Good to get? Accounts receivable financing is an alternative option for those looking for capital

Black Enterprise, March, 2009 by Donald Jay Korn

To locate a commercial finance corn pany serving your industry or your local region, go to www.cfa.com and click on "Find a Lender."

Making receivables payable, Before you decide whether to consider accounts receivable financing in these credit-crunch times, keep in mind that it comes in two forms:

FACTORING Companies known as factors Will buy your receivables from you. They'll pay a discount to the face value of the paper.

Other companies will extend you-a line of credit, secured by collateral. "We usually finance receivables and inventories," says Tom Matthesen, CEO and president of Presidential Financial Corp., in Atlanta. The companies in this group are known as asset-based lenders.

Both forms of accounts receivable financing offer fast cash flow from work your company already has performed, and both are playing an increasingly important role in today's turbulent economy. In its year-end 2007 report, the Commercial Finance Association in New York found that factoring volume rose 6.5% that year, to more than $135 billion, while outstanding asset-based loans increased 11.4%, to $545 billion.

ANNUAL FACTORING VOLUME

Year    Total Factoring     Percentage Change
          ($ Billions)      vs. Last Year (%)

2007         $135.3                6.5%
2006         $127.1               12.7%
2005         $112.8                9.3%
2004         $103.2                7.5%
2003         $96.0                 0.3%
2002         $95.7                 4.5%
2001         $91.6                -3.7%
2000         $95.1                13.2%

ASSET-BASED LENDING SURVEY RESULTS

Year   Total Outstandings   Percentage Change
          ($ Billions)      vs. Last Year (%)

2007         $545.0               11.4%
2006         $489.3               16.5%
2005         $112.8                9.3%
2004         $103.2                7.5%
2003         $96.0                 0.3%
2002         $95.7                 4.5%
2001         $91.6                -3.7%
2000         $95.1                13.2%

SOURCE: COMMERCIAL FINANCE ASSOCIATION