Accounts Receivable Factoring vs Supply Chain Finance

Accounts Receivable Factoring vs Supply Chain FinancingWith each passing day it seems like a new technology is disrupting a traditional business model. Certainly an industry that has been around as long as factoring is not immune to disruption from innovation, and currently supply chain finance is one of these disruptors. However, it is important to understand the differences between factoring and supply chain financing so that you may determine which is right for your business. While they both offer access to improved cash flow, beyond that they don’t really have all that much in common.

Perhaps the biggest difference between accounts receivable factoring and supply chain finance is who decides to use the service. With factoring, the decision rests entirely with the supplier.┬á The buyer has no say in whether or not an invoice is factored. With supply chain finance it is the buyer’s decision when and if to offer quicker payment on an invoice, and it is up to the supplier to accept that offer. As a result, a supplier can not rely on supply chain finance to fund their business since it may or may not be offered to them. If a supplier needs immediate access to working capital so that they can run or grow their business, factoring is the best way to guarantee that they always have access to the working capital they need.

The next major difference is which buyers you can get immediate funding on. In general, factoring companies will work with all of your buyers, regardless of how large or small they are. However, supply chain finance is typically only offered by major retailers as they are the ones who do enough volume to make supply chain financing affordable. Besides, typically smaller retailers are not cash rich and can’t afford to make early payments. To further complicate matters, each one of your buyers who does offer supply chain finance may do so with a different company, meaning you need to manage your accounts across multiple financing platforms, whereas with factoring you only ever work with a single factoring company so it is a much more streamlined process.

Of course the fee is also a major difference. With factoring, the fee is part of the agreement that you have with your factoring company, it does not change. With supply chain finance, the fee is not fixed, you need to make an offer to your buyer and your buyer needs to accept it. If your buyer is cash rich than they may take a lower offer and supply chain finance could be cheaper than factoring. However, for a buyer who is not cash rich or is struggling, they may only be accepting higher offers and factoring could be the cheaper option.

Another issue is timing, many buyers who offer supply chain finance may wait 7-10 days to do so as they need to check your products into their system and make sure nothing is damaged before they can approve it for payment. Then they need to ask you to make an offer. If your offer isn’t acceptable then you typically need to wait until the following day before you can make a counter-offer. With supply chain finance it may take two weeks or longer before you receive funding. However, factoring companies offer you funding the same day that you ship and invoice your customer.

Finally, credit insurance may be the most important difference. Of course, you might say that you don’t need credit insurance if you are getting early payment with supply chain finance, because after all, you are getting paid. However, it isn’t quite that simple. First of all, there is no guarantee that supply chain finance will be available from one of your buyers, even if they did offer it to you in the past, there is no guarantee it will be offered in the future.

The other issue has to deal with US bankruptcy law. When a company files for bankruptcy, the bankruptcy court may require you to return any payments you received within 90 days prior to the filing. The reason being is they don’t want creditors receiving preferential treatment, all creditors should be treated equal. Of course, you don’t need to return these funds if you can prove that you received them in the normal course of business, but if you are offering a buyer a discount to pay you early, then there is nothing normal about the transaction. This recently became a problem when Toys’R’Us filed for bankruptcy. Toys’R’Us partnered with C2FO to offer supply chain finance, and there is no doubt that everyone who received an early payment from Toys’R’Us had to later return those funds to the bankruptcy court.

With non-recourse factoring however, not only does your factoring handle all of the credit checking for you, but they also insure your receivables. So if one of your buyers does file for bankruptcy or goes out of business, you still get to keep the funds that your factoring company gave you. Furthermore, since factoring companies don’t request early payment, it is quite possible that they may be able to prove that payment was received in the normal course of business and they too would not be required to return the funds.

While supply chain finance can potentially be cheaper than factoring with stronger retailers, it can also be more expensive and does not offer all of the benefits that you receive with factoring. Furthermore, it is only available if your customer wants to offer it to you. In many ways, supply chain finance is just a more expensive way of offering your customers a discount for early payment such as “1% 15 net 30” day terms. On the other hand, factoring is a much safer and more reliable way of funding your business. Factoring can be used with all of your accounts, and has very similar pricing to supply chain finance.

If you could benefit from improved cash flow and would like to give a factoring a try, give DSA Factors a call at 773-248-9000. With over 30 years experience helping companies improve their cash flow, DSA Factors has the money to make your company grow.

Surviving the Brick and Mortar Meltdown

Surviving the brick and mortar meltdown.Today Bonton began its liquidation sales, by the end of August there will be no more Bergner’s, Boston Store, Carson’s, Elder-Beerman, Herberger’s, or Younkers. It was only last month that Toys’R’Us made the same exact announcement. On top of that, Sears, J.C. Penny, Neiman Marcus, Lord and Taylor, and Macy’s have all been closing many locations, and now things are looking very bad for Bed Bath and Beyond. Even Walmart closed 63 Sam’s Club locations at the start of the year. Things have gotten so bad that it was barely even news when Nine West filed for bankruptcy last week. So what does this mean for the retail environment?

Certainly things aren’t looking too good. Bonton is a major department store that anchors many malls. For smaller retailers in the mall, losing Bonton could mean loosing foot traffic and maybe even permanently closing their stores as well. For other struggling anchors in the mall, it might give them reason to close their store in the struggling mall. In malls that have already lost an anchor, losing a second anchor could be the end for the mall. While we have seen many big box stores in strip malls close, this is the first time that we are seeing a major department store and mall anchor close all its locations. There is a very real possibility of it having a snowball effect with the other struggling department stores.

Of course, as a manufacturer or importer, you not only have to worry about the next bankruptcy filing, but also losing a major customer. In many ways, the latter can be much worse. The proof of this is Mattel and Hasbro. Both their stocks took a major hit when Toys’R’Us filed for bankruptcy, and then another when they announced they would be closing all their stores. In fact, billionaire Isaac Larian, owner of Little Tikes and many other toy companies, tried to purchase Toys’R’Us out of fear of what its closure could do to the toy industry.

Certainly you need to be selling to┬ online retailers like Amazon, however, you can’t only focus on online. Amazon might be one of the major reasons why all these stores are closing, in fact they announced on Wednesday that they now have 100 million Prime subscribers. But to focus only on Amazon is also problematic, after all, you don’t want to have all of your eggs in one basket or limit where your customers can purchase your product. Plus, many of your customers may want to touch and feel the product before they purchase it, something that isn’t (yet) possible with Amazon.

Of course, selling to brick and mortar can be very scary right now. While one option might be the increasingly popular taking a discount to get paid early, doing so won’t actually protect you. The bankruptcy laws require you to pay back any money you received within 90 days of a company filing for bankruptcy if it is believed you received preferential treatment. Toys’R’Us was working with C2FO to offer its vendors early payment in exchange for a discount prior to filing for bankruptcy, and you can be sure that anyone who received early payment at a discount, is now returning that payment back to the bankruptcy court. What might have seemed like a smart option at the time, in the end did not offer vendors any protection.

Really the only thing that can protect you is by partnering with someone who is doing the credit checking for you, staying on top of breaking news, and offering you insurance. While credit insurance is available for extremely large, credit-worthy accounts, it typically isn’t available for smaller companies or companies that show even the slightest inkling of financial distress. Non-recourse factoring on the other hand provides you with the protection you need on the widest range of customers available.

DSA Factors has been offering non-recourse factoring for over 30 years now. When you partner with DSA Factors, we handle all of the credit checking for you as well as provide you with insurance on the receivables which we approve. As an added benefit, we help improve your cash flow by funding you the same day you ship and invoice your customers. For more information about how factoring can help your business, give us a call at 773-248-9000.

Funding Your First Large Purchase Order

Purchase Order FinancingGrowth can be difficult for any business, but getting your first large purchase order can be especially stressful. Keeping your current customers happy as you try to fulfill a large purchase order can create a nightmare for your cash flow. Getting a bank loan could take months, and there is no guarantee that you will be approved. There must be a better solution.

Introducing purchase order financing and invoice factoring. With purchase order financing you can get a short term loan to pay off your suppliers. Invoice factoring helps free up working capital that is tied up in receivables that may not be paid for 30 days or more. Unlike a bank, factoring companies move quickly, funding you within 24 hours, and making quick credit decisions based on your customer’s good credit.

So what are you waiting for, improve your cash flow with purchase order financing and invoice factoring. Give DSA Factors a call today at 773-248-9000.

How to Request an Online Credit Approval for New Accounts

Getting online credit approvals with DSA Factors is easy!The second video in our online factoring tutorial is here. In this video we show you how to submit a new account for credit approval from our web page. The process is very straight forward, but as a family owned business we pride ourselves on our excellent customer service. So if you have any questions, or want us to walk you through the approval process over the phone, please don’t hesitate to give us a call at 773-248-9000 and we will be more than happy to talk to you.

We hope you enjoy this video and the entire factoring tutorial video series. Our next video will most likely be on how to submit an invoice for factoring. Stay tuned, and as always, if you have any ideas for future tutorial videos, please let us know. Thanks!

How to Request an Online Credit Approval

Getting online credit approvals with DSA Factors is easy!We have just published our first factoring tutorial video. Our plan is to create an entire series of factoring tutorials that our new clients can use as a reference. While much of this is nothing new for our long-time clients, for those of you new to DSA Factors or are considering factoring with us, these videos will walk you through the entire factoring process, from start to finish, and hopefully answer all of your questions. For our clients who have been with us for many years now, hang in there, we hope to create some videos featuring are online reporting tools that might teach you something you didn’t know before!

The first video we are publishing is how to request an online approval (for an existing account with DSA Factors). Of course, as a family owned business we pride ourselves on our excellent customer service. So if you have any questions, or want us to walk you through the approval process over the phone, please don’t hesitate to give us a call at 773-248-9000 and we will be more than happy to talk to you.

We hope you enjoy this video and the entire upcoming video series. If you have any ideas for future tutorial videos, please let us know. Thanks!

Cash Flow for You’re Business – Accounts Receivable Factoring

Factoring gives you the cash flow you need to grow your business.It can be difficult for any business to survive without proper cash flow. Having all your money tied up in receivables can hinder your ability to take on larger accounts and grow your business. The solution to this problem is accounts receivable factoring.

With factoring you get funded for your receivables the same day you invoice your customers. As an added benefit, since your factoring company is purchasing your receivables, you aren’t taking on any new debt. Plus all credit decisions are based on your customers’ good credit, not your own.

So what are you waiting for, give DSA Factors a call today at 773-248-9000 and start getting funded today. At DSA Factors we have money to make your company grow!

Alexa, open invoice factoring

Alexa now has a new Invoice Factoring skill.Alexa just got a whole lot smarter. Earlier in the month we introduced our Accounts Receivable Factoring skill which would tell you exactly how much it will cost to factor an invoice, and it was so popular it even got written up on the Small Business Trends blog. So DSA Factors is proud to introduce our newest Alexa skill, Invoice Factoring. Simply tell Alexa to open invoice factoring, and then start asking anything you have questions about.

You can ask simple questions such as what is factoring, or more complex questions about recourse vs. non-recourse, purchase order financing, credit checks, submitting invoices, and virtually anything else. Of course, you can’t expect Alexa to be able to give you the personalized service that you have come to expect from DSA Factors. Furthermore, Alexa can only answer questions about general knowledge and not about your accounts. That is why you can still give DSA Factors┬áa call anytime at 773-248-9000 and one of our principals will be available to speak with you over the phone.

Alexa, open accounts receivable factoring.

DSA Factors introduces a new accounts receivable factoring Alexa skill.DSA Factors is proud to announce that we have published our first skill for Amazon’s Alexa service. If you own an Echo, Dot, Tap, or any other device that supports Alexa, you are no longer just limited to playing music, turning on lights, asking how to spell words, listening to a news report, or asking about the weather. You can now ask Alexa to open accounts receivable factoring and learn exactly how much it will cost you to factor an invoice. That’s right, DSA Factors has created the world’s first ever factoring skill for your smart home, and there is no telling how this skill may revolutionize the world.

You will of course have to tell Alexa how much your invoice is for and what you factoring rate is for the invoice. After that Alexa will do the rest for you and will tell you exactly what the factoring fees will be and how much will be held in reserve (assuming it is 10%), so that you can know exactly how much funding you can expect to receive.

So go ahead and make your smart home even smarter by activating the accounts receivable factoring skill today.

P.S. If this news wasn’t exciting enough, we have more skills in the works… stay tuned!

How Would an Amazon Furniture Store Impact the Furniture Industry

Amazon is expanding into brick and mortar retail.Amazon is already a retail giant, but up until recently all of their sales have existed only online. However, that is slowly changing. In November 2015 Amazon opened its first brick and mortar bookstore in Seattle, and has opened a handful more across the country in the last year. They also started experimenting with cashier-less grocery stores at the end of last year. Of course the big news came a couple of weeks ago when Amazon announced they would be purchasing Whole Foods for $13.7 billion. While Amazon is yet to open a brick and mortar furniture store, there have been reports that they are looking into doing so. If, or when, they do open a furniture store, you can bet that it will have some pretty dramatic effects on the furniture industry.

Amazon and the Book Industry

Amazon of course started off as an online book store back in 1995 and didn’t turn a profit until 2001. The impact that Amazon has had on the book industry has been dramatic. They drove Borders, a 500+ store chain and former Amazon partner, out of business in 2010. Barnes and Noble has survived but is struggling. So it is interesting that the company that has been responsible for closing hundreds of bookstores around the country, and has no problem selling books online, would want to open up their own bookstores. Of course, for a company like Amazon, the cost of opening up a bookstore is insignificant, and it could┬ábe worth it to Amazon to open these stores even if the stores themselves are not profitable since they can be used as market research and for marketing Amazon’s other services such as Prime. The fact that these bookstores are popping up slowly and only in several cities may indicate that indeed the stores are not profitable on their own.

Amazon and the Grocery Industry

Groceries, however, unlike books, have been a much bigger problem for Amazon. While non-perishable foods can be shipped, they are also heavy and shipping them can be expensive. Of course fresh produce is much more problematic, not only does it have a short shelf life, but most consumers wouldn’t want someone else picking out which bananas or cut of meat they are purchasing. Then you have refrigerated or frozen foods, if it took Amazon two days to deliver your milk, it would go bad long before it arrives at your doorstep. At the end of last year Amazon started experimenting with several grocery store concepts in Seattle. Amazon Go offered cashier-less convenience┬ástores. You simply walk in, take the food you want, and walk out, with your credit card automatically getting billed. Amazon Fresh Pickup allows customers to order food online and then pick it up at a nearby drive-thru. While Amazon Fresh Pickup still doesn’t address the issue of allowing consumers to pick their own produce, it at least addresses the issue of short shelf life and refrigeration. But just like with bookstores, which also started out in Seattle, these stores are being rolled out slowly and Amazon still has an insignificant market share of the grocery industry.

That of course has all changed with Amazon’s buyout of Whole Foods and its 460+ stores across the nation. In a matter of seconds Amazon made a major move not just into the grocery industry but into brick and mortar retail. They instantly gained hundreds of locations around the country where customers can pick up orders, drop off returns, and do their shopping all at the same time. They also can roll out some of their new technologies on a much larger scale than they have done so far.

Amazon and the Furniture Industry

The Challenges of the Furniture Industry

With Amazon apparently solving their grocery problems, that leaves only one other industry where Amazon is struggling to get their foot in the door, the furniture industry. While furniture may not go bad like fresh fruit and vegetables, it has its own challenges. First of all, it is a major purchase, even the cheapest pieces will cost you at least a hundred dollars, and if you are updating a room you can expect your bill to be in the thousands. When making such a large purchase consumers are going to take their time to shop around to make sure that they are getting exactly what they want. In the case of upholstery and bedding, consumers need to touch and feel the product to make sure that it is comfortable. Furthermore, many furniture purchases are custom orders where the consumer picks the colors and finishes they want. As a result retailers are not able to stock the merchandise but instead need to order it, meaning it could take anywhere from 4-12 weeks for the consumer to receive the merchandise. This doesn’t work well with Amazon’s goals of reducing delivery time from two days to two hours. But of course the largest problem with furniture is delivery. Furniture is bulky, heavy, and easily damaged. While it can easily be transported to distribution centers and stores, it is delivering it the final mile into the consumer’s home that presents the greatest challenge, along with assembly for items such as beds that would not be able to fit through doorways if they were delivered fully assembled.

How does Amazon Enter the Furniture Industry?

So of course the next question is what will Amazon do? Amazon has committed to selling furniture; they have opened up showrooms in both Las Vegas and High Point. While it is possible that Amazon may experiment with opening its own stores, it is likely that when they are ready to make the jump into brick and mortar furniture, they will buyout a furniture retailer. Of course, there are very few furniture retailers that have locations nationwide like Whole Foods, but Amazon doesn’t necessarily need to purchase a furniture retailer. Purchasing a department store might make greater sense as they are larger, have more locations, and would allow Amazon to sell other merchandise that is difficult to sell online, such as appliances and clothing.

If you start looking at department stores, Amazon has a lot more opportunities as many of the department stores are struggling, mainly due to having to compete with Amazon and other online retailers. Purchasing Macy’s would give them access to 800+ locations around the country. JC Penny would give them over 1000 locations. But most interesting is perhaps the department store that has told its investors that it may not be able to keep its doors open. If Amazon were to buyout Sears, not only would they be able to purchase it at a bargain price, but they would immediately have access to over 1500 retail locations and a wealth of real estate all around the country.

Of course all of this is just speculation, what isn’t speculation is that Amazon is going to do something in the furniture industry. There is talk of them using technologies such as virtual reality or augmented reality so that you can picture what a particular piece of furniture would look like in your home. Another possibility is offering delivery windows within hours of when you make a purchase in their store. But whatever they do, it is going to be big and everyone is going to have to keep up with Amazon if they don’t want to lose out.

What will be Amazon’s Impact on the Furniture Industry?

Furniture Retailers

While retailers will face stiffer competition, they may also benefit from the new technologies that Amazon brings to the industry. If existing furniture stores are able to adopt Amazon’s technologies, they too could use those technologies to increase sales. Of course, the real advantage to traditional retailers comes in the area of customer service. A company like Amazon will never be able to provide personalized┬áservice and most likely wouldn’t have trained salesmen who know about all the products in their store, instead they will probably rely on Amazon reviews like they do in their bookstores, and perhaps a specific customer’s buying trends. While Amazon may already know if a customer is looking for a more traditional or contemporary look based upon their online purchasing patterns, a traditional salesman can simply ask the customer what they are looking for and forget about all the algorithms. By offering exceptional customer service and a knowledgeable staff, current furniture retailers should be able to compete with Amazon and would definitely do better in customer retention.

Furniture Vendors

From a vendor’s point of view, Amazon stores can potentially open up more possibilities. Smaller vendors, who have trouble getting floor space in the showrooms of larger furniture retailers, may have an easier time getting floor space in an Amazon showroom. While certainly Amazon could offer everything online, it will be limited in what they can display in their showroom by the amount of real estate they have. Unlike traditional furniture retailers who buy from a handful of vendors, Amazon purchases from everyone and that of course is what sets them apart.

If Amazon’s bookstores are any indication of how they┬ádo business, products that┬áperform better online will have the upper hand. At Amazon bookstores there is a very limited selection of books, and the selection is not based on which books Amazon’s┬ábuyers feel should be on the shelves. Instead the book selection is all determined by algorithms which look at sales volume and customer reviews of each book. As a result, a category that has a more limited selection but sells modestly well may get more shelf space than a hugely popular category that offers a much wider variety of books to choose from. For example, Amazon bookstores have an excellent selection of recipe books which individually sell well online, but a very limited selection of fiction, a category that performs incredibly well as a collective group, but not as individual titles. Furthermore, where a traditional bookstore will┬áfeature every book that Dr. Seuss ever published in their children’s department, Amazon bookstores would probably only have one or two of his books that sell extremely well online, if any. There is no reason to believe that Amazon wouldn’t take the same approach in a furniture showroom.

This could be huge for niche manufacturers. While overall your sales volume may look insignificant when compared to someone like Ashley, if you have a single unique product on the market that sells very well, it is quite possible that it would get floor space in an Amazon showroom. While Ashley may offer 1000 different products, it means that each product only gets a thousandth of Ashley’s overall sales volume, and┬áyour single product receives 100%┬áof your sales volume. As a result, your single product would have better sales numbers than any individual Ashley product, and if it receives positive customer reviews, it would perform better in Amazon’s algorithms.

If there is any lesson to be learned from this, it is quite simple, online matters. If you don’t want to get left behind, you need to bring your business online, and the more you offer the more you have to gain. Getting sales and positive reviews right now on Amazon could result in even greater sales volumes in the future when Amazon starts opening brick and mortar stores. If you are looking to get your product for sale online, DSA Factors is here to help. ┬áWe provide factoring for Amazon receivables, as well as Wayfair, Hayneedle, One Kings Lane, Zulily, and many other online stores. Give us a call today at 773-248-9000 to learn more about how DSA Factors can help you grow your online business.

How Does My Business Qualify for Accounts Receivable Factoring?

Approved for immediate funding with accounts receivable factoringUnlike applying for a loan or line of credit with bank, accounts receivable factoring is very simple to qualify for. If your business bills other businesses for either a product or a service, and you offer them payment terms, then you qualify for accounts receivable factoring. Best of all, with accounts receivable factoring, credit decisions are based on your customers’ good credit rather than your own, and you don’t take on any new debt.

Accounts receivable factoring is available to a large variety of industries. All manufacturers and importers qualify, whether you sell furniture, bedding, rugs, wall decor, giftware, housewares, kitchenware, toys, electronics, food, apparel, hardware, or anything else, accounts receivable factoring can work with your business to provide you with the working capital you need to grow. Service providers can also qualify for accounts receivable factoring, this includes marketing, staffing, IT, consultants, or anyone else who provides a service for other businesses.

Startup businesses, rapidly expanding businesses, well established businesses, and even foreign businesses that are entering the North American market all qualify for accounts receivable factoring. It doesn’t matter how long you’ve been in business for or what type of credit your company has, with account receivable factoring we look at the credit worthiness of your customers to make credit decisions.

Furthermore, with accounts receivable factoring there are no credit limits. As your receivables grow so does the amount of funding you receive. So regardless of how long you’ve been in business or any credit problems you may have had in the past, with accounts receivable factoring the sky is the limit.

Sound to good to be true? Give DSA Factors a call today at 773-248-9000 and find out just how easy it is to qualify for accounts receivable factoring. All it takes is one call, and we can be funding you in as little as 24 hours!