce invoices for goods sold and delivered. We live in a North American marketplace where more and more of our economy is dependent on service industries. An invoice discounter can easily accommodate invoices for services rendered, and similarly invoices that might represent progress payments on a particular job or contract, or even sales commissions earned which will be paid at a later date. The key word for this type of financing is clearly "flexibility".

Another positive feature of a good invoice discounting program is allowing the user to pick and choose when they will need the program - a company isn't locked into a long-term contractual situation where fees and costs are incurred and little benefit obtained. Invoice discounters look at transactions on an invoice-by-invoice basis. With no standby fees or set up fees, invoice discounting is truly a "use-it-as-you-need-it" facility. Costing is geared to the usual elements in the transaction, and however you look at it, the availability of funding has a tremendous value for any growing company.

What type of business can usefully and profitably employ this type of short-term funding? There are few limitations. Programs are usually designed to accommodate the needs of smaller, younger companies. These companies may be only one or two years into their growth cycle - sales may not yet have reached a million dollars and profitability is perhaps some months away.

In a financial marketplace where there are few alternatives to conventional bank financing, a simple invoice discounting program may well be the vehicle to get a company moving up to the next plateau.

There is a light at the end of the tunnel. The key is to find the right tunnel.

David T. Banfield
President of The Interface Financial Group
Providing working capital for small business.
1-800-387-0860
ifg@interfacefinancial.com
www.interfacefinancial.com