Three Ways To Cover Payroll Funding

by Crestmark 8. October 2012 10:03

Payroll funding can be one of the biggest financial obligations that your business faces. Depending on your size and your industry, payroll financing may be one of your biggest expenses alongside materials. But how do you cover it? And what can you do if your staff frequently changes? The answer may be a line of credit. There are three major types that offer the flexible kind of funding that works best for payroll.

Accounts Receivable Financing

A/R financing, also known as a ledgered line of credit, is a flexible option that works for a wide variety of businesses. Every invoice you issue is recorded and funding is issued based on that. This structure means that it's a highly adaptable form of credit, but it also means that it can exactly match your current needs. As you issue more invoices, you're going to need to spend more to finance them – and accounts receivable financing provides the funds you need.

Invoice Factoring

Factoring offers flexible financing that functions very similarly to a line of credit but is not technically considered one. Under an invoice factoring agreement Crestmark structures your funding facility based on accounts receivable/invoices. The invoices are purchased at a discount to provide immediate availability of funds to your company.

Asset Based Lending

This form of line of credit is secured based on inventory, invoices, or a combination of the two. The amount available through a line of credit varies according to how much inventory is owned or how many invoices are issued. The main difference between asset-based lending and accounts receivable financing is how much funding is issued. With ABL, assets (including invoices) are reported in batches, whereas accounts receivable financing will involve submitting each invoice individually. 

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Is It Important To Find A Finance Company That Specializes In Your Industry?

by Crestmark 23. May 2012 12:19

Are all factoring companies equally capable of financing every deal? From the perspective of someone seeking credit for your business, it can be tempting to knock on the door of every bank and non-traditional lender in your area and online. But is it really better to work with anyone who will give you the kind of loan you need?

Your Field Is Unique

Immersed in the daily reality of life in your industry, it's easy to lose perspective on just how unique your business really is. The flow of revenue for the transportation industry – punctuated by delays, spiking gas prices, and lag time between payments – is very different from the expected pattern in a staffing agency, which in turn is different from a retail business. Because non-traditional lenders are often relying on these patterns to provide financing, it's vital that they have an understanding of what to expect. Your explanations may not tell them what they need to know.

A Specialized Company Has Custom Solutions Ready To Go

Many fields have developed specific lending practices that are unique within that industry. For example, trucking has freight bill financing and fuel cards. Government contract financing has to understand the additional paperwork and disclosure requirements that are necessary when working with federal or state organizations. A company that has worked with your field before knows what to expect and has already created unique solutions that are designed specifically to meet your needs. You just won't find that level of service in factoring companies that don't know your business.

Crestmark has always been proud of our customized offerings for fields like staffing, manufacturing, transportation, apparel, and government contracting. Even when we don't have prior experience in your field (a rarity considering the diversity of our staff and years of lending across industries) we know the questions to ask in order to provide you with the right non-traditional lending tools for your needs. 

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Alternatives To Term Loans

by Crestmark 8. May 2012 04:57

There are a number of reasons why a company may not want to take a term loan. They may want to pledge personal collateral, find it difficult to obtain this more traditional form of financing, they may simply not want to accept the terms that are available, or they may simply prefer these non-traditional financing options as a way to meet their financing needs. Whatever your situation, if you're looking outside the term loan box, you should look at these potential solutions.

Accounts Receivable Financing

A/R financing is a flexible line of credit solution available to most businesses. This type of financing leverages the money you are due to receive from invoices you have sent to your customers. A/R financing helps bridge the gap between your cost of sales  and when you get paid for your goods or services.

Asset Based Lending

This line of credit is secured by an asset that your business currently holds. Asset based lending is a line of credit, meaning that you can use as much or as little of your potential credit as you select up to the value of the collateral pledged. You can change it monthly, weekly, or even daily depending on your needs.


In this type of financing, a third party factor actually purchases your unpaid invoices. You receive a portion of the value upfront, with the rest of it being delivered, less an administrative fee, when your client makes good on the debt. Factoring may be traditional, where the factor fully purchases the invoice and assumes both the credit risk and responsibility for collection of the receivable. Or  on a recourse basis where the receivable is sold back to the seller after a certain period of time elapses. Unlike other types of financing there are less restrictive covenants inherent in factoring transactions.


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Government Contract Financing

by Crestmark 11. April 2012 05:53

As a government contractor, you face a totally different set of restrictions and regulations from your private sector counterparts. If this is your first foray into the field of government contracting, you'll need to take time and understand the basics of what to expect. One of the most important things to understand is that finding a lender who understands the intricacies and complexities of the government and can effectively work within them can be difficult. Be sure that your lender has a solid understanding of the differences that exist between financing a government contractor and financing in the private sector.  

Assignment Of Claims Act

When a government contractor is financed, the government itself must be sent a notice of assignment. This provision was created by the Assignment of Claims Act, designed to protect the government's interest and always ensure clarity about who is receiving payment. The government notice of assignment is a mandatory and common step in government contractor financing.

Federal Acquisition Regulation

This is the comprehensive document specifying exactly how the government gets virtually everything it buys. Ensuring that you adhere to the requirements of this document will help your transaction proceed as smoothly as possible, especially if you plan to obtain some kind of financing.

Big Contracts Need Big Financing

Supplying the Federal government is noble and potentially a major boon to your business, but it can also mean a lot of strain on your cash flow. Government contract financing can help. It is possible to leverage a number of different financing opportunities; just work with a lender that has sufficient experience navigating the complexities of government financing and you're in a good position to succeed.

If you have questions about government contractor financing or would like to learn more about the options available, contact one of Crestmark's government specialists. 

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Weathering The Storm: Getting Short Term Working Capital

by Crestmark 28. March 2012 04:15

Even the healthiest of businesses can sometimes experience lean times. When your business is seasonal or just starting, the need for short-term working capital can be even greater. Often banks will require at least three years of operating performance before giving a loan to a startup company or if they do they require the pledge of the personal assets of the principals. In the case of seasonal busineses, the caps placed by banks don’t allow these business to grow inventory as needed to meet demand. In many of these situations, traditional loan-based financing can fall short. It just doesn't offer the flexibility required, and may not be available as quickly, or in the volume you require. However, loans aren't the only option, and in many cases they aren't even the best option. There are many other ways to get working capital.

Asset-Based Lending

Asset-based lending is a strong option for working capital in invoice-based businesses. The idea is simple: you provide an invoice at the time services are rendered, but you may not receive payment on the invoice until a later point. You turn over the full amount of the invoice in exchange for money now, providing an effective bridge for current expenses. There are many uses for this kind of financing, ranging from taking advantage of current opportunities to buy in bulk to using the funds to make payroll. Seasonal businesses often employ asset-based  loans against inventory to build up inventory to meet seasonal demand.


Factoring has similarities to asset based lending, and can be an equally promising source of working capital. In factoring, a third party (known as a "factor") purchases the accounts receivable (or invoice) from the approved company that issued them. Essentially, you sell your unpaid invoices and receive a large percentage of the cash from that invoice immediately; shortly thereafter you will receive the remaining amount (less any managerial fees that were agreed upon in your contract). One of the most important elements of some forms of factoring is that the factor assumes responsibility for the potential of unpaid invoices, and often provides additional services such as credit and collection. This allows the client to focus on what they do best — selling. 

Both asset-based lending and factoring can be good solutions for working capital. Crestmark business development officers can help you understand the nuances that separate them and determine what is best for your business. Feel free to contact us for more information. 

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