Wednesday, December 1, 2010

Fed Data Dump: lots of details on what the Fed bought/supported

Here is the link to the data. Let me know what you think, and how it has affected small and medium sized businesses.

Once I've had time to digest the info, I will post my thoughts on the subject matter implications.

Thursday, September 23, 2010

Challenges, opportunities ahead for carriers

Active truck capacity is tight at about 94%. Couple that with an increase in the regulatory environment and driver shortages expected over the next few years and you have set the stage for an interesting time in the trucking business.

Credit: Sean Kilcarr -

Wednesday, September 15, 2010

Possible Tax Breaks for Small Business

New article from the Boston Globe on the possible new legislation designed to help small business. Please leave comments on your thoughts. Thanks, Sean.


Tuesday, September 14, 2010

Credit Insurance

Insurance is something each of us will purchase at various points in our lives. Whether it be car insurance, health insurance, life insurance, homeowners insurance, or any other of the many types of insurance available it serves one main purpose: to mitigate the risk of loss. Credit insurance is no different. This type of insurance (aka: trade credit or receivables insurance) is designed to protect a business from an event where a customer who was offered net credit terms (i.e. Net 30 days) on an invoice cannot meet its obligation to pay.

Typically, this type of insurance will pay out an agreed upon percentage of the face value of the invoice in question, but as with all other kinds of coverage there are innumerable ways a policy may be structured and priced. Often the triggering event for a claim to be filed and honored is an insolvency, bankruptcy, or documented inability to pay on behalf of the customer.

Credit Limits/Decisions: When you apply for credit insurance you can submit only one customer (usually if they are a high volume exposure, read: multi-million), or, as is more often the case, your entire customer base, or perhaps a subset of your customers. Credit insurers would rather have multiple customers included as it minimizes their risks to some degree. Once you have submitted your list of customers to include in the policy along with the requested credit limit the agent will review the list, check their proprietary database of payment and financial information on your customers, and consult with their underwriters to determine how much credit they are willing to extend to each. You will then receive your quote with the credit decision list showing you what amounts of coverage per customer the insurer is willing to accept. You should expect the proposal and credit review process to take at least two weeks.

Pricing: This can vary, but is typically based upon a fraction of a percent of anticipated sales volumes. Premiums for the first year are typically due at the time of accepting the proposed policy and are then due on a monthly basis after that. Sometimes, you can find a company willing to accept less than a year's premium upfront, but expect to pay at least $10,000 for a policy. So, if your company has annual revenues of under $1 million credit insurance might be too expensive and you will want to conduct (as you should in any situation) a thorough review of any customers requesting net credit terms.

Providers: There are three main credit insurance companies in the world and they account for over 80% of all policies sold. They are Euler Hermes, Atradius, and Coface. As with any insurance you should shop around and find out which policy will provide you with the best combination of price, coverage, and service. Each of the above companies has its own database of credit information and one may approve one of your customer while another may not. Do not be convinced that the lowest priced policy will necessarily be the best for you as how responsive and attentive your agent is can be the difference between a miserable claims experience and a very smooth and helpful one. Also, it should be noted that as with every single insurance company on the planet (regardless of what they are insuring) if you have an imminent loss or a "pre-existing condition" there is not a company out there that can help. This is a risk management tool to help guide credit decisions and support you in the event of an unexpected loss.

There are also national, quasi-govermental entities that can provide trade coverage and guarantees, but these are usually focused exclusively on exports. In the United States there is the Export-Import Bank, and in Canada there is Export Development Canada.

How credit insurance relates to factoring: If your company factors or is considering factoring its receivables and you sell overseas odds are you will need to buy a credit insurance policy since the factoring company will require insurance. Sometimes they will take out insurance against your customers on their behalf, but note that regardless of how the insurance is structured the factoring company will have to be named as beneficiary/loss payee to ensure that they will be reimbursed for any factored funds that are not repaid by a customer/debtor. Factoring companies love to see credit insurance policies as it further mitigates everyone's risk. Just something to think about if you are looking for a factoring company.

This is a basic introduction to credit insurance. For more information, please contact my recommended sources and kindly let them know that Sean sends his regards.

Christina Montes de Oca
Euler Hermes ACI

Art Warner
ARI Global Insurance

Click here for a free quote/consultation on AR funding and credit insurance.

Monday, July 5, 2010


“With our increasingly interconnected world — where 95 percent of consumers reside outside our borders — global markets can help revive the fortunes of U.S. companies and spur future economic growth.”

-U.S. Department of Commerce, November 2009

Exports are a critical component to the success of the U.S. economy and small to medium-sized businesses help to drive that success. Now may very well be the time for your company to consider expanding its business borders. The number of small business exports has tripled in the past decade, while the value of small business exports has increased 300 percent in the past five years. 20 percent of small to medium-sized enterprise (SME) exporters are companies with a single employee. In fact, 97 percent of all exporters are small to medium-sized companies.
International trade: Will it drive your company’s future growth and success?


You see the opportunities made possible by international trade. Now how can you maximize that potential for your business? There are several important questions to think about:

1. Your product has done well in the U.S. What overseas markets will be able to use it? Are there local competitors? Will your product easily adapt overseas? How can you assess demand for your product in other countries?

2. How will you sell your product overseas? Will you set up a local office, obtain a local agent/distributor or depend on internet sales? Will you need any special licenses to ship overseas? Will you be able to visit your overseas customers in person?

3. How will you ship your product overseas? Have you identified international freight forwarders and freight costing?

4. Does your company have capacity to support additional production? Are you prepared to accommodate changes in labeling that might be required to conform with overseas markets? Have you identified translators who can help you with documents, labeling and even cultural issues that might arise? Do you have employees to help with that or will you hire people on site to be your eyes and ears and provide market intelligence?

5. How will you finance this growth in your business? What are the special financing tools required for international trade, such as letters of credit? Have you identified financing experts who can help you with these issues? How will you collect your invoices from overseas sales and protect yourself from bad debts?


Globalization has made exporting — even for the smallest companies — a reality. It is changing the way companies make money. New markets diversify revenue streams for SMEs, helping to protect their companies. A recent survey of U.S. exporters found that 60 percent of small companies derived 20 percent of their annual earnings from exports. This percentage grows to 44 percent for medium-sized companies. More than three-quarters of the companies surveyed forecast export sales to grow by at least 5 percent each year for the next three years.

Would growth be good for your business? In this case study, Bibby Financial Services helped a client cross borders and expand into international markets in a complex transaction that involved five counterparties:

"Our company won a contract to deliver $4 million of our product to Brazil. This sale mattered because it was larger than all of our sales for the previous year. To begin with, the Brazilian customer issued us a non-transferable letter of credit through their bank, detailing the terms and conditions of the sale. Because the size of the deal was so large, our company needed cash to pay the manufacturer ahead of time. We turned to Bibby Financial Services (BFS). BFS ensured that the Letter of Credit (LC) was in order and that it could be assigned to BFS. They then sent third-party inspectors to the manufacturer to verify the product complied with standards set by the Brazilian customer. BFS paid the manufacturer based on that report. BFS also coordinated with the manufacturer, trucking company and freight forwarder to ensure that the goods would arrive in Brazil on time so they could collect from the LC. The goods were shipped to Brazil by air, and then BFS presented the paperwork to the bank to obtain payment under the LC."


95 percent of the world’s consumers live outside of the United States, so if a U.S. business is only selling domestically, it is reaching just a small share of potential customers. Free trade agreements have opened up markets in Australia, Chile, Singapore, Jordan, Israel, Canada, Mexico and Central America, creating more opportunities for U.S. businesses. Exporting helps small companies grow and become more competitive in all of their markets. Selling into new markets diversifies your revenue stream and can help you take advantage of currency fluctuations. For example, a weak U.S. dollar can reduce manufacturing costs, giving you a pricing advantage for your exported goods.

In the past 30 years, U.S. exports increased from $224 billion to nearly $2 trillion by 2008. Small and medium-sized firms account for the vast majority of growth in new exporters. About one of every five factory jobs — or 20 percent of all jobs in America’s manufacturing sector — depends on exports. Workers in jobs supported by merchandise exports typically receive wages higher than the national average. Small and medium-sized companies account for almost 97 percent of U.S. exporters, but still represent only about 30 percent of the total export value of U.S. goods.

Because nearly two-thirds of small and medium-sized exporters only sell to one foreign market, many of these firms could boost exports by expanding the number of countries they sell to. The quality of your product, competitive pricing and supply of your product are key to its success in international markets — the same as selling in your own backyard.


Getting paid is always the hardest part for any business, and working with customers many thousands of miles away can be intimidating. Understanding the language of international financing and working with an experienced lender can smooth out that bumpy process. Here are some terms that will be helpful for you to know:

Letters of credit (LC) – a very secure way of controlling the international shipment of goods (both import and export) and obtaining payment that requires your customer to obtain the
guarantee of a lender.

Export finance – cash advanced against the value of your outstanding export invoices and an ongoing supply of working capital. Similar to accounts receivable financing or factoring, it provides your business with a source of funding, which grows in line with your export sales. This can be very useful in overseas transactions where customer payments often extend beyond the traditional 30 days, resulting in a cash flow gap.

Export-Import Bank of U.S. – the Ex-Im Bank guarantees the financing that a lender provides to its clients. If the exporter fails, the Ex-Im Bank will step in and pay off the lender under the terms of their guaranty. A financing company is more willing to provide funds to companies seeking exporting opportunities with Ex-Im Bank’s guaranty in place.

Purchase order finance – provides funding against confirmed orders, so that you have the cash in hand to pay for the production and delivery of the goods. The lender advances the funds to your supplier or opens a letter of credit. Once the goods are delivered, you invoice your customer and the lender collects those payments and pays you the balance minus their funds advanced. This is especially useful when your supplier is based overseas and you need to import the goods/arrange for direct delivery to an overseas customer — all with the peace of mind that the goods will be manufactured to your specifications and delivered on time.


The Small Business Administration, — for information related to running a small business, including financing options.

U.S. Department of Commerce, — the primary resource center for new and seasoned exporters to research markets and gain information.

World Trade Center Association,

The Export-Import Bank of the United States, — provides credit insurance, finance guarantees and advice for U.S. exporting companies.

Small Business Exporter’s Association,

International Chamber of Commerce,

The International Factors Group, — the leading worldwide association of factoring companies.

U.S. Council for International Business,

The International Freight Association, — to find accredited companies for handling shipments.

National Federation of Independent Businesses, — offers training seminars, legislative updates and statistics about small businesses.

The U.S. District Export Council, — supports the U.S. Commercial Service by offering advice on private sector export matters.

Local chambers of commerce, industry associations and state commerce departments can also provideinformation on exporting and importing.

Credit: Bibby International Trade Finance

Saturday, June 19, 2010

Trucking Factoring

The trucking industry is highly sensitive to the economics of trade and requires good cash flow to maintain service levels since there are needs to pay for fuel and drivers. If a trucking company's customers are paying slowly or if the company does not have the capacity to make sure employees are paid and fuel tanks are full to keep the company moving, then factoring might prove to be an excellent way to ensure funds are available.

Most factoring companies only work with companies that actually haul goods, but some will consider working with brokerages. There are some factoring companies that specialize in freight brokerage factoring. If you run a company that offers brokerage services, you will want to make sure the factor you are talking with can advance on those invoices.

One of the biggest concerns trucking companies have regarding factoring their invoices is the standard requirement that the original bill of lading be submitted to the factor prior to funds being advanced. The major misconception surrounding this issue is that the factor has to keep the BOL. Typically, the factor just needs to see and scan into their system the original to make sure the document is legitimate and then can forward it along to your customer should they require the original prior to making payment.

The trucking factoring marketplace is highly competitive since there are so many companies out there that offer the services and the trucking industry is very familiar with such services. Advance rates and fee structures vary widely from company to company. If your company delivers loads to both US and Canadian based customers, you will want to make certain that your factoring company is able to work with Canadian based businesses (and ideally has a presence in Canada) otherwise you may find that you are not getting the most out of the service. Typical trucking advance rates are about 85% - 90%, but can be as high as 97% depending upon customer credit and average monthly sales volume. Fees vary depending upon the same criteria. If you are doing $50,000 in monthly sales, you should be getting rates of 1.59% for the first 30 days with at least an 85% advance rate. If you are paying more, maybe you should start shopping around.

Also, there are some companies out there that will factor a single invoice instead of having to factor all your invoices. They usually charge higher fees since there is higher risk involved for them, but this can help out in a pinch if you only need a one-time infusion of cash. Most load boards have loads listed with pre-approved invoices for this type of factoring. One of the best known single invoice factoring companies is FreightCheck.

Factoring agreements typically auto-renew and require a 30 or 60 day notice to terminate, so if you are looking to get into a new relationship check your agreement to find out when you would need to notify your current factor that you plan on ending the relationship. It is possible to leave early, but there are typically penalties for doing so. Most agreements are for 12 months, some are for 6 months, and there are some that are month-to-month. The more you are willing to commit the better deal they can offer you. Make sure you read your factoring agreement thoroughly prior to signing.

Also, ask if they offer fuel cards to help make sure your drivers have a way to stay out on the road without having to wire cash or deposit funding into a separate account. Most factoring companies offer both a credit based and pre-pay fuel cards that offer discounts at the pump along with other perks.

If you have any questions about how factoring your freight bills might help your business, please feel free to contact me.

Tuesday, January 5, 2010

The Uniform Commercial Code or UCC

If you have talked with any funding sources or colleagues who factor, you have probably heard about the UCC...and you may be wondering: What the heck is it?

First published in 1952 after ten years of development, the UCC was designed to harmonize interstate trade. It deals with personal (moveable) versus real (immovable) property and is a guideline for transacting business. The overriding philosophy of the Uniform Commercial Code is to allow people to make the contracts they want, but to fill in any missing provisions where the agreements they make are silent. It also seeks to impose uniformity and streamlining of routine transactions like the processing of checks, notes, and other routine commercial paper.

There are separate sections that deal with different aspects of commercial transactions broken down as follows:

1General ProvisionsDefinitions, rules of interpretation
2SalesSales of goods
2ALeasesLeases of goods
3Negotiable InstrumentsBanknotes and drafts (commercial paper)
4Bank DepositsBanks and banking, check collection process
4AFunds TransfersTransfers of money between banks
5Letters of CreditTransactions involving letters of credit
6Bulk Transfers and Bulk SalesAuctions and liquidations of assets
7Warehouse Receipts, Bills of Lading, and other Documents of TitleStorage and bailment of goods
8Investment SecuritiesSecurities and financial assets
9Secured TransactionsTransaction secured by security interests

The main Article factoring companies use is Article 9: Secured Transactions. Factoring companies will typically file a UCC-1 financing statement securing an interest (filing a lien) in the assets of a business for which it intends to fund. This statement outlines what collateral is being secured. For an equipment leasing company financing, say, a packaging machine, a typical UCC-1 statement would list that piece of equipment as the sole item secured. Most factoring companies will file what is called a "blanket" UCC-1 to secure all assets of the business. It is similar to the statement a bank would file if a business were to obtain a secured line of credit.

Many factoring companies file their UCC-1 at the time a business submits an application which would force that business to have the filing terminated should they choose to work with another financing company.

*When contemplating which factoring company to work with, make sure you consider those that file their UCC-1 only at the time you sign a proposal outlining the terms of the relationship, not when you submit an application.

When a factoring relationship comes to an end and the factor has been paid back all funds advanced, a business will need to make sure they obtain a UCC-3 financing statement release. This is a document stating that the company which held the security in the business no longer has any rights to the underlying assets. This will free a business to find other financing and remove that particular lien.

A given business may have many UCC-1s filed on it and the secured parties (financing companies or individuals) hold different priorities depending upon when they filed. For example, XYZ Corp. has three blanket UCC-1s filed. One by ABC Bank, one by 123 Factors, and one by John Doe (the former owner who is financing the purchase for the new owner). Assuming that ABC Bank filed on January 1st, 123 Factors filed on February 1, and John Doe filed on March 1, ABC Bank would hold the first position, 123 Factors would hold the second position, and John Doe would hold the third position. What this means is that in the event of a bankruptcy on the part of XYZ Corp., the first position holder would be paid back first, the second position holder would be paid back second, etc. so long as the underlying collateral would provide enough value to make repayment an option.

Almost all factoring companies require that they hold a first positon UCC-1. There are a select few out there which do not require a UCC-1 to be filed, but beware that these companies are advancing funds without a security in a business so they may be more inclined to make frequent and aggressive calls to your customers and actively pursue their first line of offense - a personal guarantee. The personal guarantee is used as, at most, a secondary right for financing companies to recoup if they have a UCC-1 filed.

The UCC is in place to help all parties to commercial transactions and actually supports a factoring client's ability to obtain financing. Factoring companies are mainly interested in the accounts receivable as collateral and will usually, without issue, subordinate their security interest in other assets to other lenders.

To view the UCC in its entirety, please visit:

If a business currently has a factor or bank funding them, odds are the financing company has filed a UCC-1 to secure its position. Should a business decide to change financing companies one of two things will need to happen: 1) a subordination of the existing lender's UCC-1 to the new company (sometimes a limited subordination will work, but most frequently a full subordination is required moving the old lender into a lower position and the new lender into first), or, 2) the new lender will need to payoff the old lender.

More on this in the next post...

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