The Factor Guru

Tips on accounts receivable financing and business practices.

Posts Tagged niche factoring

A Look Back and Ahead

Mar 3

Posted by Gen Merritt in Operations | Comments off

2009 was a tough year. That is all I hear. For the existing portfolios, revenues were down for the most part last year; some publications have noted a 20% to 40% downturn last year resulting from the economic decline. Note that much of this may be dependent on the industry in which a factor may have a niche. Factors have been increasing their monitoring procedures to stay more in tune with their clients’ businesses and collateral performance. More research and credit limit adherence is being required for debtor credit. Think about what it says when bankruptcies increased 25% to 50% over 2008; tax lien filings increased over 25% from the prior year.

For new business, many of us have looked at more and more prospects to ultimately only fund the same number of deals. Issues arising from the economy last year have spurred additional due diligence and research on these prospective clients to ensure a long standing relationship will exist, or can exist in the first place. The question that always comes to mind: can you get out tomorrow?

So, where does that leave 2010? Well, we are well into the first quarter and business opportunities have been increasing, provided you have the capital available… but that is another discussion for another day.

By now, you hopefully have already evaluated your portfolios to determine areas of potential loss and/or weakness. You have also by now identified areas of improvement in your operations and portfolio management to help ensure proper checks and balances internally. For an extreme example, does your account manager handle the verifications, daily fundings, collections, and payment application for their clients? How would you know if something arose that should be a red flag? Maintaining appropriate checks and balances can be critical in today’s environment. Establishing certain communication protocols both internally and externally can prove to be invaluable within an operations department.

The recent increase in deal flow should, however, not equate to reducing the recently increased monitoring and account management standards. This year will be just as challenging for many as last year. Time and time again, I hear that factors are going back to the basics: maintaining verification and collection efforts, monitoring collateral trends in purchases and cash  management, reviewing and adhering to debtor credit limits, and understanding the billing of the client and what they do (i.e., industry in which they operate, etc). Factors are also paying more attention to early warning signs that may be indicators for potential concerns.

All I can say is be prepared… be proactive and not reactive, as they say. Surprises are not always a good thing.

Wishing You Continued Success. The Factor Guru.

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Performing Industries during Recessions

Jan 13

Posted by Gen Merritt in Economy | No Comments

Looking back on prior years, certain industries have thrived during recessionary periods, predominately within healthcare and business services. After much review, many believe healthcare services and healthcare related businesses remain strong prospects for factors during these challenging times. Overall, I tend to agree with this; however, differences do exist and should be considered when comparing prior performance with the issues faced today. Primarily, these differences focus on the individuals now paying more for insurance and health benefits, thereby impacting the dollars within the healthcare marketplace. We are a consumer driver healthcare environment today.

And, just to clarify, healthcare does not necessarily mean insurance-based or Medicaid/Medicare receivables, which are considered ‘niche’ factoring products requiring specialized expertise. If you have questions on why these areas may be different than others, please feel free to email me. Examples of healthcare related business for a typical factoring client may include those companies who provide nurse staffing, linens or other hospital supplies, lab or sanitization equipment and/or services, technology or consulting/planning work and more.

And, let’s not forget that discount retailers are strategically poised to excel during a recession, provided you can structure and monitor around potential credits (i.e., damages, stocking fees, shelf space fees, advertising charges, and returns, among other potential offsets). They do exist; read the contracts or look at the client’s prior performance. The first quarter tends to be a high credit/adjustment period for the retail sector, even for these discounters.

Other growth industries to watch now compared with historical “recession proof” data may also include security services (both security guard and IT security); oil and gas and alternative energy products; passenger transportation; and storage and/or other warehousing services.

Remember though that the industry in which a company operates is just one aspect; who they sell to may be another. It is important to understand the nuances within an industry you are targeting, as well as the company and its customers.

Identifying and targeting key industries during challenging financial times may help create solid relationships with growing and performing companies, ultimately positively impacting your bottom line.

PS. Did anyone notice that today’s Yahoo home page had an article on 10 Hot Professions for 2009 and that it included factoring?

Happy hunting. The Factor Guru.

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Transportation Factoring: Feedback Wanted

Oct 28

Posted by Gen Merritt in General Information, Operations | Comments off

I have been contemplating (…or have already started…) writing a guidebook for transportation factoring. This continues to be more of a ‘niche’ industry when it comes to transportation factoring. In this venture, I am seeking feedback. In the post below, I have listed some questions and summarized feedback to those questions we have received that would be included in that manual/guideline. Any interests, feedback, suggestions would be helpful. Thank you in advance for your input and continued interests in this weblog:

Can a carrier operate outside of their base state after they have applied for authority? If a carrier is transporting exempt commodities and has a USDOT number, they may operate as an exempt for-hire interstate motor carrier without an MC number… Simply applying for operating authority is not sufficient.

Can a contract carrier broker loads? No. A contract carrier cannot broker loads without…

What is Intrastate Authority? Intrastate authority is the right granted by a state to commence for hire trucking operations within the borders of that state only. If a load’s origin and destination are within the same state then intrastate authority may be required…

What if the carrier is operating without their authority? Operating without authority can lead to civil penalties… invoices generated by carriers who are operating without their authority may be considered invalid and would not be subject to payment by an account debtor…

Is double brokering legal?  Yes but…

After reading everything about double brokering, I am still confused on what this is? Double brokering is where one broker brokers a load to a trucking company with contract authority. Then, that entity in turn brokers the load to another contract carrier, without the knowledge of the first broker…

Feel free to comment or email me directly at support@factorguru.com.

Wishing you success. The Factor Guru.

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What’s in Your Box?

Oct 5

Posted by Gen Merritt in Books to Read, Sales and Marketing | No Comments

Imagine a box. Any type will do. It could be a cardboard box, a pink or red gift box, one wrapped in newspaper or even shiny paper. It may even have a big red bow on top. The box is yours, so picture it clearly. Only you know what is in it. The question, however, is do others know what could be in there? Could they even guess? How can you make what you do ‘stick’ with them?

Well, if they know you then they probably can guess… if they cannot, then nothing specific exist sufficiently in their mind to think of you when they have something for you… such as…

a Deal…

In work, we all have niches we provide. We have certain transactions we specialize in and others in which we choose to steer clear. You, in your job, may look at several types of industries in the clients you work with such as medical, government receivables, construction, trucking carriers and/or brokers, staffing or manufacturing. You may only prefer deals that are under or over a certain dollar size or in a set geographic area.

Do people know what you do? Do they have a good understanding? Have you explained to them enough so they could guess what’s in your box? And, almost more importantly, will they remember? Does what you do ‘stick’ with them? Or, is what they know so generic that your box could hold just about anything? What makes you any different than what everyone else does?

If not, they will probably never be able to ‘guess’ what specifically could fall into your niche, or what you may include in that very vast space where any factoring company may fall. In this, they may never know what type of transaction to send your way. Unfortunately, you would just be the same as everyone else with that same generic box. Nothing special… Nothing that stands out… Nothing memorable. The only exciting benefit you may offer may be your packaging: the big red bow, the curly ribbons, and the shiny paper… the pretty marketing-driven features.

So, how do you know? How will you know?

Are you seeing transactions that are completely out of your range, target market or pricing? Getting others to understand what you do may help.

Some marketing people give the basics of their target industry, size, pricing, and other details. They key is: will you remember? Tom Siska, with Working Capital Solutions, continues to write for The Commercial Factor, The Secured Lender, and the ABF Journal. In most of his articles, he continues to address knowing who you are and sometimes, more importantly, who you are not. I tend to agree with this.  

Successful marketing people seem to develop more effective communication tactics (not sales pitches) in helping others remember what they do (in understanding their target market). I know some talented marketers that should a deal come my way and sound even close to what they would do, then I will definitely call them. Why? Because I know what goes in their box… therefore, I know what may go around their box.  Ultimately, I know if they may be able to do the deal!

One of my favorite methods of remembering: stories. Opportunities to hear examples of deals (why they worked and why they didn’t; how they were done) are lasting. They stick. People can relate to them. Stories can help seal the deal. People remember.

After reading Made to Stick, I further believe and encourage such stories. (I also highly recommend reading this book. By the way, it is a shorter read than the 8 ½ hour book on tape — or CD as the case may be. And, yes, I have both because I have ‘issues’… as some have said). The communication styles referenced in this book may help others remember more about you and what you do.

These messages leave a lasting ‘stickiness’ factor. And, at the end of the day, if communicated correctly, I know I always remember what goes in everyone’s ‘box’ for the types of transactions they are looking to fund.

So, again, what’s in your box? How do people know? How will they remember? How will what you do ‘stick’ with them?

Wishing you success… the Factor Guru.

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