December 15, 2020

Categories:

• America
• Financing
• Fintech
• Insurance

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The True Economic Cost of the COVID-19 Pandemic: Credit Insurance and Supply Chain Finance

It was over a year ago that the coronavirus was first detected, and while the disease didn’t bring drastic change to America until March, that first wave is now long behind us and things have only gotten worse since the summer months. But beyond the disease which has infected millions and taken many lives, the pandemic has also been devastating to our economy. While the most visible effect of the pandemic has been bankruptcies and empty store fronts, the economic effects of the pandemic actually go much deeper than that. Prior to the bankruptcies and store closures we saw a tightening of credit insurance policies combined with an unwillingness for the industry to take on new clients. The pandemic has also led to the disappearance of supply chain financing, which had grown tremendously over the past decade, while at the same time payment terms got extended. In other words, while consumers may only see the disappearance of their favorite stores and restaurants, behind the scenes the vendors who provide stores with their merchandise have not only seen reduced business, but a lack of financing available to them.

Credit Insurance No Longer Available

Credit Insurance has long been a tool available to wholesalers. Typically, in a business-to-business transaction, the company purchasing a product will request payment terms, meaning they won’t pay for the merchandise they receive until 30 days or more after receiving it. Of course, whenever you allow someone to pay for an item after it has been received there is risk involved. For some financially strong customers that risk may be minimal, but for others that may be struggling that risk may be significant. If a company were to file for bankruptcy within those payment terms, not only would they not have to pay you, but they will probably be allowed to keep the merchandise. Should they pay you but then file for bankruptcy within 90 days, you may be required by the bankruptcy court to return those funds. This is why many wholesalers obtain credit insurance, to protect themselves in the event that one of their customers files for bankruptcy.

Credit insurance has been around for a long time, and really hasn’t changed much over the years. Credit insurance remained available and reliable throughout the recession in 2008 and even during the current “retail apocalypse” that has followed. However, due to the rapidly changing business environment that resulted from the COVID pandemic, credit insurance had to make some major changes for the first time in recent history. Near the end of March it began with the slashing of credit limits and a refusal to take on any new clients. The credit insurance companies started lowering credit limits across the board, not only on struggling businesses, if not flat out denying coverage on accounts that they had previously covered. At the same time, they also stopped taking on new clients, even abruptly ceasing communications with potential new clients that they had been working on building policies for.

It is doubtful that credit insurance companies would have lost much money had they continued business as usual. Any outstanding receivables at the time of the initial lockdowns would still need to be covered as the insurance companies can’t backdate changes in credit limits, and oftentimes even give clients a grace period before a credit limit or coverage change goes into effect. Furthermore, businesses stopped placing orders after the initial shutdown, so there really wasn’t any need to lower credit limits. As a result, credit insurance companies didn’t really protect themselves from the bankruptcies since new orders weren’t being placed and they still had to provide coverage on orders that shipped in March or earlier, assuming they were offering coverage on these companies in the first place. The end result of their policy changes was that they turned away new business, and possibly alienated existing customers.

While credit insurance is not something that is visible to consumers, it no doubt effects consumers. If wholesalers are unable to insure an account, it makes them much less likely to be willing to sell to them. This means that the retailers have difficulty stocking merchandise on their shelves and consumers have even less of a reason to shop at their stores. All of this, combined with other difficulties caused by the pandemic, makes it that much harder for a retailer to survive, and ultimately leads them down the path of bankruptcy. However, it isn’t just retailers who got hurt by the lack of credit insurance, wholesalers may have had to walk away from some of their largest customers, putting both their short-term and long-term survival in jeopardy as well.

It is important to understand however that credit insurance companies do not have direct access to a company’s payment trends or even order history when making credit decisions. Credit insurance companies rely on credit reporting in order to get their data. The credit agencies they collect their data from receive reports from actual debtors typically on a monthly basis. Therefore, not only do credit insurance companies not have real-time data to rely on, the data they receive is not their own, and in general only places outstanding receivables into 30-day aging buckets. As a result, a receivable paid one day beyond terms would appear the same as a receivable paid 30 days beyond terms, while a receivable paid 31 days beyond terms will look much worse than a receivable paid 30 days beyond terms. The only time they receive actual real-time data is when a client of theirs has to report a receivable that has become past due by a certain number of days, and later when they ultimately file a claim on a receivable that remains unpaid. The data credit insurance companies would have had access to at the start of April would have looked perfectly normal since businesses would have been closed for at most one week at that time, it wouldn’t be until new data became available at the start of May that they would have noticed a slowdown. Any claims that they would have received at the end of March or beginning of April would have been on invoices that dated back to November 2019 or earlier. So, the decisions made by credit insurance companies in late March and early April were not dictated by data, but simply by fear of the unknown.

Supply Chain Financing’s Disappearance

If tightening credit insurance policies weren’t bad enough for wholesalers, the disappearance of supply chain financing has devasted many smaller wholesalers. Larger retailers always request credit terms from their customers, typically net 30 day terms, meaning that they have 30 days to pay for their merchandise. Over the past decade, it has become increasingly popular for larger retailers to agree to pay an invoice early, oftentimes after only a week or two, in exchange for a discount. Wholesalers may be willing to give these companies a discount, somewhere around 2%, for an early payment in order to improve their cash flow, creating a win-win situation for both the wholesaler and the retailer. However, this offer of early payment is not a requirement and is solely up to the retailer as to whether or not they wish to offer it.

Supply chain financing, and Fintech in general, emerged as a result of the 2008 recession. Venture capitalists saw that financing wasn’t readily accessible to small businesses and decided to use technology to make financing safe and easy. In the years that followed 2008, our economy improved greatly and large businesses were thriving. As a result, the industry grew at a time when our economy was growing, and had never experienced an economic downturn.

Of course, prior to 2020, retailers that offered early payments would have had very little reason to stop offering it, so offers of early payment were consistently available. 2020 of course changed all that when many of these retailers were forced to suddenly and unexpectedly close their stores, as well as the corporate offices where these payments come form, for an unknown period of time. As a result, most retailers stopped offering early payments at the outset of the pandemic, putting their vendors in a difficult situation where they didn’t have access to the funds that they relied on to keep their business running. To make matters worse, with corporate offices closed and without any revenues coming in from their stores, many of the retailers simply stopped making payments, even when the invoices became due. This all happened at a time when wholesalers saw new orders completely dry up and existing orders being canceled.

To make matters worse, many wholesalers who relied on supply chain financing, never bothered to consider getting credit insurance. They didn’t see the need for credit insurance since they were getting paid early. However, just like health insurance, you still need it even if you are young and healthy because you never know what the future may have in store for you. Companies who relied on supply chain financing and didn’t bother to insure their receivables, were suddenly exposed to the fact that these companies that owe them money have now closed all their stores and that bankruptcy was a very serious possibility.

While supply chain financing was still available as a tool available to retailers, retailers no longer wished to use it. Even now, nine months after the first wave of COVID-19 swept across the nation, most major retailers have started placing orders again, but still are not offering supply chain financing to their vendors. To make matters worse, many of them have also increased their payment terms from net 30 days to net 60 days or even net 90 days, forcing their vendors to wait even longer to get paid. Prior to the pandemic, extending payment terms was sign of financial distress and imminent bankruptcy, although this year we believe that it is simply a response to the unknown as stores may have to close again should things become worse. It is possible that supply chain financing may one day be offered again by retailers, but at this point, it is very clear that it is not a reliable way for wholesalers to finance their business. Another recession, or even worse, another pandemic, could easily result in the disappearance of supply chain financing again.

An Alternative to Supply Chain Finance and Credit Insurance

The disappearance of supply chain finance as an affordable way to finance a small business has led to a huge increase in demand for accounts receivable factoring. Factoring is a lot like supply chain finance, except instead of being initiated by the retailer, it is initiated by the wholesaler. It also does not require the approval of the retailer; it is solely at the discretion of the wholesaler as to whether they wished to work with a factoring company. Therefore, wholesalers don’t need to worry as much about when the next disaster will hit, the financing that their business needs is completely within their control.

Factoring also provides access to funds 7-10 days faster than supply chain finance. Where retailers typically need to receive merchandise and check it into their system prior to making an offer of early payment to their vendors, factoring companies are willing to fund their clients the same day they ship their merchandise to their customers. That means even better cash flow than you would have received with supply chain financing.

Furthermore, if non-recourse factoring is offered, then the wholesaler also receives credit insurance on their receivables along with the improved cash flow that they receive. However, unlike credit insurance companies, factoring companies have access to real-time data that shows orders placed and payment trends, along with the data that credit insurance companies receive from credit reporting agencies. As a result, factoring companies can oftentimes approve accounts that a credit insurance company may not feel comfortable with.

Accounts receivable factoring is also available on any and all accounts that a wholesaler may sell to. Where supply chain finance is typically only available from major retailers, and credit insurance comes with minimums and deductibles that pretty much rule out smaller receivables from being insured, factoring companies are willing to work with customers of all sizes. A wholesaler who does half their business with major retailers, and the other half with small mom-and-pop shops, would have access to immediate funding and credit insurance on their entire portfolio if they choose to work with a factoring company, whereas before only half their portfolio would have had financing and insurance available.

The cost of accounts receivable factoring is very comparable to the cost of supply chain financing, and in all likelihood is much less than the cost of supply chain finance and credit insurance combined. Like supply chain financing, factoring fees are based on a percent of an invoices value, however that rate is fixed so you know exactly what to expect every time you factor an invoice and can easily build it into your pricing. With supply chain financing the percentage can change based upon the retailers needs at the time they offering early payment. If a retailer begins to struggle, or if they simply need access to working capital to fund an expansion, they can ask for larger discounts in exchange for early payment.

Credit insurance on the other hand works like any other insurance product, you pay an annual premium based on how much volume you expect to do at the beginning of the year. Larger volumes get you better rates, but you don’t get reimbursed if your sales don’t reach your expectations. Likewise, if your sales exceed your expectations you may find yourself having to purchase additional coverage at a higher rate than had you purchased more coverage in the first place. Even when there isn’t a pandemic, guessing the correct amount of coverage to get can be tricky, while the pandemic pretty much guaranteed that any companies with credit insurance way overpaid for coverage. Since factoring is based on a fixed percent of an invoices value, you only pay for what you insure, nothing more, nothing less. You also don’t need to worry about deductibles or minimums with factoring, if your factoring company approves your customer, then you are fully insured.

Is Factoring Available During a Pandemic or Recession?

Accounts Receivable Factoring is one of the oldest forms of financing and not only has survived many recessions, but has also been available throughout recessions and this current pandemic. Here at DSA Factors we have been providing factoring for over 30 years and have survived several recessions during that time period. There is no question that the COVID pandemic has been the most difficult event that we have had to deal with, but we never stopped providing financing to our clients, not even in April when things were at their worst. However, we aren’t only continuing to fund our clients, we are also accepting new clients and offering them the same great service that we provide to all of our clients. If your business has lost the financing options it had been relying on for the past few years as a result of the pandemic, please give DSA Factors a call today at 773-248-9000. We are ready and willing to provide you with the funds you need to keep your business going!

June 19, 2020

Categories:

• America
• Financing
• Fintech
• Insurance
• Retail
• Small Business

The Dangers of Supply Chain Finance in the COVID-19 Era

Supply Chain Finance has been gaining in popularity over the past few years. Instead of forcing vendors to wait 30 or 60 days to get paid for their receivables, retailers have discovered that they can get a several percent discount in exchange for paying their vendors early. It seemed like a win-win, vendors get the cash flow they need, and large retailers get a discount at a rate that far exceeds interest rates. Of course, all of this changed over the past few months as our nation, and the world, have been gripped by the COVID-19 pandemic.

Suddenly, retailers have been forced to shut their doors with no plan for when they may be able to reopen. While their customers have been laid off, furloughed, or taken pay cuts, and those who have managed to maintain their jobs are more concerned with purchasing essentials and saving money in case they too become an economic casualty of the COVID-19 pandemic. Not to mention, many consumers simply don’t feel safe leaving their homes for anything that isn’t essential. As a result, these retailers have found it best to hold onto their money for as long as they can, and most have either extended payment terms (with or without permission) or are simply paying invoices well beyond the due date. For small vendors that have relied on supply chain finance, they now find themselves in a very difficult position.

One of the major retailers who offers supply chain financing is TJX (TJ Maxx, Marshalls, Homegoods). When stay at home orders were first issued, TJX told all their vendors that they would be extending terms on all of their invoices from 30 to 90 days, although they reversed that decision a couple weeks later due to the backlash they received from the vendors. However, by that point the damage had already been done. Many vendors were unable to get the early payment they rely on, and due to the closure of their corporate headquarters and a need to catch up, many invoices were still paid well beyond terms. Companies that were used to getting paid within 5-10 days were now waiting 45 days to get paid, and this was at a time when sales had pretty much dried up. It also appears that for the immediate future, any new orders from TJX will have terms of 90 days, making it unlikely that they would be willing to offer early payment. Unfortunately, TJX was far from the only major retailer to extend terms or simply fall behind on their bills.

Of course, it also isn’t just an issue of cash flow anymore, the COVID-19 pandemic has proven to be just as deadly for businesses as it is for the people it infects. While all non-essential businesses had been forced to close their doors temporarily to flatten the curve, many of these businesses will be closing them permanently as a result of no revenue but continuing expenses. If the retail apocalypse wasn’t bad enough before the pandemic, the recent wave of bankruptcies has been incredible. Already we have seen J.C. Penney, Neiman Marcus, J. Crew, Stage Stores, and True Religion have all filed bankruptcy during the pandemic. Lord and Taylor has avoided bankruptcy, but has announced they will be holding going out of business sales as soon as they are allowed to reopen. L Brands (Victoria’s Secret, Bath and Body Works) will not be filing, but will be permanently closing 250 stores. While Pier 1 Imports and Art Van Furniture, both who filed bankruptcy prior to stay-at-home orders being issued, were forced to change their bankruptcy plans and completely liquidate. Of course, the retail sector is far from the only industry being hit with bankruptcies, hospitality, entertainment, and health clubs have also been filing for bankruptcy at an incredible rate. Sadly, these companies are only the beginning, with many more considering their options as well.

Even worse, the dangers of bankruptcy are actually compounded by supply chain finance. Many businesses don’t feel the need to carry credit insurance if their customers offer supply chain financing. The logic behind this is that there is no risk if a company is paying them early. However, the decision to pay early is entirely up to the customer, as is the amount of the discount that they will take. Prior to filing for bankruptcy in 2017, Toys’R’Us utilized the popular C2FO platform for supply chain financing. Towards the end they started demanding larger and larger discounts in return for early payments. Further complicating matters is US bankruptcy law in regards to receiving preferential payment. When a company files for bankruptcy, the bankruptcy court can demand that any preferential payments made within 90 days of the filing be returned to the court. When a vendor offers a discount in exchange for an early payment, there is no question that the vendor has received a preferential payment and will be forced to return the payment to the court. So vendors that offered double digit discounts that Toys’R’Us accepted, ultimately would have had to return the funds if they were received within 90 days of the filing. Had they waited until the invoice was due and gotten paid in full, they probably would have been able to keep their money.

With many businesses reopening at this time, there is still a question of how many of them will be able to survive. With consumers spending less money these days, and spending in unpredictable ways, combined with a fear of whether it is even safe to go out in public, revenues will continue to remain low for the foreseeable future. Yet these companies will need to rehire much of their workforce and continue to make rent, pay utilities, and interest payments on debt. For businesses such as restaurants and movie theaters, who will need to reopen at reduced capacities, there is a question as to whether or not they will be able to remain profitable. Unfortunately, most experts are predicting that even though businesses are starting to reopen now, many businesses that have survived so far might not make it through to the end of the year. Even with companies that emerge from the lockdowns with strong sales, there is still the question of whether or not they would be willing to pay invoices quicker, the current trend is that most companies are requesting longer payment terms. Of course, none of this takes into account the possibility of a second wave of infections and subsequent closures.

Relying on supply chain financing to improve your cash flow may have worked for the last few years, but it is doubtful that it will be as reliable moving forward. Furthermore, wholesalers need to be more careful than ever about who they are selling to. The only thing worse than getting paid slowly is not getting paid at all. Paying for credit insurance on top of supply chain financing can be extremely costly, especially for businesses that do less than $10 million a year. Not to mention, the credit insurance companies have been hesitant to take on new clients, and have slashed credit limits across the board for their existing clients.

There is a solution to this problem, and that is accounts receivable factoring. With accounts receivable factoring you sell your receivables to a factoring company, and can be funded the same day you ship the merchandise, making it a much quicker turnaround than supply chain finance. Furthermore, your factoring company is responsible for monitoring your customers and establishing appropriate credit limits. If the factoring company offers non-recourse factoring, then not only do you receive improved cash flow, but they also insure your receivables, eliminating the need for costly credit insurance. Just like supply chain finance, when you factor your receivables you are not taking on any new debt as your factoring company is purchasing your receivables from you. The best part, however, is that accounts receivable factoring is available for all of your accounts and costs no more than supply chain financing. Plus, since factoring rates are fixed, it takes away all the guess work associated with supply chain finance and can easily get built into your margins. Want to learn how easy it is to improve your cash flow with accounts receivable factoring? Give DSA Factors a call today at 773-248-9000 and we will be happy to speak with you.

April 9, 2020

Categories:

• America
• Fintech
• Small Business

Fintech’s Massive Failure During the COVID-19 Pandemic

Fintech has been a major disruptor in the financial world over the last few years. Their promise of quick access to funds available at your fingertips has changed the landscape of commercial lending. Perhaps the most attractive part of it is that everything is done seamlessly online. So it would be reasonable to assume that as millions of Americans are under stay-at-home orders, Fintech should be the go to source for funds to keep struggling small businesses from collapsing. However, it is turned out that the major Fintech companies are doing the exact opposite. Instead of providing the access to capital that small businesses are desperate for, they instead are shutting down their operations altogether.

A prime example of what is happening in the Fintech world is perhaps one of the largest and most well known lenders in the Fintech arena, Kabbage. Not only is Kabbage not providing Paycheck Protection Program (PPP) loans under the CARES act, they have completely stopped giving out loans altogether. The only thing that they are offering small businesses these days is a platform to sell gift cards on which they claim they will not profit from. But small business owners aren’t alone, Kabbage is also furloughing most of their employees and completely shutting down their office in Bangalore, India. A company that has received billions of dollars from investors, not only is turning its back on its clients, but also on its own employees.

Even more surprising is the fact that on March 10th, Kabbage’s CEO and founder Rob Frohwein suggested a three week lockdown for the country. While certainly he was correct about a lockdown being needed to stop the spread of the virus and flatten the curve, he also believed that it would be a good thing for small business. He wrote “my hope is that a plan like this one saves millions of lives and saves millions of businesses – many of them small businesses that cannot afford three months, a year or even potentially longer exposure to this threat. Small businesses are most at risk during long periods of disruption. We need to avoid this as small businesses account for more than half of the non-farm GDP in the United States and two-thirds of all new jobs.” While he did argue for only three weeks, and not months, given that China has been locked down for over three months, it is pretty unrealistic to expect things would go back to normal after only three weeks. However, here we are three weeks in, and for some parts of the country even less, small businesses are struggling to stay alive and Frohwein’s company has already stopped giving loans. When states actually decided to follow his suggestion that he claimed would be good for small businesses, he decided to stop supporting small businesses. Clearly large Fintech companies like Kabbage do not understand, or perhaps don’t even care, about the needs or success of small businesses.

Other lenders in this space are also shutting down operations. Two of the more popular Fintech companies to put new loans on hold and to stop allowing existing clients to draw on their line of credit are Fundbox and OnDeck. However, they certainly aren’t alone, and the few companies out there still giving loans are restricting funding only to certain industries such as the grocery and medical industries. For companies in hospitality and other industries that have been shut down, there simply aren’t any options available. At a time when small business owners need funding the most, Fintech is not providing their customers with access to the funds they desperately need.

To make matters worse, for small businesses that already have a loan or line of credit with a Fintech company, they will be unable to look elsewhere for funding as the Fintech companies are holding their assets as collateral. Unfortunately for small business owners, there is nothing they can do about this since the law protects the Fintech companies in a situation like this. To further add insult to injury, these Fintech companies, including Kabbage, will continue to make daily or weekly withdrawals from the bank accounts of small businesses that no longer have any revenues. This of course is the price to pay when we allow algorithms to make major financial decisions in place of humans.

Another type of Fintech is supply chain financing, where C2FO is a leader in the space. C2FO effectively works as an intermediary between vendors and their customers. If a customer is willing to pay an invoice early, they will submit it to their vendors via C2FO and the vendors will have the ability to offer them a discount in order to get paid that same day, rather than wait until the invoice becomes due. It is then up to the customer to either accept or decline that offer, and if they decline the offer the vendor can offer a larger discount the following business day. In theory it’s a win-win situation for both vendors and their customers. Vendors get paid earlier and oftentimes the cost is a little bit less than if they factored the invoice, while cash rich customers get a discount on their merchandise. C2FO doesn’t make commissions facilitating these discussions, and the funds do not pass through their accounts, they make their money through a monthly service fee from retailers who choose to use their platform.

However, where supply chain finance fails is in a situation like the current coronavirus pandemic. Many cash rich customers no longer have positive cash flow. With their stores having been closed for several weeks, many of these companies have furloughed or laid off employees, they’ve stopped paying rent, and they are extending the terms of their invoices (regardless of whether or not their vendors approve). In the clothing industry, due to the fact that merchandise is purchased a season in advance and it isn’t going to be able to sell this year, many retailers are requesting very large discounts along with extended terms from their vendors. In other words, major retailers aren’t submitting invoices to C2FO for early payment, or if they are, they are requiring extremely large discounts. As a result, companies that have been relying on supply chain finance for the last few years are finding that immediate funding is either no longer available or is too expensive.

Furthermore, for vendors who saw supply chain finance as a way to avoid needing credit insurance, now they are stuck with receivables for customers who may be struggling financially, and depending on how long they are forced to remain closed, may even need to file for bankruptcy. We already saw this sort of activity happen in the months leading up to Toys’R’Us’s demise in 2017. Toys’R’Us had partnered with C2FO to provide vendors early payment, and customers who wanted to receive early payments in the months leading up to the initial bankruptcy were being forced to give discounts of 25-50%. To make matters worse, after Toys’R’Us filed bankruptcy, these payments would have been considered preferential payments and the bankruptcy court would have demanded they get returned. As major retailers are forced to stay closed longer, there is a very real threat that we may see a lot more of this.

Shockingly, C2FO is trying to advocate for small businesses by arguing that major corporations should get government bailouts. According to their data, small businesses around the world have $16 trillion in open receivables, and if they received payment for these receivables today, it would help them survive this current crisis. While these funds would help small businesses, who don’t already get an advance on their receivables, to survive the next 30 days, it will do nothing for these small businesses a month from now when they are still not getting in any new orders. Without any orders, they will have no receivables, and this type of funding will no longer be available Furthermore, their theory is that the large corporations could use these bailouts to pay their suppliers, the reality is that this has never been the result of government bailouts in the past. The bailouts in 2008 and 2009 worked wonders for the banks, but did nothing for the people who lost their homes due to foreclosures.

Even if these major corporations used these funds properly and paid off receivables owed to small businesses, it wouldn’t help small businesses who sell to other small businesses. At DSA Factors our clients sell to both major retailers as well as small businesses. Our clients, all of whom are small businesses, do approximately 55% of their volume with other small businesses. Another 28% of their volume comes from major retailers like Amazon, Target, Walmart, and other essential businesses such as grocery store chains that are thriving right now and are in no need of receiving a bailout. That leaves just 17% of total receivables owed to small businesses that could actually get paid with such a bailout. Of that 17%, many of these businesses are cash rich (TJX) or have a strong online presence (Wayfair) and will not require a bailout to weather this current economic downturn. Sadly, C2FO is just another example of how a massive Fintech corporation does not understand the actual needs of small businesses.

For many small businesses who loved the appeal of fast and easy funding that Fintech offered them, that funding has completely disappeared at a time when they need it most. There is little doubt that Fintech companies will be back in business at the end of the COVID-19 pandemic, after all, they will be sitting on the billions of dollars that they’ve stopped lending. However, are the small companies who made them rich going to continue to seek out their services? Will small businesses feel betrayed that the Fintech companies who were so quick to offer support, quickly turned their backs when times got tough? Will small businesses ultimately be bankrupted because the Fintech companies won’t stop pulling funds directly out of their bank accounts? This is the first economic downturn in the Fintech age, but it certainly won’t be the last. At least for now, it looks like Fintech isn’t up to the challenge.

January 15, 2020

Categories:

• Factoring
• Financing
• Fintech

Fintech: Balancing Speed and Availability with Service and Privacy

Fintech is becoming increasingly popular each year. The success of Fintech is primarily driven by the ease and speed of getting access to funding. However, oftentimes as Fintech companies work tirelessly to improve their funding process to make it faster and more seamless, they are doing so at the expense of offering you quality customer service while at the same time invading your privacy. Part of the reason for this disconnect comes simply from the size of these businesses. Over half of all Fintech companies have more than 5000 clients, and a quarter of them have over 50,000 clients. There simply is no way to manage these large number of clients efficiently without making sacrifices. However, if they limit their client base, then it becomes way too expensive to support their massive IT and marketing budgets, not to mention keep their investors happy. For business owners, the solution is to find a financial partner who is small enough to offer you the personalized service you need, but large enough to offer fast, reliable service and have the funds necessary to keep your business running.

Speed

Certainly, it is the ability to get funds fast that has made Fintech so popular. The way that Fintech has been able to do this is by using AI to automate processes that traditional financial institutions rely on humans to do. By taking humans out of the equation, it allows computers to make instant decisions and get you the funding you need. This has and continues to be the main focus of most Fintech companies, with over 80% of Fintech companies actively looking for ways to automate more processes and remove humans from the equation. Unfortunately, this comes at a cost, as more people are getting replaced by machines, customer service winds up suffering, and their ability resolve problems becomes more and more limited. Privacy concerns also become an issue as the Fintech companies require access to more data in order to base their decisions on.

Availability of Funding

Fintech companies also benefit due to the fact that getting a loan or line of credit from a bank has always been a challenge for many small businesses. Banks make credit decisions by looking at the business’s credit as well as the personal credit of its owners. Oftentimes for a young and growing business, establishing good credit can be a very big problem. As a company begins to grow, so does their expenses, and when a company suffers from poor cash flow, funds aren’t always available to pay bills in a timely fashion. For the owners of these businesses, frequently they will have invested much of their own money into the business, so their personal credit also takes a hit. The result is that banks are typically unwilling to fund them. Fintech companies get around this problem in several ways. First, they look at assets that banks may not have easy access to. By integrating with QuickBooks and other financial software, Fintech companies have real time access to all of their client’s receivables as well as a history of how the receivables have been paid in the past. More importantly they participate in predatory lending techniques such as excessively high interest rates and daily debits from the business’s checking accounts. By taking funds directly out of a bank account on a daily basis, it guarantees that they will get paid before anyone else, not to mention since they have access to the account, they know exactly how much money has been going in and out of the account and what the current balance is. The high interest rates also allow them to accept a higher rate of default since they make a very large amount of money on clients who don’t go into default.

Customer Service and Communications

The ability to easily communicate with your financial partner is perhaps the most crucial. Whether you have a simple question you are looking for an answer to, or have run into a problem that you need to come up with a solution to, you need to have a way to communicate. These days there are three main forms of communication. The two most popular forms are email and phone; however, online chatting is becoming increasingly popular and is expected to have tremendous growth in the future. The problem of course is how you integrate these three forms of communication. The last thing you want is for your client to utilize two of these forms, and have to re-explain themselves each time because there is a disconnect between the people assigned to answering each communication method. Only a little more than 10% of Fintech companies actually have a way of managing these three channels in an integrated fashion, and even so, it is unlikely that their clients would be able to deal with the same person if they change methods. To make matters worse, less than a third of Fintech companies actually have a way of providing the people speaking with their clients full access to their client’s account, especially when they’ve outsourced their communications overseas. Therefore, quality customer service is typically something that Fintech companies sacrifice in order to cut costs and take on more clients.

Privacy

Typically, when we hear about privacy concerns these days it involves major breaches, however, while breaches are certainly still a concern, in the world of Fintech there are also very different privacy concerns. In order for Fintech companies to work so efficiently at funding thousands of companies, they have learned how to take humans out of the equation, and make all credit decisions using AI. In order to this, these institutions require access to data which usually comes in the form of direct access to your bank accounts and accounting software. Fintech companies are constantly keeping track of any transactions you make and are basing their credit decisions on what they see. Many Fintech companies also make automatic withdrawals from your bank account, the very same bank account that they require you to give them access to, in order to pay them back. If you don’t feel comfortable allowing your financial partner to have complete control over your financials and the funds in your bank account, Fintech is probably not right for your business.

Alternatives to Fintech

Just as Fintech is considered an alternative form of financing, there are also alternatives to Fintech that combine its speed and availability with high quality customer service and respects your privacy. Accounts receivable factoring has long been an alternative form of financing that is fast and easy. Factoring is easy to qualify for, if your company has receivables then it can qualify for factoring. With accounts receivable factoring you are not receiving a loan, but rather selling your receivables to your factoring company, as a result, credit decisions are based on your customer’s good credit and not your own. As for speed, most factoring companies have introduced automated credit approval processes, although they also still rely on humans to review requests as well. However, so long as you submit your requests during normal business hours, factoring companies are typically able to respond to you with a decision that same day, oftentimes within half an hour to an hour. As for funding, the process may not be as automated as it is with Fintech companies, but typically your factoring company will allow you to email them invoices that you wish to get funded on, and they will be processed for payment that same day. It may not be as easy as clicking a button on a Fintech company’s phone app or in your accounting software, but by making these very small sacrifices in convenience, factoring companies make up for it with customer service and privacy.

Customer service is something that can vary between factoring companies. With large factoring companies, you typically get assigned an account manager who you will deal with all the time, as a result they should be familiar with your account, although they may need to get permission from upper management to make major decisions. With smaller factoring companies however, you oftentimes can speak with a principal each and every time you call, email, or chat with them. So, you not only get to speak with someone who is very familiar with your account, but they also have the ability to make major decisions and get you access to additional funding if needed.

In terms of privacy, some factoring companies may request financial statements from time to time, but this is not always the case. However, what is true of all factoring companies is that they will never ask for access to your bank accounts or your accounting software. The reason why factoring companies don’t require access to this information is not just because they use human decision makers, but because they are not giving you a loan. Since you are selling your receivables to your factoring company, it is ultimately your customers who are responsible for paying your factoring company back, not you.

Of course, the biggest difference between Fintech and factoring is that factoring companies don’t use predatory lending techniques. The fees charged by factoring companies are much lower than those charged by Fintech companies. While it is true that if you calculated a factoring fee as an APR it would appear to be much higher than a bank loan, this isn’t really the case. Factoring is much more than just improved cash flow, with factoring there are also two other major benefits. First, you are outsourcing your accounts receivable. That means that your factoring company will be handling all of the credit checking and collecting for you. Not only will you be able to save money by not having to subscribe to expensive credit checking agencies, but you also don’t need to hire additional employees to handle your collections, or if you handle collections yourself, you’ll be able to free up some more time to focus on marketing, sales, or other aspects of your business. The other benefit is that if your factoring company offers non-recourse factoring, that means that credit insurance is included with the factoring, you no longer need to worry about customers who are unable to pay their bills. After accounting for these additional benefits, the actual cost of factoring as an APR is actually very comparable to what a bank might offer you.

At DSA Factors we take pride in the customer service we are able to provide to our clients while also respecting their privacy. As a small, family-owned business we understand the needs of your business and can offer the same fast and reliable funding you get from the larger companies, but with a personal touch and flexibility that only a family-owned business can provide you. If you want to get started with factoring, give us a call today at 773-248-9000, and one of our principals, either Ben, Max, or Howard, will be happy to speak with you.

* Data for this article comes from the LiveVox Fintech Contact Center Survey Report for 2019.

January 8, 2019

Categories:

• Factoring
• Financing
• Fintech
• Insurance
• PO Financing
• Top Posts

Avoid The Pitfalls of Online Lending

Online lending, often referred to as Fintech, is becoming increasingly popular and is a major disruptor in the world of finance. The reason for this is simple, these online lenders are filling a void for small and medium sized enterprises (SME's) who have always had a hard time qualifying for SBA or traditional bank loans. Even for SME's that do qualify for a loan from the bank, Fintech companies are able to approve loans in as a little as 24 hours whereas banks can take months to make a decision and provide funding. Of course, online lending has its drawbacks, and there are other financing solutions out there that can help SME's improve the cash flow quickly. Let's dive into the world of Fintech to understand how it works and what it entails.

How do banks make funding decisions?

Traditionally bank underwriters would require vast amounts of information in order to approve an SME for a loan. They would analyze sales records, business assets, accounting statements, and pretty much anything else they could get their hands on in order to make a decision. Oftentimes the decision process is slowed down as they request more and more information. At the end of the day, the bank underwriter is only looking at what a business has done in the past, and not looking at what they can do in the future. As a result, even if they do approve an SME for a loan, the amount will only be based on historical numbers and may not be enough to support future growth. Furthermore, since it is only based on past data, startup businesses are pretty much eliminated from receiving funding from a bank.

How do online lenders improve the approval process?

Online lenders have done away with underwriters reviewing accounts, instead they're underwriters have come up with complex computer algorithms that can measure if an SME qualifies for a loan, and how much they will qualify for. They do this by requesting access to a company's online banking platform and the EDI systems of their largest customers. By providing the Fintech company with login information to these various portals, the algorithms are able to work their magic and come up with an instant decision based on the data collected from these sources. Even startups can qualify as the algorithms would have rules built in for dealing with smaller amounts of data. The algorithms are of course designed to predict future potential growth, giving an SME access to the funds that they would need to grow.

What are the drawbacks to online lending?

Like all good things in life, there is a catch to online lending. Most of these companies are funded by venture capitalists or crowd sourcing, as a result, the investors are looking for very high returns on their investment. Fintech companies are also taking on more risk as they are allowing computer algorithms to make instant financing decisions, as opposed to a bank that would use a human underwriter to review an application in great detail. The combination of these factors results in much higher interest rates than you would get from alternative financing options. At the low end, Fintech companies may offer APR's around 30% for companies with strong financials, but for startups or struggling businesses, those APR's can be well over 100%.

Furthermore, online lenders require you to authorize them to automatically withdraw funds from your bank account, a practice often associated with predatory lending. Based on the lender this can mean monthly withdrawals, weekly withdrawals, or in some cases even daily withdrawals. Furthermore, since you have provided them with access to your online banking platform, they have the ability to wipe out your account should you in anyway breach their contract.

Another common practice of online lenders is to have steep penalties for early repayment of a loan. Where a bank would allow you to repay a loan early to avoid paying interest, online lenders are expecting you to be paying their exorbitant interest rates for the entire term of your loan. Those that don't have penalties for early repayment tend to charge you all of the interest up front when you take out the loan, so even if you were to pay off the loan early, it won't save you from having to pay interest.

The other big problem with online lending is that it is entirely online. It is very difficult for you to pick up a phone and speak with someone at these large Fintech companies. Even if they do offer customer service, these companies are run by algorithms and it would be impossible for a customer service representative to offer you any actual help.

So why is online lending so popular?

By allowing computers to do the jobs that had traditionally been done by underwriters, combined with having those very same computers also withdraw funds directly from your checking account, online lenders have eliminated a lot of the expense involved with financing. They have also greatly increased the APR's for financing and have investors with very deep pockets. The combination of all these factors have allowed them to spend more money on marketing their products than traditional financing institutions have been able to do in the past. The result is that while many small business owners aren't familiar with banking alternatives, they are being bombarded with advertising from online lenders and are jumping at the opportunity to receive funding without first checking to see if they have any other options available.

So what are the alternatives to online lending?

There are alternatives to online lending that don't require you to work with a bank. Two of those alternatives are accounts receivable factoring and purchase order financing. While not every business will qualify for these services, businesses that sell to or provide a service for other businesses (B2B) do qualify. With accounts receivable factoring, businesses are able to turn their receivables into working capital without taking on any debt. Purchase order financing is a way of getting a short-term loan based on a purchase order so that you can pay your suppliers in order to fulfill your purchase orders.

Accounts Receivable Factoring

Accounts receivable factoring is a financial tool that allows you to sell your receivables to a factoring company at a discount. As a result, you are not taking on any debt because your factoring company is purchasing your receivables. Furthermore, you aren't just getting funded sooner on your receivables, but you are also outsourcing all of your collection work to your factoring company and, in the case of non-recourse factoring, getting insurance on your receivables. You also aren't taking on debt so there is no lengthy approval process. Instead your factoring company is checking out the credit worthiness of your customers, eliminating the need for you to subscribe to expensive credit agencies, and typically credit decisions can be made within half an hour of submitting a customer for credit approval. The discount for factoring your receivables can vary based on the terms of your receivables, but is very similar to a credit card processing fee.

There are many factoring companies out there, all of who offer slightly different programs and rates. Another big difference between factoring companies is with their ownership. Some factoring companies are family-owned, small businesses just like yours, others are owned and run by major national banks, credit bureaus, gas station chains, or may be subsidiaries of overseas factoring companies. If having a personal relationship with your factoring company is important to you, and it should be, then it is important that you look at who the ownership of the factoring company is.

While there are online lenders that offer "Fintech Factoring", in reality all they are doing is giving you a loan based on your outstanding receivables being used as collateral. They also do not provide you with credit checking or collections services, and it is with recourse, meaning that your receivables are not insured. Plus, they still charge you the same exorbitant APR's as other online lenders.

Purchase Order Financing

Purchase order financing is a way of securing the funds necessary to pay your suppliers when you receive a larger than normal purchase order. Purchase order financing can either be used as a stand-alone product or can be combined with factoring to help fund your business. Either way, since purchase order financing is a short-term loan, the fees involved are higher than factoring, but still much lower than fees charged by online lenders.

As a stand-alone product, purchase order financing has a rigid set of rules that can not be broken if you wish to receive funding. Common rules are that it is not available for a work-in-progress, you must have an overseas supplier, and the product must be shipped directly from your supplier in the foreign country to your customer in the US, that is it can't pass through your hands or the hands of any other third party. Typically, the way it works is that your supplier will be issued a letter of credit that they can then take to their bank and draw upon. Because it requires a bank to issue a letter of credit, it tends to be a lengthier process and could require several weeks to secure.

However, if you combine purchase order financing with accounts receivable factoring, it is a very different story since you have built a relationship with your factoring company through the factoring of your receivables. Because your factoring company will ultimately be repaid when you factor the resulting invoice, there is no need to obtain a letter of credit from a bank. Purchase order financing rules become much more relaxed and funding is often available the same day you ask for it. Purchase order financing is more expensive than accounts receivable factoring, so if you can fund a purchase order through the factoring of other receivables then that is a better way to do it. However, for very large orders, if factoring can not provide you with enough funding, then purchase order financing can be a very useful tool in order to take on large orders and grow your business.

How do I find the right form of financing my business?

Only you know what is right for your business, but just like any other important decision, it is important that you research your financing options before signing up with a company. While it may seem easy to click on an ad on a web page and get instant approval to a loan or line of credit, there is usually a reason why it is so easy and why they have enough money to bombard you with advertisements all the time. When it comes to financing your business, make sure you research all the options out there. After all, you want a financing company that will be working for you, otherwise you will wind up working for your financing company.

About DSA Factors

DSA Factors is a small, family-owned and family-run business. We have been providing accounts receivable factoring and purchase order financing for over 30 years to wide range of industries. We offer very competitive rates and the personalized service you would expect from a family-owned business. Give us a call at 773-248-9000 and one of our principals will be more than happy to speak with you about how we can help you grow your business.

May 2, 2018

Categories:

• Factoring
• Financing
• Fintech
• Insurance
• Technology
• Top Posts

Accounts Receivable Factoring vs Supply Chain Finance

With 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. 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.

April 20, 2018

Categories:

• America
• Factoring
• Financing
• Fintech
• Insurance
• Retail
• Technology

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.

September 29, 2017

Categories:

• America
• Financing
• Fintech
• Technology

Bloomberg Warns that Fintech May Lead to Our Next Financial Crisis

It's been almost ten years since our last financial crisis was caused by banks that were too big to fail. However, Bloomberg is warning that the next collapse will be tied to Silicon Valley rather than Wall Street. Over the last ten years the government has tightened regulations on Wall Street to ensure that we won't find ourselves in the same situation that occurred in 2008. However, there has also been a revolution in the world finance by startup companies incorporating new technologies.

While most people are aware of the new regulations that have been placed on the too-big-to-fail banks. It is now nearly impossible to get a small business loan, and even refinancing a mortgage on your home requires massive amounts of documentation that can take you weeks or months to put together. However, not many people are aware of just how large and diverse Fintech companies have become.

While Fintech has entered the world of factoring, its reach extends well beyond factoring into all other arenas of finance. There are Fintech companies that give out business loans, do crowd funding, give computer generated advice, and there are even virtual currencies such as Bitcoin.

The main issue with these new Fintech companies is that unlike the institutions that existed prior to the crash, these new businesses have no oversight. Not only has the government avoided regulating the industry, but the very idea of Fintech implies that there aren't humans making the credit decisions, instead decisions are made based on complex algorithms that are hosted on internet servers. Without any human input going into financial decisions, it is quite possible that businesses may learn how to manipulate the systems and receive funding that they shouldn't qualify for.

Of course the biggest threat to the industry is hackers, who have been breaking into systems and stealing sensitive information at an incredible rate recently. In fact, it was just announced today that Whole Foods' restaurants had been hacked and credit card information had been stolen. The world of Fintech has already been attacked. In 2014 a security breach put Mt. Gox, the world's largest Bitcoin exchange at the time, out of business and cost Bitcoin owners $3.5 billion in today's dollars. To make matters worse, the security breach apparently happened in 2011 and went unnoticed for three years.

While there is no clear cut solution to the problems presented by Fintech, the fact is, Fintech has had an incredible impact on the world of finance over the last ten years. Furthermore, while many Fintech companies have come and gone, overall as an industry, it doesn't look like Fintech is going to slow down any time soon.

UPDATE: Breaking News

Former Securities Exchange Commission Chairman Arthur Levitt spoke out yesterday at the Economist's Finance Disrupted conference in New York. At the conference he stated, "Fintechs tend to march to their own rules. It's a new industry with lots of failures and lots of spectacular successes. But regulation is often kind of background music, and the prevalence of scandal and mismanagement and aggressiveness is part of the backwash of innovation. Hardly a day goes by where there isn't a recording of some scandal or another"

At the same conference, Scott Sanborn, CEO of Lending Club said "We do need to take responsibility in [Silicon Valley] where there is a mentality of growth at all costs, and if you don't have the right checks in place, the right kind of board in place, and plenty of people with audit and risk experience that are providing the right kind of governance, you can have problems."

June 9, 2017

Categories:

• Amazon
• Financing
• Fintech
• Small Business

Is Amazon Lending Right for My Business?

You may have noticed Amazon Lending in the news recently. According to Bloomberg, Amazon has given out more than three billion dollars in loans since the inception of the Amazon Lending program in 2011, with one billion of those dollars being lent in the last twelve months. They have reportedly given loans to 20,000 businesses throughout the US, UK, and Japan in amounts ranging from $1000 to $750,000. Their loans supposedly carry a very modest APR between 6% and 14%, which would make them cheaper than most other Fintech lenders out there. But just like with PayPal Working Capital, there is a catch. While the APR may be low, Amazon makes up for this by taking a large sales commission. As a result, Amazon Lending may work for very small businesses, but if you're ready to take the next step in growing your business, accounts receivable factoring may be the better option.

Who qualifies for Amazon Lending?

You can not request a loan from Amazon Lending, rather Amazon makes loan offers to sellers on Amazon Marketplace, and those sellers can either accept or ignore the offer. It is unknown what criteria is used to determine when a loan offer is made, how much the loan offer is for, what the term of the loan will be, or what the APR on the loan will be. However, Amazon bases the loan on the seller's sales history on Amazon Marketplace, so you can probably assume that if you don't have large and steady sales figures, you probably won't be offered a loan. Furthermore, if you sell directly to Amazon, then you do not qualify for these loans.

What is the difference between Amazon and Amazon Marketplace?

While shoppers who use Amazon will see all the products available from both Amazon and Amazon Marketplace every time they search for something they want, the platforms are very different from a wholesale point of view. If you sell direct to Amazon, it is like selling to any other retailer. They give you a purchase order, you ship the merchandise and invoice them, and when the invoice is due Amazon pays you. However with Amazon Marketplace, it is kind of like selling your product on eBay. Amazon will list your product on their site, and will take a commission for each sale you make. If you would like your product to qualify for Amazon Prime, then you need to ship your product to Amazon warehouses, pay storage fees, and when the product sells, you are charged a shipping fee as well. Basically you are giving Amazon merchandise on consignment, and you may be paying them additional fees as well.

How much are Amazon Marketplace commissions and fees?

Commissions are based on what type of product you are selling. Commissions can be as low as 6% if you are selling computers, and as high as 45% if you are selling an accessory for an Amazon device, for example a Kindle cover. In general, commissions are typically around 15%. In addition to these commissions, Amazon may charge you either a monthly fee or a transaction fee on each sale. If you let Amazon warehouse your product so it qualifies for Prime, you will be paying storage fees and shipping fees as well. If you ship yourself, then you are responsible for paying for shipping. Additionally, Amazon will also charge you a closing fee for each item sold.

Should I accept a loan offer from Amazon Lending?

Only you can decide whether or not a loan is correct for you. If you sell your merchandise on Amazon Marketplace and wish to continue doing so for the term of the loan they offer you, then you are already paying their commissions and the loan may carry an attractive APR. The loan gets repaid automatically as you sell more merchandise through the Amazon Marketplace, so as long as sales volume remains steady you won't need to worry about paying off the loan. However, if you would like to start selling directly to Amazon or any other retailers, then this loan probably isn't right for you.

Are there other options for financing my small business?

Accounts receivable factoring is another form of alternative lending that works with small businesses. Unlike Amazon Lending, accounts receivable factoring works with companies who sell directly to Amazon or other retailers, both online and brick and mortar. With accounts receivable factoring you get funded for your receivables the same day you invoice your customers. Plus, since your factoring company is purchasing your receivables, you aren't taking on any new debt.

What's my next step?

Amazon Marketplace may be a great way to introduce your product to the market, and Amazon Lending might allow you to purchase more product to increase your sales volume. However, if you really want to grow your business and want to take the next step, you will have to start selling direct to Amazon and other retailers. If you are ready to take that next step, then give DSA Factors a call today at 773-248-9000 and find out how we can help you fund your growing business.

May 9, 2017

Categories:

• Factoring
• Financing
• Fintech
• Insurance
• Technology

How Accounts Receivable Factoring Fits Into the Fintech World

It may seem strange that accounts receivable factoring, a form of financing that dates back further than the Silk Road, could fit into the modern world of Fintech, an industry that is less than a decade old. However, like any business that has survived since antiquity, accounts receivable factoring has constantly evolved with changing times and in many ways pioneered the path for the new Fintech industry. While you would be hard pressed to find an a true factoring company that only exists in the online realm, you would be just as hard pressed to find a traditional factoring company that doesn't offer a large variety of online tools.

In the same way that online banking and ATM machines have made it so many Millennials never had to write a check or step inside a bank branch location, accounts receivable factoring can now provide your business with the financing that you need without needing to walk away from your computer. In fact, here at DSA Factors we've been offering online tools to our clients for over a decade now. So in many ways, we were a Fintech company before Fintech even existed. But unlike Fintech, we haven't stripped down our factoring program to only offer the services and benefits that a web page can provide. Plus we are still happy to work with clients who prefer doing things the old fashioned way, via phone, mail, and fax.

Online Credit Approvals

For years now, offering online approvals has been a standard service that accounts receivable factoring companies have offered. What this means is that when you get a purchase order, you just login to your factoring company's portal and request an approval. Often times the computer is able to make an actual credit decision on the spot and offer you an instant online approval. Of course, as in any business, there is a limit to what can be completely automated, so in the case where the computer can't approve an order, it gets sent to your factoring company's office for review. When this happens at DSA Factors, we do our best to get back to you with a credit decision within 30 minutes, and will e-mail the credit decision to you.

Real-time Aging Statements

Most factoring companies will provide their clients with aging statements each week so that they know where their accounts stand. At DSA Factors we take this one step farther. At any time our clients are able to login to our portal and view a real-time aging statement.

View Transmittal Sheets

Just like how banks and credit card companies allow you to view statements online, at DSA Factors we give our clients to view transmittal sheets from our online portal. And unlike banks or credit cards that may limit you to only one or two years of statements, here at DSA Factors you can go back as far as you want to that very first payment we sent you when you first started factoring.

Access to a Variety of Online Reports

In addition to aging statements and transmittal sheets, at DSA Factors we offer our clients a variety on online reporting options. This includes being able to pull account statements for any customer. Viewing all open or used approvals. Pulling sales reports that show you how much volume each of your customers gave you over a specified period of time. Plus, if there is a report that you would like to see on the portal, all you need to do is give us a call and we will do our best to create it for you. As a family owned business, we pride ourselves on the quality service we provide our clients with, and that extends to the online services we provide as well.

Allow Customers to Pay Online

At DSA Factors we don't just extend online benefits to our clients, but also to their customers. At any time your customers may login into our portal with a login and password we provide at the bottom of every account statement we send them so that they can view a real-time statement and make payments online. After all, don't your customers deserve access to the same online conveniences as you.

Why Choose Accounts Receivable Factoring Over Fintech?

If the online services that we offer at DSA Factors doesn't seem like enough, keep in mind that we offer one huge benefit that no Fintech company is able to offer. At any time you are able to pick up a phone, give us a call, and one of our principals will be able to talk to you and help you come up with a solution that works for you. That isn't something that you will get from a large Fintech company, that is something that you can only get from a family owned accounts receivable factoring company. And the value of being able to speak with someone who can actually help you and cares about your business, is much greater than the inconvenience of being limited to only the functions that a web page is able to handle.

If you want to improve your cash flow, outsource you accounts receivable, get credit insurance, and have the convenience of being able to work online, but still want the personalized service that you deserve, give us a call today at 773-248-9000. Or if you want to go "Fintech", feel free to send us an e-mail at info@dsafactors.com or chat with us right now on this web page.

February 8, 2017

Categories:

• Factoring
• Financing
• Fintech
• PO Financing
• Technology

The Original Fintech Factoring Company

Everyone knows that accounts receivable factoring has been around for a while, in fact, if it wasn't for factoring, in fourteen hundred and ninety two, Columbus wouldn't have been able to sail the ocean blue. However, in recent years, in response to rapidly developing technology and an unwillingness by banks to lend money, a large number of fintech companies have emerged offering entrepreneurs a variety of ways to raise money for their businesses. These fintech companies offer everything from crowdfunding to factoring. However, it is important that you compare the services that these new fintech companies provide as well as the fees they charge to more established funding sources.

Crowdfunding vs Venture Capital

Crowdfunding is indeed an excellent alternative to venture capital. Companies like Kickstarter and Indiegogo allow start-ups to raise money for their business through pre-sales, rather than receiving loans or giving up a percentage of ownership to venture capitalists. So not only does crowdfunding allow you to maintain ownership of your business without taking on new debt, but it also provides young companies with advertising and the chance to build up a large and enthusiastic customer base. Of course crowdfunding isn't free, you will have to pay a commission on any funding you receive in addition to payment processing fees, but then again venture capital isn't free either. The other big difference between crowdfunding and venture capital is the scale. Typically crowdfunding works on a much smaller scale, giving new start-ups the ability to raise thousands, tens of thousands, and occasionally hundreds of thousands dollars. Venture capital on the other hand isn't always all that interested in such small investments, but could be a good place to start if you are looking for a million dollar deal.

While crowdfunding is a great way of getting your product seen and sold directly to consumers, it does not typically help you with funding large orders from retailers. For this, an excellent alternative to venture capital is purchase order financing, which is a service provided by many traditional accounts receivable factoring companies. With purchase order financing you can obtain a short term loan based on a purchase order, and then you pay back that loan by ultimately selling the invoice associated with that order to your factoring company.

Fintech Factoring vs Traditional Accounts Receivable Factoring

Factoring has always been an excellent alternative to getting a bank loan. However, fintech factoring companies haven't really innovated the factoring industry, but rather offer short-term, high-interest small business loans that improve your cash flow, but don't provide the other services that traditional factoring companies provide you with. Like traditional factoring, the fintech factoring companies are not too concerned with your business's or your personal credit, meaning that companies that do not qualify for a traditional bank loan will qualify for a loan with them. However, coming from their IT backgrounds, the principals of these firms don't have any real experience in the factoring industry, nor do they understand all of the benefits that traditional factoring offers small businesses.

In an interview with ABF Journal, George Bessenyei, director of 48 Factoring, stated "we are not coming from the financial space, we are coming from a technology space. I see us as a technology company that provides finance." In another interview with ABF Journal, Eyal Lifshitz, CEO of BlueVine said "I was looking for a way to disrupt the lending industry. I started learning about factoring. I wanted to modernize it and make it a streamlined process where the borrowers can click a button and get money." While it is true that these new fintech companies have streamlined the process of getting funded so it can be done entirely online, they also stripped-down factoring to its bare bones. Key aspects of factoring such as not taking on any new debt, outsourcing your credit checking and collections, insuring your receivables, and an unlimited potential for funding have been eliminated by the fintech factoring companies.

While fintech factoring may offer a faster, more streamlined approach to getting funded, and its rates mirror traditional accounts receivable factoring rates, they actually will cost you quite a bit more both timewise and financially than traditional factoring. Because fintech companies don't handle your credit checking, you are still responsible for assessing the credit worthiness of your customers and will need to subscribe to expensive credit agencies in order to do so. You are also responsible for handling all the collection work, which as your company grows could eat up much of your time or require you to hire additional employees. Finally, without credit insurance, when a customer is unable to pay an invoice, you are out the money. While you could be very conservative in who you offer payment terms to, doing so will mean that you will be turning down a lot of business that a traditional factoring would most likely be willing to improve. Alternatively, for large orders, you can purchase credit insurance for an additional charge from insurance companies.

Technological Innovations Offered by Accounts Receivable Factoring Companies

It is true that accounts receivable factoring may be old, but that doesn't mean that traditional factoring companies don't innovate. The fact is, traditional factoring companies have been using innovative software and providing online tools to their clients for many years now. Nearly every traditional accounts receivable factoring company allows their customers to submit accounts for credit approval online, and oftentimes can provide their clients with instant approvals directly on the web page. Invoices can also be sent via e-mail to ensure speedy processing. Plus, your factoring company has the ability to pay you via ACH or wire so that funds are electronically deposited into your bank account as opposed to having to wait for a check to arrive in the mail and then take it to a bank. While the process might not be as streamlined as fintech factoring, accounts receivable factoring companies always pride themselves on speedy turnaround and funding you within 24 hours, if not the very same day that you submit your invoices to them.

Another common misconception that fintech factoring companies have about traditional factoring is that accounts receivable factoring companies are all owned by banks and only care about large accounts doing millions a year in sales. While it is true that many factoring companies are owned by banks and prefer not to deal with smaller businesses, this is not true of all factoring companies.

DSA Factors has always been family owned and operated, and we provide factoring to all businesses regardless of how much volume they do. At DSA Factors we have always been innovating ever since we started factoring in 1986 and programmed our very own factoring software using Basic on DOS 3.3 computers. While we have long ago moved on from our original software, we still continue to develop all of our own software and are continuously improving it in order to give our clients more options in how we finance their businesses. Today we offer online instant approvals to our clients along with a number of online reports including real-time aging statements as well as give them the ability to view previously paid transmittal sheets for as long as they have been factoring with us. Additionally we provide your customers with a login where they can view an account statement and make payments online. We even welcome ideas from our clients on how to improve our online portal so that they can get the most out of our factoring services. So if you are looking for financing and want a factoring company that combines technology with knowledge, experience, and service, look no further than DSA Factors. Give us a call today at 773-248-9000 and one of our principals will be more than happy to speak with you.

December 30, 2016

Categories:

• Factoring
• Financing
• Fintech
• Insurance
• PO Financing
• Small Business
• Technology
• Top Posts

Factoring vs Fintech: Finance in the High Tech World

For most small business owners, obtaining a line of credit from a bank has never been easy. In recent years a number of technology companies have discovered this problem and it has led to the emergence of fintech, a form of online lending. However, what many small business owners don't realize is that there is another alternative to the banks, which is factoring. Factoring companies however offer a whole lot more than the fintech companies, but also have much more experience and knowledge, better customer service, and typically cost less.

Industry Knowledge

Fintech companies provide their customers, who don't qualify for a small business loan from a bank, with short-term, high-interest loans using their receivables as collateral. Because they are using receivables as collateral, companies such as BlueVine claim that they provide accounts receivable factoring, but really they are just providing their customers with a loan. Other companies like Fundbox claim they provide invoice financing, which they differentiate from factoring. While it is true that they do not provide factoring, what they don't realize is that invoice financing and accounts receivable financing mean the same as factoring. This demonstrates a very big difference between fintech and factoring. These fintech companies are really young IT start-ups with little or no experience in the industries that they serve; in fact, they may not even know basic industry terms. Factoring on the other hand has been around for hundreds of years, even Christopher Columbus used factoring. While most factoring companies haven't been around quite that long, they all have quite a bit of experience and a background in the industries that they serve. For example, DSA Factors started off as the consumer finance arm of a retail furniture store under the same ownership. Eventually they decided to start offering factoring services to furniture and bedding wholesalers who they bought from. As the factoring business grew they started expanding out to other industries such as giftware, housewares, apparel, and trucking. Now, having factored for over 30 years, they are still helping small and medium sized businesses grow.

Improved Cash Flow - Debt vs No Debt

While the goal of both fintech and factoring is to help you improve your cash flow, perhaps the biggest difference between fintech and factoring is how they accomplish this. A fintech company provides you with a loan, meaning you are taking on debt. Furthermore, the loan has a very short term and if you offer extended terms, such as net 90 days, to your customers, it is quite possible that the loan will become due before you receive payment on the invoice that was used as collateral. With factoring, the factoring company is purchasing your accounts receivable, or invoices. The funds you receive from a factoring company are yours to keep and spend however you like. Even if one of your customers pays late, you don't need to worry about paying back the funds you received.

Accounts Receivable Outsourcing

Of course services provided are another really big difference between fintech and factoring. Fintech companies seem to pride themselves on how they will never contact your customers; they seem to think that you will appreciate this. However, all that this means is that if your customers don't pay them, they will come after you. With fintech you still need to stay on top of your accounts receivable and send out statements and make collection calls. For a small business this means that the owner typically needs to spend a lot of time just trying to get paid by their customers. For medium sized businesses you will probably need to hire another employee just to manage your accounts receivable, meaning additional payroll. With factoring you are outsourcing your accounts receivable. Factoring companies have already invested heavily in the software necessary to manage A/R, and are able to do so because they manage A/R for many clients. They have professional and courteous collectors who are able to make the phone calls for you. Plus, because your customers may purchase from several other vendors who factor their receivables, a factoring company has a lot more leverage in collecting from a customer who may not be willing to pay. The fintech companies try to scare you by saying that factoring companies can ruin your relationship with your customers, but this couldn't be further from the truth. Factoring companies are not collection agencies, they understand the importance of the relationship you have with your customers, after all, they have a similar relationship with you. As a result, your factoring company provides your customers with gentle reminders that payment is due, and always treats your customers with the respect they deserve.

Credit Insurance

Another big difference between fintech and factoring is the insurance they provide. With Fintech you receive no insurance on the invoices you put up as collateral, if the invoices don't get paid, you still have to pay back the fintech company. However, many factoring companies, such as DSA Factors, provide non-recourse factoring, meaning that you are insured in the situation where one of your customers is unable to pay due to financial problems. Furthermore, since your factoring company is insuring your receivables, they also handle all of your credit checking for you, meaning that you don't need to subscribe to expensive services such as Dun & Bradstreet. While it is possible to purchase credit insurance separately, it of course comes with additional fees, and typically only covers large orders for very creditworthy companies such as Amazon or Walmart. If your customers are mom and pop stores, or your invoices are smaller than five or six figures, credit insurance is not something that is readily available to you.

Purchase Order Financing

Of course, for many small companies simply getting funded for your invoices isn't enough. For a company that has just received their first six figure purchase order, it may be very difficult to put that order together. To make matters worse, if you are unable to accept such a large order, it is unlikely that the company placing the order will come back to you in the future. If you manufacture in China you typically need to put 30% down to start production and then a month later when production is complete, pay the remaining 70% to get the merchandise put onto the boat. It will be another month before the container arrives in the US and you are able to ship and invoice your customers, and a fintech company will not provide you with a loan until you do so. For service companies you may need to hire additional labor and will need to meet payroll long before you complete the job and invoice your customer. If use fintech for your financing they won't lend you the capital in advance, and you won't be allowed to take out a loan with a bank. However, many factoring companies, such as DSA Factors, will provide their clients with purchase order financing, which is a short term loan based on the PO so that you can fulfill a large order.

Customer Service

Finally there is one more major difference between fintech and factoring companies, and that is customer service. Fintech companies are all about technology; they integrate with business software such as QuickBooks, and believe that customer service is about giving their customers fancy online tools. Of course this means that you too need to use QuickBooks or whatever other software they may integrate with. Factoring companies on the other hand realize that a big part of doing business is developing a relationship with the people they work with. Perhaps factoring companies don't offer all the fancy technology and software integrations as the fintech companies do, but they aren't dinosaurs. Nearly every factoring company has an online portal where their clients can login, request approvals, and view a variety of reports. While there are some large bank-owned factoring companies, there are also plenty of family-owned factoring companies such as DSA Factors. At DSA Factors you can always call and speak with a principal, no need to deal with account managers or low-level employees who can only answer simple questions. As a result, factoring companies are able to work with you creatively and aren't restricted to just the 1's and 0's of the digital fintech world.

Choose Your Financing Carefully

When it comes to financing your small business it is important that you look at the big picture. While fintech may be new and exciting, you get a whole lot more with factoring. Plus, with factoring you most likely will save money as well!

If you would like to give factoring a try, call DSA Factors at 773-248-9000 and either Ben, Max, or Howard will be available and able to help you. There is no obligation or long-term commitment, and you can start receiving funds in as little as 24 hours. Start growing your business today with a time-tested and proven method that works, accounts receivable factoring.

September 1, 2016

Categories:

• Factoring
• Financing
• Fintech
• Insurance
• PO Financing
• Technology
• Top Posts

Traditional Factoring vs Fintech

There has been a lot of talk in the news about fintech (financial technology) lately. Certainly there is a lot to be said about alternative approaches to financing over more traditional methods offered by the banks. However, accounts receivable factoring has always been an alternative financing method over what the banks offer, and has a long track record of success. In fact, many of the fintech companies even offer factoring programs, but they tend to be bare bones versions of factoring that only offer some of the benefits gained by factoring, and oftentimes even charge higher rates than traditional factoring companies.

The factoring industry has been around for a long time. It was well established in Europe when the original colonists brought it over to America. In fact, the king and queen of Spain offered a form of factoring to Christopher Columbus when he wanted to set sail for the "New World". While this may seem antiquated in our modern technology driven world, the fact is that most factoring companies do take advantage of modern technologies, offering most of the benefits of fintech, but with much more experience, a proven track record of helping to grow small to medium sized businesses, and much lower rates.

To see the difference, the chart below compares traditional factoring with DSA Factors to similar programs with PayPal Working Capital, Bluevine, and Fundbox, three of the more popular fintech companies offering similar programs to invoice factoring.

	DSA Factors	PayPal Working Capital	BlueVine	Fundbox
Take on New Debt	No, the funds DSA provides you with are yours to keep.	Yes, PayPal is offering you a loan, so you are taking on new debt.	Maybe, if your customers don't pay BlueVine, they will require you to pay them back after 90 days.	Yes, Fundbox is offering you a loan, so you are taking on new debt.
Credit Limit	No, with DSA Factors we will fund you for all of your receivables.	Yes, the lesser of 18% of your annual sales on PayPal or $97,000.	Yes, $20,000 to $500,000 based on your company's credit.	Yes, $25,000.
Based on Your Credit	No, since DSA is giving your customers a line of credit, credit decisions are made based on your customer's good credit.	No, the loan amount is based on your annual sales volume with PayPal.	Yes, BlueVine will assign you a credit limit based on your credit worthiness.	Yes, Fundbox determines your credit limit based on your credit worthiness.
Charges You Interest	No, DSA offers a flat rate factoring fee.	Yes, the interest is charged to you up front when you get a loan, regardless of how long it takes to pay the loan off.	No, BlueVine also offers a flat rate program, but at 10-15% their rates are at least triple or quadruple the rate that DSA offers.	Yes, based on the size of the loan, Fundbox may charge you anywhere from 5-12% over the course of a 84 day loan.
Term Limit	No, DSA Factors has no problem working with extended terms.	Yes, PayPal requires you to pay back 10% of the loan every 90 days, with the full amount due in 540 days.	Yes, if payment has not been received after 90 days, you are required to pay back BlueVine.	Yes, you must pay off the loan in 12 weekly installments.
Collections Outsourcing	Yes, DSA Factors handles all of your collection work.	No, your customers must make payments through PayPal, but PayPal does not help with collections.	No, your customers are required to make payments to a BlueVine drop box or bank account, however BlueVine does not help you collect.	No, Fundbox does not handle collections for you, it is strictly a loan that you need to pay back.
Insure Your Receivables	Yes, with DSA's non-recourse factoring your invoices are insured against non-payment.	No, PayPal only does payment processing for you.	No, if an invoice has not been paid after 90 days of being funded for it, you are required to pay back BlueVine.	No, Fundbox is strictly a loan that must be paid back in 12 weekly installments.
Choose Which Invoices You Factor	Yes, DSA Factors does not require you to factor all of your receivables.	No, a percentage of all payments made through PayPal will be applied towards your loan.	Yes, you can choose which invoices you want to get funded on.	Yes, however there is a $100 minimum in order to get funded for an invoice.
Minimum Volume Requirement	No, at DSA Factors you are not required to factor a certain amount, and there are no annual fees.	Yes, PayPal requires you to pay back 10% of the loan every 90 days if you aren't doing enough volume.	No, BlueVine does not require you to fund a minimum amount each year.	No, Fundbox does not require you to draw a minimum amount each year, however, they will not fund you if an invoice is worth less than $100.
Long Term Commitment	No, with DSA Factors you can stop factoring at any time, but since many of our clients have been with us for over 20 years, we don't think that you will want to stop.	No, once your loan with PayPal is paid off you can start looking for alternative sources of financing.	No, BlueVine allows you to stop drawing on your line of credit at any time, but you will need to pay them back for any invoices that they have not received payment on.	No, once you have paid off your loan with Fundbox, you are free to pursue other financing options.
Charge Payment Processing Fees	No, DSA will never charge you for processing a payment.	Yes, you are required to accept payments through PayPal and pay their payment processing fees.	No, although BlueVine will funnel all payments into their account without your customers knowing that BlueVine is receiving the payment.	N/A, Fundbox does not process payments.
Available Technology	DSA offers its clients an online portal where they can get automatic approvals, view agers, remittance reports, and other reports in real time. Your customers may also go online to make payments.	With PayPal you get a loan online and customers make payments online.	BlueVine requires the use of Quickbooks or similar software to get funded.	Fundbox requires the use of Quickbooks or similar software to get funded.
Good Old Fashioned Service	As a family owned and operated business, you can call DSA at any time and speak with a principal who can come up with creative solutions to help grow your business.	PayPal doesn't even list a phone number on their web site.	BlueVine may have a phone number, but it is doubtful that you will be able to speak to anyone who can actually help you.	Fundbox may have a phone number, but it is doubtful that you will be able to speak to anyone who can actually help you.
	DSA Factors	PayPal Working Capital	BlueVine	Fundbox

As you can see, traditional accounts receivable factoring with DSA Factors offers all of the benefits that the fintech companies offer, along with many more. You still get an online portal where you can efficiently do business and your customers can make online payments, but you also can pick up a phone and speak with one of our principals at any time. As a result, we can come up with creative solutions for your business that might not fit into a fintech company's software, such as purchase order financing. So if you are looking for ways to finance your business, go with a time-tested method that works, accounts receivable factoring. Give DSA Factors a call today at 773-248-9000 and we can be funding you in as little as 24 hours.