Chris Lehnes Factoring Specialist

203-664-1535 | clehnes@chrislehnes.com

Proposal Issued – $3 Million – Consumer Product Manufacturer

Posted on February 19, 2025 by Chris Lehnes

Proposal Issued – $3 Million – Consumer Product Manufacturer

A backlog of orders can only be filled if additional working capital is promptly provide.

We can fund in a week.

Contact Factoring Specialist, Chris Lehnes to learn if your client is a factoring fit and would like a proposal.

The Benefits of Accounts Receivable Factoring to a Consumer Products Manufacturer

For consumer products manufacturers, maintaining steady cash flow is essential to sustaining operations, managing production costs, and ensuring timely delivery to retailers and distributors. However, long payment cycles and delayed customer payments can create financial bottlenecks that restrict growth. Accounts receivable factoring provides an effective solution by offering immediate access to working capital without the need for traditional loans. This article explores the key benefits of accounts receivable factoring and its strategic advantages for consumer products manufacturers in need of proposal.

1. Improved Cash Flow

One of the primary benefits of accounts receivable factoring is the immediate improvement in cash flow. Instead of waiting 30, 60, or even 90 days for customers to pay invoices, manufacturers can sell their receivables to a factoring company and receive a significant percentage of the invoice value upfront. This ensures that operational expenses such as raw material purchases, payroll, and transportation costs are met without disruption.

2. Reduced Dependence on Traditional Financing

Consumer products manufacturers often require additional capital to scale production or manage seasonal demand fluctuations. Unlike traditional bank loans, which require collateral, strong credit history, and lengthy approval processes, factoring is based on the creditworthiness of customers rather than the manufacturer itself. This makes it an accessible and viable financing alternative, particularly for growing businesses or those with limited borrowing history.

3. Enhanced Credit Risk Management

Factoring companies typically conduct credit assessments on a manufacturer’s customers before purchasing receivables. This due diligence helps manufacturers mitigate credit risk by identifying potentially unreliable customers. Additionally, some factoring arrangements include non-recourse options, meaning the factoring company assumes the risk of non-payment, further protecting the manufacturer from bad debts.

4. Increased Flexibility and Scalability

As a manufacturer’s sales grow, so does its need for working capital. Factoring provides a flexible financing solution that scales with business growth. Unlike traditional loans, which have fixed limits, the amount of funding available through factoring increases as invoice volumes rise. This allows manufacturers to take on larger orders and expand their operations without the constraints of limited credit lines.

5. Streamlined Accounts Receivable Management

Managing outstanding invoices and collections can be time-consuming and resource-intensive. Factoring companies often handle collections on behalf of manufacturers, allowing them to focus on core business activities such as product development, marketing, and customer relationships. By outsourcing accounts receivable management, manufacturers can improve efficiency while reducing administrative burdens.

6. Strengthened Supplier and Vendor Relationships

With improved cash flow from factoring, manufacturers can make timely payments to suppliers and vendors, potentially negotiating better terms, discounts, or bulk pricing. Strong financial standing fosters trust and enhances relationships with key stakeholders, creating a more stable supply chain and increasing competitiveness in the market.

Conclusion

For consumer products manufacturers facing cash flow challenges due to long payment cycles, accounts receivable factoring presents a strategic financial tool. By providing immediate liquidity, reducing credit risk, and streamlining receivables management, factoring enables manufacturers to sustain operations, grow their business, and remain competitive in a dynamic marketplace. As the demand for efficient financing solutions continues to rise, factoring is emerging as a valuable alternative to traditional financing methods, offering both stability and flexibility to manufacturers in the consumer products industry.

Inflation Ticks Up to 3% – Now what?

Posted on February 12, 2025 by Chris Lehnes

Inflation Ticks up to 3% – Now what?

The latest economic data shows that inflation has risen to 3%, prompting concerns about its potential impact on businesses, consumers, and policymakers. While at this level is not necessarily alarming, it does signal a shift in the economic landscape that requires careful consideration.

Understanding the Current Inflationary Trend

A 3% rate represents a moderate increase, but it is essential to analyze the underlying factors driving this rise. Several key elements contribute to inflationary pressures:

Supply Chain Constraints – Ongoing disruptions in global supply chains have led to increased production costs, which businesses are passing on to consumers.
Labor Market Dynamics – Wage growth, driven by a tight labor market, has contributed to higher prices across various sectors.
Energy Prices – Fluctuations in oil and gas prices continue to impact transportation and production costs.
Consumer Demand – Post-pandemic recovery efforts have fueled robust consumer spending, driving up demand for goods and services.

Implications for Businesses and Consumers

For businesses, rising prices can lead to increased costs for raw materials, wages, and operations. Companies must decide whether to absorb these costs, reduce profit margins, or pass them on to consumers through price increases. Additionally, it may impact investment decisions, as higher interest rates could make borrowing more expensive.

Consumers, on the other hand, may feel the strain of higher prices on essential goods and services, reducing their purchasing power. This can lead to shifts in spending habits, with households prioritizing necessities over discretionary purchases.

Policy Responses and Economic Outlook

Central banks and governments have several tools at their disposal to manage inflationary pressures. The most common approach is monetary tightening, including interest rate hikes to curb excessive demand. If inflation persists, further rate increases may be on the horizon.

On the fiscal front, governments may consider targeted interventions such as tax adjustments or subsidies to alleviate the impact on vulnerable populations. However, balancing economic growth with inflation control remains a complex challenge.

What’s Next?

The trajectory of increases in the coming months will depend on multiple factors, including global economic conditions, supply chain recovery, and central bank policies. Businesses should focus on strategic cost management, efficiency improvements, and pricing strategies to navigate inflationary challenges.

For consumers, financial prudence, budgeting, and smart spending decisions will be crucial in maintaining financial stability amid rising prices. Policymakers will need to monitor economic indicators closely to ensure a balanced approach that supports sustainable growth without exacerbating inflationary pressures.

While a 3% inflation rate is manageable, vigilance is key. Stakeholders across the economy must stay informed and proactive to adapt to the evolving economic landscape.

Connect with Factoring Specialist, Chris Lehnes

Trump Orders End of Penny

Posted on February 10, 2025 by Chris Lehnes

Impact of End of Penny Production

The decision to cease the production of the penny has sparked significant debate across economic, social, and financial sectors. While some view it as a practical step towards modernizing the economy, others express concern over potential repercussions, particularly on pricing strategies and consumer behavior. This article examines the multifaceted impact of discontinuing the penny, considering cost savings, inflationary effects, and the broader implications for businesses and consumers.

The end of penny production represents a significant yet manageable transition for modern economies. The potential cost savings for governments and businesses, combined with the minimal impact on inflation, suggest that phasing out the penny is a rational economic decision. While some initial adaptation may be required, historical precedents indicate that both businesses and consumers can adjust without major disruption. As digital transactions continue to gain prominence, the role of physical currency will likely continue to evolve, shaping the future landscape of monetary systems worldwide.

Cost Savings and Economic Efficiency

One of the primary arguments in favor of eliminating the penny is the cost of production. In many countries, the cost of minting a penny exceeds its face value. For example, in the United States, the production cost of a single penny has been higher than one cent for years due to rising metal prices and manufacturing expenses. By ceasing production, governments can allocate resources more efficiently, potentially redirecting funds toward more economically beneficial projects.

Businesses also stand to benefit from streamlined cash handling. Counting and storing pennies impose additional operational costs on retailers and financial institutions. The elimination of the penny could reduce transaction times, simplify cash management, and improve overall efficiency in financial transactions.

Inflationary Concerns and Rounding Effects

One of the primary concerns surrounding the removal of the penny is its potential impact on inflation. Some fear that businesses may round prices upward when pennies are no longer in circulation, leading to increased costs for consumers. However, empirical evidence from countries that have already phased out their lowest denomination coins—such as Canada, Australia, and New Zealand—suggests that rounding effects tend to be neutral in the long run.

Rounding systems typically dictate that transactions be rounded to the nearest five-cent increment when using cash, while digital payments remain unaffected. Studies have shown that the rounding process averages out over time, mitigating fears of systemic price increases. Additionally, digital transactions, which make up a growing share of consumer purchases, will not be impacted by rounding rules, further reducing inflationary concerns.

Consumer and Business Adaptation

The shift away from pennies would require adjustments from both consumers and businesses. Retailers would need to update pricing strategies and point-of-sale systems to accommodate rounding policies. Consumers, particularly those who rely heavily on cash transactions, may initially struggle to adapt. However, experiences from other economies suggest that the transition is relatively smooth and short-lived.

Furthermore, eliminating the penny could accelerate the ongoing trend toward cashless transactions. With digital payments becoming increasingly dominant, physical currency—including small denominations—may become progressively less relevant. Businesses that adapt to digital payment solutions may gain operational efficiencies while catering to the preferences of modern consumers.

Broader Implications for Monetary Policy

The discontinuation of the penny also raises broader questions about the future of physical currency. As digital payment solutions gain traction, the necessity of other low-denomination coins may come under scrutiny. Governments may eventually consider phasing out additional coins or even promoting digital currencies as a more efficient medium of exchange.

Additionally, the symbolic nature of currency cannot be overlooked. The penny holds historical and cultural significance in many societies. Policymakers must balance economic efficiency with public sentiment when making decisions about currency discontinuation.

Conclusion

The end of penny production represents a significant yet manageable transition for modern economies. The potential cost savings for governments and businesses, combined with the minimal impact on inflation, suggest that phasing out the penny is a rational economic decision. While some initial adaptation may be required, historical precedents indicate that both businesses and consumers can adjust without major disruption. As digital transactions continue to gain prominence, the role of physical currency will likely continue to evolve, shaping the future landscape of monetary systems worldwide.

Contact Factoring Specialist, Chris Lehnes

Trump Imposes New Steel Tariffs of 25%

Posted on February 10, 2025 by Chris Lehnes

The Impact of Trump’s 25% Tariffs on Steel on the Broader Economy

Trump announced the imposition of a 25% tariff on all steel and aluminum imports into the United States, supplementing existing metal duties. This move has reignited discussions on the broader economic implications of such protectionist measures.

Historical Context and Immediate Reactions

The U.S. has a history of implementing tariffs on steel imports, notably in 2018, when a 25% tariff was imposed on steel and a 10% tariff on aluminum from most countries. This policy aimed to bolster domestic steel production and reduce reliance on foreign imports. However, it also led to increased costs for industries dependent on steel, such as automotive and construction, and prompted retaliatory tariffs from trading partners.

The recent announcement of additional tariffs has elicited varied responses. While some domestic steel producers may benefit from reduced competition, industries reliant on steel imports are expressing concerns over rising production costs. For instance, the automotive sector, which utilizes substantial amounts of steel, may face higher manufacturing expenses, potentially leading to increased vehicle prices for consumers.

Economic Implications

Economists have extensively analyzed the effects of tariffs on the U.S. economy. A study published in the Journal of Economic Perspectives in 2019 estimated that by December 2018, tariffs had resulted in a reduction of U.S. real income by $1.4 billion per month and imposed an additional $3.2 billion per month in costs on consumers. These figures highlight the economic burden of tariffs on the broader economy.

The Congressional Budget Office (CBO) projected that between January 2018 and January 2020, trade barriers would reduce real GDP by approximately 0.5% and increase consumer prices by 0.5% in 2020. This suggests that while tariffs may protect certain domestic industries, they can also dampen overall economic growth and elevate consumer prices.

Sector-Specific Effects

The tariffs have a disproportionate impact on industries that rely heavily on steel imports. Manufacturers in sectors such as automotive, construction, and machinery may experience increased production costs, which could be passed on to consumers in the form of higher prices. Additionally, the National Retail Federation has warned that tariffs could lead to higher prices for consumers, potentially reducing consumer spending and affecting retail sales.

Global Trade Dynamics

The imposition of tariffs has strained trade relations with key partners, including Canada, Mexico, and China. Retaliatory tariffs from these countries can affect U.S. exports, potentially leading to a decline in demand for American goods abroad. For example, China has previously imposed tariffs on U.S. agricultural products, adversely affecting American farmers.

While the intent behind the 25% tariffs is to protect and revitalize the U.S. steel industry, the broader economic impact is multifaceted. The potential for increased consumer prices, reduced economic growth, and strained international trade relations underscores the complexity of using tariffs as a tool for economic policy. Policymakers must carefully weigh these factors to ensure that the benefits to the steel industry do not come at the expense of the broader economy.

Connect with Factoring Specialist Chris Lehnes

Factoring: Funding to Survive A Trade War

Posted on February 5, 2025 by Chris Lehnes

Based on recent news, tariffs on some of the United States’ top trading partners seem inevitable. Many businesses will need to contend with increased cost of raw materials as well as the possible impact of retaliatory tariffs placed upon US exports by the effected countries. This is setting up a trade war.

While some of these costs may be able to be passed along to customers, others may need to be absorbed by the business due to competitive pressures.

This downward pressure on margins can result in a tighter cash position. Factoring of accounts receivable can relieve some of this pressure by quickly converting accounts receivable into cash.

Program Overview

$100,000 to $10 Million
Quick advance against AR
Flexible Terms
Non-recourse
Ideal for growing businesses

We also fund challenging deals:

Losses
Turnarounds
Highly Leveraged
Customer Concentrations
Weak Personal Credit
Character Issues

In about a week, we can advance against accounts receivable to qualified manufacturers, distributors or service providers,

Contact me today to learn if your client could benefit.

New Podcast Episode: Factoring – Help Your Clients Help Themselves

Posted on February 3, 2025 by Chris Lehnes

New Podcast Episode: Factoring – Help Your Clients Help Themselves

This podcast summarizes the key insights from an interview with Chris Lehnes, Business Development Officer at Versant Funding, regarding the role of factoring in small business finance, particularly within the context of the COVID-19 pandemic and beyond. The article highlights Lehnes’ emphasis on education and building a network of referral sources to promote factoring as a valuable alternative financing option. It also details Versant Funding’s strategic focus on “difficult deals” and its position as a bridge for businesses in transition.

Key Themes and Ideas:

Factoring: An Underutilized and Misunderstood Tool:

Lack of Awareness: Lehnes emphasizes that factoring is not a well-known financing option among small businesses or even commercial loan brokers. He notes, “It’s not anybody’s first choice of financing…They don’t often plan to focus on factoring.”
Negative Perceptions: He acknowledges that negative stories about unscrupulous factors have created apprehension, stating, “a lot of times what is known about factoring scares people…They’ve heard a bad story about some factor that was an ‘evildoer’…”.
Educational Imperative: Lehnes believes it’s crucial to educate financial professionals (brokers, bankers, lawyers, consultants) about the benefits and proper application of factoring. He wants to highlight how “well-trained commercial loan brokers will be a great asset to small businesses in this market.”

Strategic Marketing to Referral Sources Podcast:

Focus on Intermediaries: Versant doesn’t directly market to business owners but rather concentrates on intermediaries and advisors who are more likely to understand and recommend factoring when appropriate. As Lehnes says, “All my efforts are getting in front of, and speaking with, bankers, attorneys, consultants and coaches…so that when one of their challenges could be met by factoring they can recommend what I do.”
Building a Wide Network: Lehnes emphasizes the importance of having a large network of referral sources, rather than a small core group, to ensure a consistent flow of potential deals. He states, “I just have a really huge network, some of which I might only hear from once a year, or even less, but that large network is enough to keep the pipeline going.”
The Value of Endorsements: The referral-based approach depends on receiving endorsements and introductions that provide credibility and prequalification of the prospect.

Versant Funding’s Niche: “Difficult Deals” and Short-Term Solutions:

Targeting Tough Situations: Versant specializes in factoring deals that other lenders often avoid, such as businesses with poor financial performance, credit issues, or no track record. This positions them to serve businesses needing help when traditional avenues are unavailable.
Bridging the Credit Gap: Versant sees itself as a temporary solution, a “bridge” to help businesses stabilize and move towards more conventional financing options (e.g., bank loans, equity). Lehnes states, “We’re a way to get a business to the next step of their evolution, where they’re stable enough to get bank financing…or move on to a cheaper form of financing.”
Short-Term Relationships: Due to the nature of their clients, most relationships are short-term, lasting 24 months or less.

Market Conditions and the Impact of COVID-19:

Increased Need for Alternative Lending: The pandemic has made traditional financing more difficult for many small businesses, increasing the relevance of factoring and non-bank lenders. Lehnes states, “A lot of small businesses, all they know about finance is the bank…and when the bank can’t meet their needs, they’re going to need help.”
Shifting Deal Landscape: The pandemic has impacted various industries, making Versant more cautious about sectors like traditional retail, oil & gas, and travel, which previously seemed promising. As Lehnes notes, “Businesses that sell heavily into traditional retailers…or the travel industry, those are all areas that looked great nine months ago that now we’re very cautious about.”
Anticipated Credit Tightening: Lehnes anticipates banks will become more selective with renewals due to defaults and delinquencies, creating opportunities for alternative lenders like Versant. He expects that banks will “neglect or let go of the rest” of their clients that don’t fit their desired profiles.
Potential Challenges for Non-Bank Lenders: Lehnes also points out the potential vulnerability of some smaller factoring companies that rely on lines of credit from larger factors or banks, potentially leading to further market disruption as these lenders face their own challenges. He believes there could be “some pretty good scrutiny of some of those lines of credit.”

Factoring as a Source of Recurring Revenue for Brokers:

Long-Term Commissions: Lehnes emphasizes the appeal of factoring for brokers, as it provides recurring commissions for the life of a deal, unlike one-time fees from real estate deals. He says, “Factoring provides an ongoing commission. You close a factoring deal; you’re going to get a commission monthly for the life of the deal.”

Versant Funding’s Profile:

National Scope: They serve US-based businesses with domestic receivables.
Client Revenue Range: Typically between $5 million and $10 million annually, but they can handle deals from $100,000 to $10 million per month in factoring volume.
Diverse Client Base: Includes small businesses, middle market companies, privately owned, family owned, and private equity backed organizations.
Podcast Focus on Deliberate Growth: They do not aim for high-volume deal flow, but rather a slower, more focused and strategic approach, as Lehnes points out: “We’re going to do a handful of deals in a year and grow our portfolio slowly and deliberately.”

The podcast portrays Chris Lehnes as an experienced and knowledgeable proponent of factoring, particularly as a viable solution for small businesses navigating challenging financial landscapes. He emphasizes the need to educate the market, especially intermediaries, and position Versant Funding as a strategic partner, especially for those businesses that are not currently able to access traditional forms of credit. The company’s focus on “difficult deals” and its understanding of factoring as a bridge, not a long-term solution, highlight their unique position in the lending market. The article also suggests that the current economic climate, amplified by COVID-19, may further increase the demand for factoring services.

Contact Factoring Specialist, Chris Lehnes

Trump Tariffs: Expect Cost Increases On These Items

Posted on February 3, 2025 by Chris Lehnes

Trump Tariffs: Expect Cost Increases On These Items

As trade tensions escalate, Trump’s tariffs have taken center stage in discussions about their impact on consumer prices. Tariffs, essentially taxes on imported goods, increase costs for businesses that rely on foreign products and materials. These costs are often passed down to consumers, making everyday items more expensive. Here’s how tariffs will affect the prices of cherry tomatoes, Tonka trucks, avocados, maple syrup, tequila, and smartphones.

Cherry Tomatoes: A Pricier Staple for Salads

The United States imports a significant portion of its cherry tomatoes from Mexico, particularly during the winter months. A tariff on Mexican produce means grocery stores will pay more for imports, leading to higher prices for consumers. In an industry where margins are tight, retailers will have little choice but to pass along the increased costs.

Tonka Trucks: Tariffs on Toy Manufacturing

Classic American toys like Tonka trucks are often manufactured using imported materials, particularly metals from China. Tariffs on these raw materials drive up production costs, leading to higher retail prices. Parents shopping for holiday gifts could see a noticeable increase in toy prices due to these trade policies.

Avocados: A Costly Breakfast Addition with tariffs

Avocados have become a dietary staple for many Americans, but they are largely imported from Mexico. Tariffs on Mexican goods will directly affect the cost of avocados, making guacamole and avocado toast a more expensive indulgence. Given the already volatile pricing of avocados due to supply fluctuations, additional tariffs will only exacerbate cost concerns for consumers.

Maple Syrup: A Blow to Breakfast Budgets Due to tariffs

Although the U.S. produces a fair amount of maple syrup, a significant quantity is imported from Canada. Tariffs on Canadian agricultural products will make syrup more expensive, increasing costs for consumers who enjoy this breakfast staple. The impact could also hurt businesses that rely on maple syrup as a key ingredient.

Tequila: Higher Costs for a Popular Beverage

Tequila, a product exclusively made in Mexico, is another item set to become more expensive under tariffs. As demand for tequila-based cocktails like margaritas continues to rise, tariffs will increase the cost of importing tequila, leading to higher prices at liquor stores and bars. Consumers and hospitality businesses alike will feel the financial strain.

Smartphones: The Tech Industry Faces Higher Costs

Smartphones, including popular models like Apple’s iPhone and Samsung’s Galaxy series, rely on components sourced globally. Tariffs on Chinese electronics and components will increase production costs, which companies will likely pass on to consumers. Given the essential nature of smartphones in everyday life, these price hikes could have widespread financial implications.

Consumers Will Bear the Burden

While tariffs are intended to promote domestic production and protect American industries, they often lead to higher consumer prices. As businesses face increased import costs, those costs will inevitably trickle down to shoppers. From food and beverages to toys and technology, many everyday items will see price increases, affecting household budgets across the country.

Understanding the real-world impact is crucial, as consumers and businesses alike prepare for the economic consequences of these trade policies.

Contact Factoring Specialist, Chris Lehnes to learn if factoring can provide your client the working capital needed to survive this trade war.

US GDP Grew 2.5% in 2024: Resilience Amid Uncertainty

Posted on January 30, 2025 by Chris Lehnes

US GDP Grew 2.5% in 2024: Resilience Amid Uncertainty

The U.S. economy demonstrated robust growth in 2024, with gross domestic product (GDP) expanding by 2.5%, according to the latest government data. Despite global economic uncertainty, fluctuating interest rates, and shifting labor market dynamics, the economy managed to sustain moderate yet steady growth throughout the year.

Key Drivers of Growth

Several factors contributed to the 2.5% expansion in GDP. Consumer spending remained a key driver, buoyed by a resilient job market and rising wages. Although inflationary pressures persisted, cooling price increases allowed households to maintain purchasing power. The services sector, particularly travel, hospitality, and healthcare, experienced strong demand, further supporting economic activity.

Business investment also played a role in GDP expansion. Companies continued to allocate capital towards technology, automation, and supply chain enhancements, strengthening productivity and long-term growth prospects. Meanwhile, federal spending, particularly in infrastructure and clean energy projects, added further momentum to economic expansion.

Challenges and Headwinds

While the economy posted solid growth, it was not without challenges. Higher borrowing costs, resulting from the Federal Reserve’s restrictive monetary policies, weighed on sectors sensitive to interest rates, such as housing and commercial real estate. Additionally, global supply chain disruptions and geopolitical tensions created volatility in trade and commodity markets.

Labor shortages in certain industries also posed constraints, leading businesses to invest more in workforce training and automation to mitigate hiring difficulties. The labor force participation rate remained stable, but demographic shifts and evolving workforce trends continued to shape labor market dynamics.

Outlook for 2025

Looking ahead, economists remain cautiously optimistic about 2025. While growth is expected to moderate slightly, ongoing investments in infrastructure, innovation, and clean energy could provide long-term benefits. The Federal Reserve’s policy stance will be closely watched, as any shifts in interest rates could impact consumer spending and business investment.

Overall, the 2.5% GDP growth in 2024 underscores the resilience of the U.S. economy. Despite global and domestic challenges, strong consumer demand, business investment, and strategic federal policies have supported expansion, setting the stage for continued economic stability in the years ahead.

Contact Factoring Specialist, Chris Lehnes

Fed Doesn’t Make a Move

Posted on January 29, 2025 by Chris Lehnes

Fed Doesn’t Make a Move – Rates remain Unchanged

On January 29, 2025, the Federal Reserve announced its decision to maintain the federal funds rate within the 4.25% to 4.50% range, citing ongoing solid economic activity, stable low unemployment, and persistently elevated inflation.

federalreserve.gov

Economic Implications:

Banking Sector: Moody’s analysts suggest that holding interest rates steady allows banks to better align deposit pricing with declining loan yields, thereby supporting net interest income. marketwatch.com
Inflation Control: The Fed’s decision reflects its cautious approach to managing inflation, which remains above the 2% target. Maintaining current rates aims to prevent exacerbating inflationary pressures. ft.com
Market Reactions: Investors are closely monitoring the Fed’s stance, with major indices experiencing gains ahead of the announcement. The decision to keep rates unchanged provides markets with a degree of stability amid economic uncertainties. investors.com

Political Context: Fed Doesn’t Make a Move

President Donald Trump has advocated for significant rate cuts to stimulate economic growth. However, the Fed’s decision to hold rates steady underscores its commitment to data-driven policy and maintaining independence from political pressures.

ft.com

Future Outlook:

The Federal Reserve emphasized that future rate decisions will be informed by incoming economic data and the evolving economic outlook. Factors such as inflation trends, labor market conditions, and the impact of new fiscal policies will play crucial roles in shaping monetary policy moving forward.

federalreserve.gov

For a more in-depth understanding, you can watch Federal Reserve Chair Jerome Powell’s press conference discussing the decision:

federalreserve.gov

Economic Implications: Fed Doesn’t Make a Move

Banking Sector: Moody’s analysts suggest that holding interest rates steady allows banks to better align deposit pricing with declining loan yields, thereby supporting net interest income. marketwatch.com
Inflation Control: The Fed’s decision reflects its cautious approach to managing inflation, which remains above the 2% target. Maintaining current rates aims to prevent exacerbating inflationary pressures. ft.com
Market Reactions: Investors are closely monitoring the Fed’s stance, with major indices experiencing gains ahead of the announcement. The decision to keep rates unchanged provides markets with a degree of stability amid economic uncertainties. investors.com

Political Context:

ft.com

Future Outlook:

federalreserve.gov

For a more in-depth understanding, you can watch Federal Reserve Chair Jerome Powell’s press conference discussing the decision:

Contact Factoring Specialist, Chris Lehnes

Factoring Program Overview – A Primer

Posted on January 29, 2025 by Chris Lehnes

Factoring Program Overview – A Primer

Executive Summary – Factoring Program Overview – A Primer

We specialize in providing working capital solutions through accounts receivable factoring, particularly for businesses that may not qualify for traditional bank financing. We focus on the quality of a client’s receivables (invoices owed to them by their customers) rather than the client’s overall financial health, enabling them to serve a wide range of businesses, including startups, rapidly growing companies, and those with financial challenges. We offer full notification, non-recourse factoring with a focus on speed and a personal touch, working with a network of intermediaries like brokers, bankers and lawyers, rather than marketing directly to businesses.

Key Themes and Concepts – Factoring Program Overview – A Primer

Factoring Defined: Factoring is the sale of a company’s accounts receivable invoices to a third-party factor in exchange for immediate working capital. This is not a loan; it’s a purchase of an asset. It is distinct from a loan because there is no loan amount or interest rate, but rather a discount rate or fee against the invoice.

“Factoring is the sale of a company’s accounts receivable invoices to a factor in order to obtain working capital.”

Non-Recourse, Full Notification Factoring: We offer “full notification, non-recourse factoring,” which means:

Non-Recourse: Factor assumes the credit risk of non-payment by the client’s customers. The client is not responsible for repaying the advance if a customer doesn’t pay due to credit issues (bankruptcy, etc.) . However, clients remain responsible if customers don’t pay due to issues with the goods or services provided to the customer, often referred to as a “performance guarantee” or “validity guarantee”.
“With non-recourse, the factor takes on the customer’s credit risk (their inability to pay), but the client remains responsible for most other discounts or deductions their customer may take on an invoice.”
Full Notification: The client’s customers are notified to pay Factor directly and invoices will usually include instructions for the customer to pay directly to the factor. This allows for greater control over the flow of cash and is often used for businesses with weaker financial conditions.
“A notification factor is one that will contact each of a client’s customers and instruct them to make payments to the factoring company. Each invoice issued will usually include instructions that payments must be made payable to the factor.”

Client Profile: Versant targets a broad range of businesses, particularly:

Small to medium-sized companies with annual revenues between $1 million to $50 million.
Companies that need quick access to working capital and can’t wait for slow-paying customers.
Businesses with limited access to traditional credit (startups, fast-growing companies, seasonal businesses, those with poor credit or losses).
Businesses with credit-worthy customers, typically large corporations, municipalities or government agencies.
“The success of nearly every business is dependent on its supply chain. Whether it is a neighborhood restaurant securing fresh produce from local farmers market or a time-sensitive, month or a high-tech manufacturer procuring microchips from Asia often depends on reliable sources of supply. “

Use of Factoring Funds: Factoring can be used for various purposes, including:

Project Financing
Business Growth Financing
Business Acquisition Financing
Bridge Financing
Financing Working Capital Needs
Realization of Supplier Discounts
Preparation for High Season
Crisis Management
Debtor-In-Possession (DIP) Financing

Program Details:

Factoring Volume: We handle annual factoring volumes from $1 million to $120 million, with monthly transaction sizes ranging from $100,000 to $10 million.
Advance Rate: Factor typically advances up to 75% of the face value of approved receivables. The remaining balance (less fees) is paid when the receivable is collected.
“Client is typically advanced 75% of face value of approved receivables in the batch. The balance is paid when the receivable is collected and the batch is fully closed.”
Fees/Rates: Factoring fee is generally 1.5%-2.5% of the face value of the purchased invoices for each month that the account receivable is outstanding. There are no other fees charged on dollars outstanding or for the facility. Fees can vary depending on client risk profile.
“Factoring fee is typically 2.5% of the face value of the purchased invoices for each month that the account receivable is outstanding.”
Factoring Term: Factoring agreements typically range from 1 to 24 months, with some clients renewing.
Personal Guarantee: None is required, as Factor assumes credit risk on the invoice with the previously mentioned “performance guarantee.”
Audit Requirements: None is required of the client’s financial performance, as Factor focuses on the credit quality of their customer base.
Closing Time: Funding can occur as quickly as one week from the initial contact to funding, and often within 3-5 business days of the initial referral.

Competitive Advantage:

Focus on Difficult Deals: Versant specializes in deals other factors might avoid, including those with poor financial performance, limited credit history, or new companies.
Speed: Can fund quickly, often within a week of initial contact, and funding typically occurs on the same day that accounts receivable invoices are received.
Personal Service: Each client is assigned a dedicated Account Executive.
Technological Advantage: We provide clients with access to web-based reports to monitor the performance of their accounts receivable.
“Online platform (FactorSQL Software) enables clients to review reports and determine if/when it’s economical to close out aged receivables “batches.”” Factoring Program Overview – A Primer

Marketing and Business Development:

We focus on educating financial professionals (bankers, brokers, CPAs, attorneys, business coaches) about factoring to increase referrals.
“All my efforts are getting in front of, and speaking with, bankers, attorneys, consultants and coaches, and all those people that help small businesses get through their challenges, so that when one of their challenges could be met by factoring they can recommend what I do,” Lehnes says.”
They aim to build a large network of referral sources.
They see value in being a “bridge” to help businesses grow, become profitable, and eventually obtain traditional bank financing.
“Sometimes they’ll renew with us and stick around a little longer, but we fully acknowledge that we’re a bridge. We’re a way to get a business to the next step of their evolution, where they’re stable enough to get bank financing, or they’re large enough to go out and raise equity, or just that they’re profitable and can move on to a cheaper form of financing.””

Process Steps
The process is a multi-step process that includes:

Initiation: The process begins with identifying a prospect who has accounts receivable that may benefit from factoring. The referral source then hands off the completed request with the necessary documentation (Accounts Receivable Aging, Intake Checklist) to Versant.
Application Review and Legal Documentation: The client submits a signed proposal letter, a signed application, and a non-refundable fee. Versant then prepares a factoring agreement and associated documents, which the client then signs.
Underwriting: Versant conducts a review process by reviewing the Accounts Receivable Aging, conducting public record searches for liens and UCC filings, reviewing customer credit, verifying the receivables by calling the customers, creating a purchase and sale agreement, taking a 100% security interest on client assets, and filing a UCC notice. Invoices will be mailed to debtors with assignment stickers and customers will be notified.
Closing and Funding: Versant purchases the receivables, typically advancing 75% of the face value and assuming responsibility for collection.
Closing of Batches: When all payments for a particular batch are received, Versant pays the balance owed (the difference between what was collected and the 75% advanced) to the client, less their factoring fees.
Ongoing Flow of Receivables: After the client is set up, Versant continually purchases new invoices based on the terms of the agreement.

Factoring’s Role in Economic Uncertainty:

In times of economic uncertainty when traditional lending standards tighten and businesses have reduced cash flow, factoring can be a better option than a traditional bank loan.
“This economic uncertainty will likely continue for some time and cause many traditional lenders to restrict credit to small businesses in an effort to shield their institutions from the impact of a softening economy.”

Important Considerations: Factoring Program Overview – A Primer

Terminology: It’s crucial to understand the differences between lending and factoring terminology (e.g., “loan” vs. “factoring facility,” “borrower” vs. “client/seller”).
Fee Structure: Factoring fees are not interest rates; they are a discount or fee on the invoice amount, generally based on the time the receivable remains outstanding.
Cost vs. Benefit: While factoring can be more expensive than traditional bank loans, it provides critical access to capital, particularly when bank credit is unavailable and can improve a business’s profitability.
Not a “Last Resort”: Factoring is a widely used financial tool, not just an option for troubled companies.

Conclusion: Factoring Program Overview – A Primer

Factoring offers a valuable service for businesses needing flexible and fast access to working capital. Their focus on non-recourse, full-notification factoring, combined with a client-centric approach, positions them as a strong alternative to traditional lenders, particularly in times of economic uncertainty. Their model provides a way for businesses to operate when they do not qualify for traditional loans or need an alternative to banks. Their emphasis on education and partnerships with intermediaries has been crucial to growing their business. Factoring Program Overview – A Primer

**Compiled with AI Assistance

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