Ozarks Capital Funding

Forming the right mix of staff members can literally determine the success or failure of a dental practice. I recently interviewed Ken Smith, Vice President of Peak Performers, a well-regarded healthcare staffing company. Ken has many years of experience in the staffing field and also provides support for both buyers and sellers of dental practices.

Ken shared some insights into dental staffing, practice transitions, can contingency planning for dentists in a three-part video series on youtube.com. Each segment runs between 3 and 5 minutes.

Segment one http://www.youtube.com/watch?v=7HIFlEjkNo4

Segment two http://www.youtube.com/watch?v=6KqNG2K0JY8

Segment three http://www.youtube.com/watch?v=GO5bJi3PgE4

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Are you looking for financing to purchase, remodel, or equip a dental practice? Apply at www.dentalpracticecash.com

Many times a company will have a long term contract to perform services for another firm.  In these circumstances, the company will bill the out the customer for part of the services rendered, even though the entire project hasn’t yet  been completed.  An example would be a construction company contracts with a city to build a water tower. They might bill the city every month in order to rely on some cash coming in each month so they can pay bills.  This is known as progress billing.  Factoring companies are not able to advance funds in these situations because the service in total has not yet been accepted by the customer.

When the contract calls for a project in which a variety of tasks are to be completed along the way, an invoice factoring relationship can usually be developed.  This is because there are milestones along the way.  For example, lets say a construction company contracts with the city to erect structures around several park areas.  The company bills the city each time they have finished work at a park.

Since there has actually been a service total completed that relates to the bill, the factoring company can usually work with the company to provide much-needed working capital.

If you own a medical or dental practice, staying on top of collections is a critical function.  It can literally mean the difference between success and failure.  Utilizing a medical and dental collections professional may at first appear costly.  But in the long run, doing so can yield substantial dividends.

I recently interviewed Mr. Ron Priebe, a collections expert with Greenflag Profit Recovery, located in Ann Arbor Michigan. Ron has a long and successful track record in the area of medical and dental collections. Ron shared some of his insights in an interview that I incorporated into a three-part video series.

If you are interested in learning more about effectively lowering the amount of bad debt in your practice, I strongly suggest that you check out the following youtube videos (about 4 minutes each).

http://www.youtube.com/watch?v=0Vwhoymq7bs segment 1

http://www.youtube.com/watch?v=Q4zLhSaqStQ segment 2

http://www.youtube.com/watch?v=tm19H1fI1Z0 segment 3

How did the financial meltdown REALLY happen?  Why was the crash inevitable?  A new documentary coming out next month, Generation Zero, featuring more than 40 leading experts, authors, and pundits from across the political spectrum, makes the case that the root of the problem was the mindset of the “Greatest Generation”.  

Many in this era vowed to not let their children suffer through the same economic hardships that they did during the Great Depression and WWII.  This in turn led to the “Me Generation” and ultimately the Clinton/Bush era of trading campaign contributions for government “cover” in the form of guaranteed bailouts of Wall Street’s speculative investments, thus sowing the seeds of economic disaster that would be reaped by coming generations.

The teaparty movement has sprung up in large part from the irresponsible handling of our economy by leaders we have entrusted.  This documentary will likely result in a further outcry against big government and overspending.

Is your company unable to extend credit to potential customers because you need the cash NOW?  Many businesses, especially in this economy are facing this dilemma and it is very detrimental to both short and long term success.   Invoice factoirng helps cash-strapped companies offer credit to their customers because they can receive most of the amounts due within 24 hours of billing.

Factoring companies provide cash advances for receivables relating to  credit-worthy customers.  Most companies expect to receive at least 30 day terms on their billing, unless they are given a discount for paying sooner.  To require cash-only terms, you are likely losing a significant amount of market share to your competitors.

I’ve been asked:  “but isn’t accounts receivable factoring too expensive?”  My response is usually:  “although it is more expensive than bank loans, you should look at the opportunity cost of not factoring.”  In other words, how much does it cost your company in lost sales and profits by not extending credit compared to the fees charged by the factoring company.

A regular reader of this blog sent me an email telling me that he was reading the latest post and suddenly another page loaded.  He was  taken to a site unaffiliated with Ozarks Capital Funding.

I launched the blog and the same thing happened to me.  After doing some research, I discovered that some code had been inserted in the administrative section of my Wordpress account.  With the help of my webmaster, James Gerhold of Mediavelocity, I deleted the code that created the problem and adjusted the settings to shut out any future possible issues of this nature.

Hackers need to be caught and sentenced to the full extent of the law!

We get inquiries all the time from business owners concerned about the cash flow of their companies.  Many of them have limited knowledge about invoice factoring and we do our best to educate them.  We thoroughly explain the process of becoming a factoring client and assess their situation to determine if they a good candidate for this type of financing.  If they appear to qualify, we send out an accounts receivable factoring application and ask for copies of a few other documents such as their articles of incorporation, past two years financial statements, and a current aging report.  Then we wait.

Surprisingly, we don’t receive a large share of completed applications.  If the business is struggling with cash flow, and it has been demonstrated that factoring enhances cash flow, why won’t many owners or financial managers take the next step?

Unfortunately, fear of the unknown is one the main reasons.  Even though we’ve gone through step by step and explained how factoring companies operate, many of them are not comfortable because it differs from traditional bank financing.  Despite the fact that a majority of those that call are not eligible for a bank loan, they ultimately decide to “ride it out”.  This can be costly in several ways.

Another reason is the cost.  As we’ve expressed many times before,  factoring is not cheap financing, but it is critical for the decision-maker to analyze the costs and benefits.  If the company has a healthy profit margin of 15% or greater and can increase market share and profits by factoring invoices, it should be strongly considered.

We’ve produced a new invoice factoring video that has been placed on youtube and will be distributed on other areas of the internet.  Go to : 
www.youtube.com/watch?v=p4fQeWPSD54

We are proud of how it turned out and kudos are in order for the Producer, James Gerhold of Mediavelocity.  James is a real pro who has won several Addy awards in the Springfield, Missouri market.   Check out his site:  www.mediavelocity.com and view his excellent works.

Special thanks to Sarah Bargo, who did a great job with the spot.

Need a free, no-obligation factoring quote?  Call us at (417) 560-4420.

Most factoring contracts last twelve months.  When taking on a new client, many factoring companies want to maximize their reserve and set a high fee structure.  This is because of the uncertainty a new client brings to the table, especially if they operate in an industry that has been struggling.

Normally, the factoring contract renews automatically after the one year term unless either party terminates the relationship in writing at least 30 days in advance.

In the event the client decides to renew the contract and the invoice factoring relationship has gone well (few bad debts and timely payments), he or she should consider contacting the factoring company to negotiate better terms.  A higher advance rate or a lower fee structure (or both) could be worked out with the factor.

Get a free, no-obligation factoring quote with your online application.

Despite the fact that invoice factoring volume continues to grow each year, many business owners who desparately need working capital are unaware of this alternative form of financing.

Factoring is the sale of a company’s business to business accounts receivable at a discount for immediate cash.  Note that the services rendered or products sold must be to creditworthy business customers, not to individuals.

Important accounts receivable factoring terms:

Advance rate: The amount of cash the factoring company gives the client, expressed as a percentage of the invoice totals.  Advance rates are typically between 70% and 85%, depending on several factors such as the overall credit standing of the customers and the type of industry the client is in.

Factor: The factor is the funding source for factoring transactions.  Most of these companies are only involved with factoring and similar services such as purchase order funding.

Reserve: This represents the total amount of the invoices factored less the amount advanced by the factoring company.   The reserve is remitted back to the client upon collection of the invoices less the factoring fee.

Letter of Intent: After the factoring company has received the application and other documents from the proposed customer and it appears that they can work with this client, a letter of intent is issued.  The LOI specifies the proposed terms of the relationship, subject to due diligence.

UCC filing: The only collateral for a factoring relationship is the business receivables, so the factoring company files what is called a blanket UCC filing to protect its interests.   When they make a UCC filing, they have a lien against the company’s receivables in the event of bankruptcy.

Factoring fee: This is the cost to the client for the service and is usually expressed as a percentage of the receivables factored per 30 days.  The fee can be anywhere from 2% to 4.5%, depending on the perceived risk of the account.

Due diligence: When a company applies for factoring, the funding source performs an investigation to:  (1) determine if there are liens on the  receivables in question, (2) validate the information contained in the application, and (3) check the credit of the client’s customers.

Subordination agreement: As stated above, the factor must have a “first position” on the receivables.  In other words, they have the right to receive proceeds from the receivables in the event of default as a result of a blanket lien on the A/R.  When another entity already has a lien on the receivables, the factor will require the bank, taxing authority or individual to release the encumbrance.  The legal document that accomplishes the lien release is called a subordination agreement

Debtor notification: At the inception of the factoring relationship, the factor sends a letter to each business customer of the client.  The letter explains that the company has entered into an agreement to manage the company’s accounts receivables and that future payments are to be made to a new address.  The debtor sends payments to a lock box that is controlled by the factoring company.

Spot factoring: Most factoring contracts require a minimum amount of factoring volume per month from the client.  But there are other niche factors that allow the client to factor invoices only when needed.  This type of funding is called spot factoring.

These terms are important to understand before entering into an agreement with a factoring company.  The contract, which is typically for a year in length, should be thoroughly studied before signing on the dotted line.

Get a free, no-obligation factoring quote by filling out our easy online application.