Small Business Money Receivables Problems? Try a Receivables Agency

When you are a small business, yoour money management and cash flow need to be impeccable if are to stay afloat in a tough business environment. You can afford to extend your clients a bit of credit for a reasonable period of time, in pursuit of staying competitive; but there comes a point when you simply have to be paid. What do you do if your clients, sensing that there is pretty much nothing you can do, just refuse to pay you? There is actually a very doable solution to a situation like this. And it's been done ever since people have been in business for themselves. It's the same thing that the banks do what they can't collect on what they are owed on a credit card - they sell the loan to a debt collector. Usually, the practice of selling is called factoring. It's a huge $200 billion-a-year business in America and it's pretty much poorly organized. It's just individual businessmen who have skills in this apartment who go into business collecting debt. And no, they don't send thugs to your client's door (who show up armed with a length of steel pipe). They use unsubtle but legal methods. But they won't accept all kinds of debts; and the way they deal with your client will leave a lot wanting, too. Still, it's always been a kind of service that never absorbed any modern trade practices. Until now.

For instance, a Louisiana-based company called The Receivables Exchange has signed on thousands of small businesses. They buy your small business money problems from you, and offer them to one of the banks or hedge funds on their rolls. Any one of them that thinks that your difficult-to-collect debt looks like promising stuff, will take your debt off your hands. They actually end up collecting 80% of the value of the money you're on the hook for. If you went to a traditional unorganized factoring business, you would be lucky to get half of that. It could be such a boon to small business money flow situation to have a more or less guaranteed way to collect on debt. Your save on your capital costs, and you are able to quickly get on with your business.

As a business idea, the new receivables exchange concept is a pretty profitable one for all concerned. The exchange collects a bit in commission from both parties, the buyer of the debt makes a decent profit, and the small businessman has his shirt saved. To small businesses, having a customer not pay on time is about the worst nightmare possible. They are the ones that have to waste time nagging a client to pay, they are the ones who pay capital costs for the money they aren't receiving. While a receivables exchange idea doesn't really solve the problem that small business owners have with deadbeat clients altogether, it does manage to offer a reasonable workaround.

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