Why do the media and Congress seem surprised about the current credit crisis? I’ve been warning my clients about it for years. The effects of greed, poor money management practices and betrayal of consumers’ trust have been building and are now being exposed in every dark corner of the credit market. The days when practically any business still open could get a bank loan are long gone. The good news is that there are alternatives.

Despite the sub-prime meltdown negatively affecting the credit markets and the dramatic change in the rules of lending, it is still possible to qualify for business equipment leases. Yes, it’s tougher to get the capital you need to grow, but there are things you can do to increase your chances of qualifying for a loan or lease. Here are some suggestions that will help:

Check your credit regularly and take steps to improve your score. Underwriters have always placed a lot of importance on credit scores because it reflects the debtor’s ability to take care of obligations in a timely manner. Lenders are obviously nervous today, so a credit score of 675 or higher is even more critical. It is a smart money management practice to check your score on a regular basis and carefully review the information. In a 2004 study, it was found that 4 out of 5 credit reports contain errors that can be detrimental to your credit standing. These errors include, but are not limited to:

1. Inaccurate personal information and out-of-date addresses.

2. “Closed” accounts listed as “open”, like a student loan paid off but showing delinquent.
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3. The same mortgage or loan listed twice.
   
4. Major loans or mortgages that have been paid off or timely serviced not listed at all.

If you find an error on your report, write a letter or e-mail to the credit bureau. The bureau is obligated to contact the creditor who supplied them with the disputed information and then respond to you within 30 days. If you are unhappy with how the claim is settled, you can ask to have a brief written explanation added to the bottom of your credit report.

To improve your score, you need to take steps to resolve any items that are showing up as delinquent and those in which a judgment or lien has been filed. Make it a priority to pay credit cards and loans on time each month.

Pledge additional collateral. Some lenders who might otherwise turn down your application for a business loan or equipment lease may change their minds if you increase the collateral base. This might add a comfort level in the event things to south. Additional collateral might include specific assets from another business that is free and clear, rental property, or equity in a personal residence.

You’re ready to start your next construction project. Then you realize the money you need is tied up in accounts receivable. Construction invoice factoring gives you the working capital needed for materials and labor. Your construction receivables are an asset that can be leveraged.

Owners of construction companies are frequently hampered by the lack of working capital, particularly when they’re involved in multiple projects. The dilemma is magnified when their funds are tied up in construction receivables. In many cases, materials must be purchased without the benefit of credit and employees must be paid weekly. This can cause a major cash crunch, but construction invoice factoring is an excellent money management solution to the problem.

With factoring, cash is advanced to the client upon submission of an invoice. The services being billed must be approved and acceptable to the client’s customer. With construction factoring, there must be a “milestone” for each billing. In other words, a certain part of the contract must be performed and an actual invoice generated, as opposed to a percentage of the entire contract completed.

The advance for construction factoring is typically between 65% and 75%, depending upon the situation, with the remainder remitted to the construction company upon collection of the invoice, less the factoring fee. The advance can be advantageous in a variety of ways, including the ability to obtain materials purchase discounts and to be able to negotiate optimal pricing. The influx of working capital from factoring construction receivables fuels the company’s growth.

Factoring provides cash flow to:

Cover payroll and other expenses

Take on new jobs

Take advantage of volume discounts on material purchases

Increase your company’s growth

One frequent question is,” Can invoice factoring be utilized if the service provided spans a long time frame?” The answer is yes, but the way the company bills the client is critical. When you initially set up the agreement with the customer, you should specify the exact work to be performed as it relates to billing. In other words, both parties should agree that an invoice can be generated upon a certain level of performance or milestone. The factoring company will be able to advance funds based upon that invoice even though the entire job isn’t completed.

Contrast this scenario to progress billings, an arrangement in which the customer advances money for the job as a whole. The Factor (lender) is hesitant to advance funds to the client with progress billings, since the company getting billed may become unhappy along the way and stop making payments. With milestones, on the other hand, that is not a problem.

Smart money management strategies I use with my clients include looking at factoring as an alternative for funding projects. Construction companies that need working capital owe it to themselves to investigate factoring as an option.

Factoring is just one of the many money management strategies that I use to help my clients. Here is a recent testimonial from one of my construction company clients:

“Two years ago my construction company was close to bankruptcy with only $30 in our bank account and no way to pay bills.

Using the Money Management Solutions program we are doing so well now. With the power of this system and the financial stability it has helped us create, we now have $130,000 in reserves and always have $250,000 or more in our bank operating account.” K. A.

For information on a reputable and ethical factoring resource for your construction receivables or information about the Money Management Solutions program, ask Sandra by sending an email to Sandra@MoneyMgmtSolutions.com

Buying with a credit card is an alluring trap invented by our modern financial system.

Buying something using a credit card is not bad, IF you have the income to pay the credit card balance in full when the statement arrives, plus all your other bills.

But buying with a credit card because you don’t actually have the money, is simply committing your future earnings to the credit company under the threat of a bad credit rating. That is financial slavery.

Credit card debt = financial slavery

Buying with a credit card

when you can’t pay

is financial slavery

Over the past few years, financial experts have helped a lot of people to get out of the credit card trap with debt reduction programs. Helping people do this is not looked on favorably by the credit companies; they lose all that profitable interest. They take counter measures to hook more people back in by offering 0% percent interest for some period of time.

Are they really giving you 0% interest? Only if you can pay off the debt before the time frame is up. What they are counting on is you NOT having the ability to pay it off.
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