How Factoring Can Help Your Cash Flow

 

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Mr. Biz Radio: How Factoring Can Help Your Cash Flow


Unedited transcription of the show is included below:

Welcome to Mr. Biz Radio Biz Talk for biz owners during the next half hour, Mr. Biz, Ken Wentworth, leading business advisor, and two time bestselling author we'll cover topics that will help business owners run their companies more profitably and more efficiently. If you're ready to stop faking the funk and take your business onward and upward, this show is for you. And now here's Mr. Biz Ken Wentworth. All right. Welcome to another episode of Mr. Biz Radio with the Mr. Biz, Ken Wentworth.

And this week we've got a guest to talk about a subject that I'm sure is going to resonate with a lot of our listeners, especially giving, given the financial situation that we've been in for the law. I mean, gosh, it's been a year now. Exactly. So I'll make downturn, which has caused a lot of financial issues with companies and cash flow issues. I know it's funny when that all started to happen, my, you know, people were asking me, how is your business doing? I'm like, Oh my gosh, my phone's ringing off the hook because of course people are looking for new solutions and new ways to, you know, improve their cash flow and things like that. And so that's why we're talking this week with the CEO of Porter Capital Corporation, Mr. Mar Porter.

Welcome to the Mr. Biz Radio.

Thank you, Ken. I appreciate you having me on today. Yeah,

Yeah, absolutely. Now I have to say you guys loyal listeners know that I'm based in Columbus, Ohio, which is home of the Ohio State University. And I I'm, I hate to say this. I had, I'm having Marc on the show, even though he's based in Birmingham, Alabama - home of the Alabama Crimson Tide who kicked our butts in the national championship game. I'm still, I'm still a little sore about that.

Well, you, you you'll get past that. There's always next year.

Yes, yes. Well, yeah, but for Alabama next year is another national title. It seems for the last you know, eight, 10 years or so my gosh, what a, what a run you guys have had.

I know. And you know, you bring it up and they were talking about recruiting here recently and they said that Nick Saban has recruited the best classes ever recruited in history. And I went, Oh my God, I can't imagine what that's like.

I know I saw the same thing cause you know, the ho I stayed had a really good class and same thing they were saying, this might be a high state's best class ever. And yet they're still ranked behind Alabama's class this year. I'm like, Holy crap. What what's Alabama got coming in. Jesus please.

Yeah, I know. It's ridiculous. Yeah.

They, those programs have it dialed in for sure. I mean, I could see why people in in the college football fan world are getting started, get a little frustrated by it. It's almost like the NFL, you know, the, the run, the Patriots had people get tired of seeing the same teams dominating every year.

I like the New York Yankees of baseball college. Yeah.

Yeah. I mean, it's just so dominant. Oh my gosh. Well, so, so aside the college football diversion Marc, tell us a little bit about your entrepreneurial journey. You know, what led you to, to creating Porter Capital and starting it and all that,

You know gosh, we we've been in business now 30 years. This is our 30th year. And before that I had a, I guess that was in the late eighties. I was buying small businesses that either had a problem and most small businesses usually have a management problem more than anything else. And if you can figure out what the management problem is, and they have a decent product, you can make something out of it, or you may, you know, what I did was you may decide, you know, they really don't have a good product or good process and maybe you need to liquidate it. And I did that a few times and made some money that way, but I was on a plane from Dallas to Birmingham years ago, and I read an article about financing, which was called factoring, which is financing accounts receivable for small businesses.

So I decided I would do a little research and, you know, Ken, back in that day, you know, you didn't Google something and find out what you need to know about it. You had to go to the library for two days, but you can dig up and I'm sure you're familiar with that. Oh yeah. Yeah. And so I did that and I also did some research and found out that there were, there was nobody in Alabama, Tennessee, Mississippi, or Louisiana. There were one or two in Atlanta and one or two in Florida. And there were probably only a couple of hundred of these type of financing companies in the country. And nobody understood what it was.

So not only did you have a product, but you had to sell them on how the product worked, which is really takes a while to do. But I managed to make 327 sales calls in some capacity before I got the first client. And let me tell you, there were many days I was doubting myself, whether it was whether it was something that was viable or not. But once I got that first one, I think two more came within the next 10 or 12 calls after that. And as I say, the rest is history. It only takes you 30 years to be a success.

Yeah. To be an overnight success. That that is a, a, an absolute, a mastermind in I call it consistent perseverance, you know, as entrepreneurs, as business owners. Gosh, what was your mindset when you're, you know, on call number 250 and you're over 250,

You know, I, I, you, you have to want it really bad and be determined and you have to believe in yourself and believe in what you put together, that it will work because, and if it's not, and you come to a realization, not say, what am I missing or what do I need to add to this to make it successful? And just think you have to stop and ask yourself that.

Yeah, I think that's super important. And I think that's what, honestly, I tell folks all the time and I hate to say this, it sounds a little bit negative, but you know, not everyone, in my opinion, at least not everyone has the mindset necessary to be a successful entrepreneur. Because they're those folks that they get knocked down seven times and they stay down, they don't continue to get back up. And so, you know, I've had folks that I've mentored that I've said, you know, I don't, maybe this isn't your jam. You know, maybe it's this, isn't what you're meant to do.

I tell you something. Can I tell people to do that? That helps. I mean, first off you gotta have the desire to want it and you've gotta want it pretty bad. And then they say, yeah, but I've got this job that I might not have said, you know, that's fine. You can go down to old tracks. And they said, what do you mean? I said, if you will get up every morning and say, I'm devoting five minutes or eight hours today to that dream to get to where I want to get to, you will get there. It might take you years to do it, but you will get there if that's what you want.

Yeah. Yeah, no, I agree. A hundred percent. And that's, again, that's what I call that consistent perseverance. You know, it may take you, you know, like you said, you may have a plan to get to a certain goal in six months and it might not might take it eight months. It might take a year. It might take you three years. But if you continue to be consistently persevere, you will get there again. Maybe it just takes you a little bit longer. Yeah,

No, I, that that's, that's my philosophy. You just gotta be determined. Okay.

Well then you, you, the proof is in the pudding, as they say, you know, that have your first sale on your 327th. Call that again. That's a mastermind and in a consistent perseverance, my gosh, I mean, I'm pretty mental, mentally strong person, but man, I tell you that I can imagine that was a trying time, especially when you're trying something new, you know? And you would probably, at some point in there, we're starting to wonder like, is this something that's viable? Maybe there's a reason why there aren't there weren't competitors in the area,

You know, it, you know, that was a wake up call for me. The next wake up call for me can, it really is. It's kind of interesting and funny. And this was like 28 years ago, I needed a bank line. And so I started going around to banks and said, I need a half, a million dollars, you know, for my business to get started. And I got turned down and turned down and you know, probably six or eight times, maybe nine, I don't even remember.

And finally, I decided I needed to ask one of these lenders. I said, what, what is wrong with what I'm doing here? That you guys don't like so much? What, what is it? And was almost like giving him permission to tell me because a lot of times they won't tell you. Yeah. And he says, you know, he says, you're not asking for enough money. And I said, what do you mean? He said, well, a 500,000 and a line doesn't excite us, but a million would.

Oh, wow. And so I just, they just hit me like a ton of bricks. And so I started going around and talking to people about a million dollar line. And within two weeks I had three people. They want to give me a million dollar line.

Wow. Well, let's, let's dive into that. Let's hit a break here and let's dive into that as we start the second segment and come back on Mr. Biz Radio

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Check out both the Mr. Biz’s national bestselling books, “Pathway to Profits” and “How to Be a Cash Flow Pro” on Amazon. Now, once again, here's Mr. Biz.

All right. Welcome back,

Mr. Biz Radio, it's time for the Mr. Biz tip of the week. And this week's tip is you often don't realize what you CAN do until someone tells you that you can't.

Somewhat related to what we were just talking about with Marc during the first segment. And speaking of can't, do you lack the cash flow needed to expand your business, but maybe you don't meet the qualifications of a traditional bank loan. If so, invoice financing with you guessed it, Porter Capital can help you get the working capital you need, when you need it. Visit www.PorterCap.com/MrBiz  to apply for a free quote today.

All right, Marc. So you were telling us about the, the, the, you weren't asking for enough money. So that's interesting, and I'm sure a lot of our listeners out there would love to hear that. So, so what, what did you do? You pivoted obviously you said, okay, well, half a million is not enough. Did you go to a million or how did you handle that?

I did. I put proposals together to go out for a million dollars. And I think what happens too is, you know, these guys get additional fees with additional money. And even though you may have not have needed the money at that point in time, if you wanted a loan, that's what you needed to do. And so I probably pay several thousand dollars more than I really wanted to pay. Cause I really didn't need that extra money. But you know, at that point I couldn't even get the first 500, so I had to do it.

Yeah. It's interesting. I mean, it's completely counterintuitive, right? You're getting rejected for half a million and they're saying, yeah, it's not enough.

And I, I never could understand, you know, that philosophy just really flipped it on its for me when I realized, I said, Oh my God, I would never have thought of this. If I didn't ask the question. And a lot of times when you're dealing with a lender of any sort, you know, don't ask them a question out, right. Almost ask the question as if you know, I'm giving you permission to tell me bad news and please tell it to me so that I can do a better job in my business and know what I need to correct if there's something not right.

Yeah. No, I think that makes sense. I mean again, how do you know if you don't ask the questions? Right. So I think that's an important lesson, not only with lending, but with a lot of the things in businesses, making sure you ask those questions and stay out in front of those. So you had mentioned when you first started Porter capital you, I, it sounds like you were primarily just doing factoring, correct? Correct. Okay. So why don't you being that you're an expert in the field and we we've talked about factoring on the show over the years, a few different times, but explain to the, to our listeners, what, what is factoring? How does it work?

Factoring is, is to help businesses with their cash flow. A lot of times you get in here and you made me profitable. What have you, but you don't have enough cash and you may not understand why. And what happens is if you're running a business and you're selling any type of widget and you sell a hundred thousand dollars at the widgets that month and businesses is starting to improve and next month you're going to sell 125, 150,000. Well, that means you have to have more inventory that may mean you have to have more employees that may mean you have to have a piece of equipment, additive, some sort. And what we do is come in and when you invoice Walmart for that product, what have you, they may not pay you for 45 days, sometimes 60 days. So as you are getting bigger and you're profitable, you're getting cash constrained because it's all getting hung up in that chain to where Walmart owes you that money and you can't get it fast enough. You come to somebody like Porter Capital, and we will look at the invoices, verify them that they are good, that they owe you the money. And we can usually do that in less than 24 hours and give you a big draw of maybe 85 to 90% of that money, right then within 24 hours so that you don't have that lag time of that cash flow.

Yeah. And I think so there's a whole bunch of advantages to doing it as well. And I think anyone out there, anyone who's listening, who deals with large companies, you know, I think you're being pretty nice when you said 45 days, Marc. I know a lot of my clients that some of their larger, you know, it seems the bigger the company they deal with the later, the longer it takes them to pay. I don't know if it's just all the red tape and all the signatures needed. Or they, the big, the big dogs just know they don't have to pay, you know, what are you going to do? Walk away. You're not going to walk away from a, a Walmart account for your business.

Interject. Something can real quick in here. That's important. You make a good point about the 45 days or 60 days. Now, mind you, we are pricing the product on the turn that you have on your receivables. And if you, we have a special division that deals nothing but transportation companies. And oddly enough, the transportation industry, most of those receivables turn every 32 to 34 days. And you say, well, gee, that sounds like that ought to be fine. Well, in the transportation industry, it's not, they need their money quicker than I am. So every industry is different depending on how long they take to pay. And that one is just real fast. A lot of the other ones are very slow as you well know, can, it just depends on what industry you're in to what the, what the turn is going to be. And if the turn is extremely slow, you need this product.

Yeah. And so there are a bunch of advantages of walk us through some of the advantages of factoring versus like a traditional loan.

Well, for the factoring, you're probably going to pay more, but you're going to also have somebody that's going to be doing verifications to make sure the customer is satisfied with the product they receive. And if they're not, then our people are required to call the client back and say, Hey, we've got a little problem here. Here's what it is and let them fix it. And then we'll also do the collections on them as well. And you know, a lot of times people think of collections is people badgering, someone it's not as much badgering as much as it is just a refresh daily reminder. And they will pay you for that. And if you start out with Porter Capital, and you've got say $250,000 line of credit, and you're all of a sudden about to put best buy on, that's going to start buying $50,000 more product from you a month.

You can come to us. And usually within 24, 48 hours, we can take your line from two 50 to three 50 or 400. Really easy. If you go back to a bank, they'll say, no, wait a minute. We just gave you $250,000 and you want another 150. And that was only like six months ago. We gave you that. And there's going to be a lot of education with them in that. And it's going to be a lot of time before you finally get that raise and you didn't know best buy was going to come in without order until it actually came in. And now you're under the gun to make it happen.

Yeah. Well, and especially in that situation, you know, that's a, that's a big fish to land depending on the size of your business. You know, you don't want to, especially with their initial order, you don't want to have it delayed. You don't want to have them waiting or you may lose that account.

That's correct. And if, and if, if we can act within a few days, that's usually just fine. If you end up getting stalled and now it's a number of weeks before you can get that order in house, because you're going through a bank, you might lose it.

Right. And imagine that the hard work, your sales folks, your business development folks have gone through to land that account and then to lose it from something of just not having the working capital necessary. Because you know, I've had that happen with clients as well, where they've got, they land that big account and the, and or they can't land it. And the reason they can't as the, the larger customer in this case best buy says, we don't think you have the wherewithal to be able to meet our needs in a timely manner. So we can't do business with you. So that's a, I think another very important distinction to make. And so right along those lines, you know, just, we're just talking about, I mean, if you're tired of waiting 60 plus days, or sometimes more for customers to pay invoices, invoice financing with Porter capital can provide cashflow help.

As, as Marc just mentioned as little as 24 hours. So to get the working capital you need, when you need it, visit www.PorterCap.com/MrBiz  to apply for a quote today, get on the phone, find out and they'll offer a ton of other products as well. You can get on the phone, talk with them, tell them what exactly, what your challenges are. They can connect you with the right products that make the most sense for you and help with your cash flow.

So come back after the break and we're going to get some tips from Mark on how to obtain necessary financing.

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All right. Welcome back to Mr. Biz Radio with me, Mr. Biz, Ken Wentworth this week again, we're talking with Mr. Marc Porter, who is the CEO of Porter Capital Corporation. And he's been dropping all kinds of knowledge on us, the first couple of segments about how he started his business, how it's evolved and some of the key aspects of, and advantages of using factoring. So with that, let's get into Marc. You've been in the industry for so long. Now you've got a ton of experience. Talk to us about some tips you would give to business owners on when they need to obtain financing. It could have been a variety of different forms. What are the, some of the things that you see that most often business owners maybe neglect don't realize when they need financing, things like that.

You know, Ken, one of the first things, I try to tell people when you're looking for funds, you, you, you probably are to decide what it is you're trying to do and do family and friends. Are they interested in what you're doing? And they may be interested in investing or may be interested in lending you some money. That's the first, that's the first paper you should go to man. And some people out there may say, well, I don't think my family and friends want to be involved and that's okay if they don't, but I'm saying that's something you ought to give it a try. And then the next category is you're looking for a lender that works best for you. And that might be a banker. That might be a factor that might be an asset based lender. That might be an equipment lending person, an inventory person, but it's real important.

You find that person that you work well with because when you get into pantry, you getting a tight, that's the person you want to be in bed with is somebody that understands you and understands your business and willing to work with you. And also you need to decide on what you're boring. This money for is the money for cash flow and you need factoring or ABL, or is it money you need for inventory? Just that, could it be that you need the money for a build-out in your office or a build out in your warehouse of some sort, or maybe you're producing such widgets that you've gotten to the point to where your equipment is older and you need to update it and you need an equipment lease in order to get a newer and better equipment. A lot of times you have to kind of test these waters with each of these different lenders to find out if you qualify for that, you know, a lot of times if you can find out what their qualifications are that times out, whether you fit in, in with what they're looking for. Go ahead. Can you,

Yeah, I was just going to say, what do you, what have you seen over the years that is the most common challenge or that creates a hiccup in the process of someone seeking financing and what is the most common thing you would S you would say you've seen it's, you know, they, they don't have X, Y, and Z. What does that X, Y, and Z,

You know, I, this may sound a little strange to you, but you know, one thing that we find that people are not as prepared when they go to get a loan or to deal with any type of lender they're walking in unprepared. And what I mean by that is you should have pretty good working knowledge of how your business works. Be able to explain it to people in about three minutes to where they understand it. More than that, though, you need to kind of say, I need to have my business financials. If they're done and updated, that's very important to have. If you have a personal financial statement, you want that updated and ready to go. If you've got your taxes done and what have you, and you have the tax returns, that's good to have. And if you have equipment or other collateral, you have, if you have some recent appraisals or past appraisals, I would bring those with you too, as to have that.

But a lot of times, many people are not prepared to do this. And I make it a point every March or so about this time a year is to do all that financial information all at one time, because what happens is you get during the year and then you want to go see your lender. And if you've already sent it to them in March, you don't have to think about it again. You know, you've already sent them the taxes. You've sent them the personal, you send them the business numbers, and what have you, and, you know, taste should be ready to go. And if there's one thing I stress, please do yourself a favor and do a little homework on front end and get that all prepared.

Yeah, I would say, I would say I've seen that on. Even my end, working with clients is I've seen exact same thing. They just, and I think some of it, honestly, in their defense somewhat I would say two things I think is maybe the reasoning behind that. Number one, most business owners don't want to have to deal with it, right. It's almost like the, you know, putting their head in the sand. And the second part, I think is some of it's, they're just naive and they don't realize now you would think someone would say, Jesus, if I want to borrow money from someone, of course, they're going to want to know the financial health of me personally, and my business. So you, you would think people would know that, but yeah, I think that probably delays the process a good bit often and not having those things all prepared.

No, that absolutely does. And there's, like I said, one thing I recommend is try to start getting your head wrapped around it. A lot of times, most entrepreneurs they're good at something. And usually that's not something they're really good at and they really don't like it. Right.

Well, and here's the thing I've, I've talked about this on the show before. I mean, the, the general lack of knowledge of even just consumer finance, I think, you know, that I've seen, you know, even back in Oh eight Oh nine, when the, you know, we had the economic crisis and folks were losing their homes and things, and you saw so many people really, I mean, a dry grown adults, you know, 30, 40 plus year old people that truly don't understand how a mortgage even works. And it was, it was very eye-opening for me during that time.

No, and I, I agree with you. It's, it's sad to say at times, but it, they just need to be more prepared for that, you know, and during the, and what have you, it is amazing to me how many small businesses got whipsawed so bad and they didn't have any reserves to call on upon either to get it to the next segment. And mind you, I feel like a lot of the bars and restaurants and what have you, a good portion of them will go out of business. But I, you know, I'm such a believer in this country and the entrepreneurial spirit that a great percentage of more opened back up and 18 to 24 months.

Yeah. I mean, demand will be there. So I agree with you. We will come back. They may open in a different form or fashion, but I agree with you. They will we've only got about two minutes left, but one quick question, I get this often, I'd be curious to hear your take on it. Marc is, do you recommend a business open a line of credit even before they need it? So let's say they're anticipating that in three to five years, they want to have that sort of safety net per se, and have that line of credit. Maybe they don't really even tap into it initially, but is, it is a good idea to open that before you even might need it?

Oh, absolutely. That's because what you're doing is anticipating what is going to happen in the future. And if you don't start getting prepared for it now, you won't be ready for it. Don't wait until you need the money and then go get it. It's a good idea to go ahead and get started early and just tell you a quick story can, when I got out of college, I said, gee, you know, I need to establish some credit. And I grew up in a very small country town here in Alabama, and I went to the bank and I said, I need to borrow $300. And I said, $300. And I borrowed a $300 and I paid it back. And then I went back the next time and borrowed $600. And I kept doing that year after year after year. And a lot of times I had no use for the money. It was just a bill that credit.

Yeah. Again, that consumer finance knowledge and knowing how important that is. More people need to understand that. You know, I I'm, I definitely agree with you, I think anticipating and having that line of credit as that safety net, if you need it, especially, probably came in handy for a lot of folks during the pandemic and the economic downturn we experienced with that super important. Well, this week we've been talking with Marc Porter, who's the CEO of Porter Capital Corporation. Marc. I really appreciate you coming on the show. You shared a ton of knowledge with us, and I'm sure it's helpful for a lot of the listeners.

Okay. Ken, thank you for your time. I appreciate you having me on.

Yes, for sure. So again, go out to www.PorterCap.com/MrBiz. You can find all the different products. And we talked primarily today about factoring with, they offer a bunch of other products as well, that might fit the needs that you have great team down there in, in, gosh, darn Alabama, but we'll, we'll give them a pass on that one.

So thanks for listening guys. Thanks to our show sponsor. Porter Capital. Have a great week and don't forget as always cash flow is King.

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