In the past, entrepreneurs rarely used factoring to raise money, because it was seen as a sign of financial instability. The early 1990s' credit crunch changed that, says Craig Sheinker, founder and president of New York City-based Quantum Corporate Funding Ltd. Now, selling your invoices and other financial obligations is becoming a more popular way to raise money.
"Factoring today is much different than it was 20 to 30 years ago," says Sheinker. "The stigma is removed, and now large companies and small firms all use factors."
Factoring isn't for everyone, however. "If you operate on a 5 percent profit margin or less, you shouldn't factor," advises Sheinker, because factors may charge up to 4 percent of the invoices they collect. But if you need short-term financing, your payroll fluctuates seasonally, or your company is growing too fast to wait for traditional financing, factoring may be for you.
What type of factor should you choose? Nonrecourse factors, like Quantum, will bear the financial exposure if your customers default. Maturity factors (a type of nonrecourse factor) will pay you on a specific date if your invoices aren't paid. Recourse factors, in contrast, require repayment in the event of a default. If you only need to factor a few invoices, spot factors offer greater flexibility at a higher cost.
As you search for a factor, don't shop by rates, cautions Sheinker. It's more important to find a good team with experience making creative deals to service your account.
For more information on finding a factor, contact the Commercial Finance Association at (212) 594-3490 or http://www.cfa.com
The Color Of Money
An old favorite teaches kids about money.
Conjunction junction, what's your function? If that question stirs warm memories, read on.
"Schoolhouse Rock: Money Rock," a 30-minute video by the creators of "Schoolhouse Rock," helps 5- to 8-year-olds understand the history of money, how to budget an allowance, checks, taxes and even Wall Street.
With lessons presented by colorful characters like country singer Dollars and Sense Becky Sue and showman Tax Man Max, "Money Rock" marks the 25th anniversary of "Schoolhouse Rock." It retails for $14.99.
Make No Mistake
How good are your investment decisions?
Are your stock market investments starting to resemble a runaway roller coaster? You could be letting emotions (and a touch of greed) influence your decisions instead of relying on information, reason and an investment game plan, says Kirk Kazanjian, author of Wall Street's Picks for 1999 (Dearborn Financial Publishing).
In the book, investment experts name this year's most promising stocks and funds. (See "Who'd A Thunk It" below.) They also give their views on the number-one mistake investors make:
- Staying with stocks too long
- Being too conservative
- Trying to time the market
- Chasing your winners
- Following the crowd
- Insufficient research
- Holding on to losers
- Being impatient
- Trading too often
Who'd A Thunk It?
No Intels or Microsofts in these stock picks.
Four companies whose products are so much a part of your life that you probably don't even think about them are among the top picks of investment analysts for 1999, according to Kirk Kazanjian, author of Wall Street's Picks for 1999. Take a look:
B/E Aerospace. Next time you sit in an airplane seat, think of B/E Aerospace, which owns 70 percent of this market.
Pierce Leahy. All the credit card applications and insurance forms you've ever filled out are likely to be stored in facilities owned by Pierce Leahy archive-management company.
Specialty Equipment Cos. Like to eat soft-serve ice cream at McDonald's? This company manu-factures all the machines that dispense this and other frozen dairy treats for the worldwide franchisor.
Staar Surgical. Big on new vision-correction technology, Staar's products include intraocular lenses implanted in the eyes of cataract patients.
Quantum Corporate Funding, (800) 352-2535, http://www.quantumfunding.com