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The WSJ reports on this question almost daily now:  When will banks start lending to small businesses again?  Greenwich Associates partnered with Ftrans, surveying a host of community banks, to gain insight into the issue.  Dan Drechsel talks about the results of that study and his perspective on the outlook for bank lending to SMBs over the next 18 months.


Next up:  Will banks help SMBs recover?  Is there actually a demand from SMBs for financing?

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There were times when I lay down on the floor at night, close to crying, and said, “I’m done.  I can’t make payroll.”  Then my wife would come over and kick me and say, “Get up and figure it out.”  One time, I got a customer to prepay us.  Another time, I came into the office and said, “Oh, by the way, we’re changing payroll dates.”  That bought me 10 days.

This month’s issue of Inc. is full of 3-minute case stories of entrepreneur productivity.  The above quote comes from Josh James of Omniture which recently announced its acquisition by Adobe.  It caught my eye because of how honest it was.  If you are running a small business, you have to have had the same gut twisting night at least once.   Josh is a creative guy and he brought creativity to solving his cash flow crunches.

What was the most creative approach you ever took to solving cash flow problems?

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“Small businesses can’t survive if they can’t get customers to pay bills,” says Edgar Ortiz, president and CEO of Strategic Analytic Solutions, an Atlanta-based management consulting firm, a guest columnist for the Atlanta Journal and Constitution this past weekend.

I read that, and maybe because of the recent success of the New Orleans Saints, I immediately thought of an expression I heard quite often in the three years I lived in New Orleans, “For True!”

Ortiz opines further:

Credit policy and debt-collection processes are fundamental requirements to run a profitable business. 

Knowing who to approve for credit, how much credit to extend and how to collect are key responsibilities of successful business ownership.

I can almost feel heads nodding in agreement.  But the reality is that most small businesses are afraid to know the truth about their customers’ credit because they are terrified to turn away potential business. 

Small businesses can fail if they don’t understand the value of credit intelligence and accounts receivable and collections practices for all the reasons Ortiz outlines in his article.  Kevin Kiernan, FTRANS VP of Sales, just yelled over to me from his office, “Hey, I just scheduled lunch with that Ortiz guy!” Maybe he’ll come back with some more small business wisdom.

Ortiz’ article is a must read for small business owners.  For True.

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Now that I’m back at my desk after the holiday break, I came across this news note from WXIA –TV and the Metro Atlanta Chamber of Commerce President, Sam Williams. 

 *According to Williams, thinking “small” may pay off big in the long run. “This economy is going to turn around when small business turns it around,” he said.

Even in a city that has the 3rd most Fortune 500 businesses in the U.S.,  Mr. Williams points to the role of small business growth in growing the economy overall and highlights the current financing obstacles small businesses face.

With bank lending slowing, small businesses must be open to alternative ways of expanding their working capital.  FTRANS helps small businesses get the funding they need to begin growing again.

Excerpt from the full article:

As business and political leaders met in Washington to discuss job growth, Metro Atlanta Chamber President Sam Williams offered his own thoughts: “The private sector creates jobs. The government cannot create sustainable jobs over the long period. I think the biggest part of our economy that needs help is small business owners.”

According to the Small Business Administration, small businesses account for 99.7 percent of employers. They employ more than half of private sector employees and they account for 44 percent of the total U.S. private payroll.

In a conversation with reporters Thursday, Williams said the scarcity of credit is holding small businesses back. “Availability of loans and financing from the financial industry. They’re being pushed down a lot by the regulatory environment that’s coming out now and the whole aftermath of the financial crisis,” he said…

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Inc. Magazine announced it’s prestigious Inc. 500 list today, and FTRANS is listed as #345.  From 2005 to 2008, FTRANS achieved a record 718.4% growth making it one of the fastest growing private companies in America.  Congrats to all of the FTRANS team for the accomplishment and hard work!

500_color stacked

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Expansion, Slowdown, Downturn, Recovery.  If these are the four phases of the business cycle, we’re all intimately familiar with Slowdown & Downturn, but the question is – how far away are we from Recovery?  The NY Times published an interesting article in July suggesting that based on the predictable cycle, we should be headed in that direction.


So, if that is the case, what are the preparations to position yourself for the turnaround?  Norm Brodsky for Inc Magazine enumerated his top ten lessons learned from 29 years as an entrepreneur and included (#2) “A sale isn’t a sale until it is collected.”  While it’s tempting to focus on sales, the reliance of growth on swiftly converting sales to cash cannot be overemphasized.  Though outsourcing the processes associated with Accounts Receivable collections, FTRANS can vastly improve your access to capital and days sales outstanding.

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In light of recent developments at CIT Group, one of the largest credit protection providers in the U.S., it is clear that there must be alternatives to traditional methods of trade credit protection.  In today’s economic environment, it is simply insufficient to ask a potential customer for a credit application up front, check a few references, and fail to stay on top of an ongoing review.

That’s why FTRANS is migrating its customers to an innovative credit scoring model.  This model uses front-end credit data to qualify a small business’s B2B customers, eliminating the need to purchase blanket insurance on all of a business’s trade credit. This strategy, similar to how B2C companies issue individual credit checks prior to extending personal credit, enables small businesses to make better- informed decisions on which customers are worthy of trade credit. 

“In today’s economic environment, it is simply not enough to ask customers for a credit application up front and check a few references,” said Dan Drechsel, CEO of FTRANS. “At FTRANS, we’ve developed a model to help our customers determine the creditworthiness of their buyers. Small businesses need stability now more than ever and using a credit  policy based on solid credit information is one way they can insure themselves without entirely relying on a third party.”

And FTRANS clients like it.

“We switched to a credit scoring model because we can’t afford to take a hit from bad loans and there’s no guarantee our credit will be fully insured by third-party lenders that may not be able to withstand the recession themselves,” said Mark Wecker, CFO of Southland Graphics. “FTRANS’ credit scoring policy is a simple, precautionary step I can take to ensure that I’m working with the right customers and protecting my business.”

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Sramana Mitra writes about FTRANS on her Deal Radar blog today.  Deal Radar highlights the details and marketing opportunity of emerging companies to watch.  The article outlines the history of both John and Dan, explains how FTRANS works, and the FTRANS target.

On of the most interesting parts is an explanation market opportunity for FTRANS:

“The total addressable market for FTRANS is made up of SMBs in the US with annual sales under $200 million. These businesses sell more than $8 trillion goods and services to other domestic businesses and governments annually and self-fund these transactions at $1.2 trillion, annually. Firms with over $200 million in sales have greater access to reasonably priced capital and can operate credit systems for just about 2% of sales while smaller firms may spend 3%-5% to operate credit systems. FTRANS sees an opportunity to move this financing to financial institution, such as banks and thereby facilitate more efficient access to capital for SMBs.”

The article notes that there were $8 trillion in sales for companies that could significantly benefit and grow from the FTRANS product offering.

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The most common question we get at FTRANS is:  how is your solution different from factoring?  Before we get into that, let’s recap what types of factoring are out there: 

  1.  True factoring is the purchase of accounts by a third party and a transfer of risk from the SMB to the factor.  Not only is it very expensive, but it also puts your reputation at risk, as factoring invoices is done on a one-off basis and there is no incentive for a factor to maintain your solid client relationship.
  2. ‘Receivables Discounting,’ an alternative kind of factoring, that you are liable for and is now more common than True Factoring.  It’s expensive as well, and again, there is no incentive for a receivables discounter to carefully manager the relationship with your buyer. 

Now that doesn’t sound like the best way to run a business.  Let’s break it down more and look at the 5 key ways FTRANS is different from factoring: 

  1. FTRANS is significantly less expensive than factoring and accounts receivable discounting.  Traditional factoring costs as much as 20 % – 30% of an invoice.  FTRANS costs significantly less than that.
  2. FTRANS is a customer-friendly alternative to factoring.  With FTRANS, you have the discretion to maintain your customer relationships.  You still send the invoices, and your buyer sends payment to a lockbox, addressed to you.
  3.  Unlike factoring, where the SMB makes discrete decisions on factoring each invoice, our system facilitates the capture of 100% of your A/R.  You see a continuous view of your cash availability position with the bank, and you can drill down into the detail of your credit administration.
  4. Due to the credit background investigation completed by FTRANS, you have ongoing significantly enhanced insight into the credit quality of your buyers.
  5. Any disputes you face as a borrower, you now have the assistance of FTRANS as a professional third party.

On the other hand, FTRANS preserves a key advantage of factoring – its operational simplicity.  We provide you with virtually the same ease-of-use as accepting a credit card for payment.  FTRANS designed this new approach in B2B trade credit to be simple, safe, and based on familiar business processes.

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Have you ever tried to get good information about who your potential customers are?  We are working on a project to draw a picture of our ideal customer. That got me thinking. What if there was a dependable source where I could learn key information about my target market? What if I could find out good, reliable information on the average size of companies within a SIC code in my geographic area?

If you are a Peachtree accounting software user, which probably also means you are a small to medium business, it’s likely you cannot buy sophisticated market data. The latest version of Peachtree Software includes a module called Business Analytics. Business Analytics is primarily a tool to benchmark financial results against other businesses, sliced and diced by region, size, industry, etc. Why not use it to learn about your competitors or your customers? With more than 500,000 customers, the Peachtree userbase is an information gold mine. Plus, the information gets more valuable as more and more Peachtree customers use Business Analytics. And, get the word out about this new module; it can only help you.

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