Accounts Receivable Factoring and Amazon: Part II

If you are a small business owner retailing consumer products or services and you are not offering consumer receivable financing to your subprime as well as prime credit rated customers you are at a considerable disadvantage in today’s marketplace.  Even as our economy at the time of this writing, is in the eighth year of expansion, the retail industry itself is facing an existential crisis.  For example, the parent company of both Sears and Kmart stores, Sears Holdings, said recently that it had ”substantial doubt” as to its survival prospects.  This is due largely to the fact that it has lost more than ten billion dollars over the last six years.

Urban Outfitters likened the troubled retail industry to a housing bubble that has popped. In the age of Amazon.com retailers are taking a hard look at the future of their industry.

The thirteen billion seven hundred million Amazon recent acquisition of  the natural foods grocer Whole Foods Market stunned the marketplace.  In addition Amazon was said to be considering an entrance into the pharmaceuticals market, industrial supplies, auto parts, message apps and business lending.  

To compete in today’s marketplace the entrepreneur who is marketing products and/or services directly to the consumer will have to become more creative.  One way to achieve this is through accounts receivable factoring.  Accounts receivable factoring, sometimes known as consumer receivable financing or installment contract financing, is a way of offering creative financing to customers not only with A credit but with credit scores as low as 620.

By factoring consumer notes the small business owner is making use of a liquid asset which they may not realize they have.  A consumer note, for example, in the form of a retail installment contract can be sold in order to create capital for such things as:

To Launch An Advertising Campaign

To Take Advantage Of Supplier Discounts

To Make Quarterly Tax Payments

To Make Payroll

To Bring On More Productive Sales People

To Eliminate Unnecessary Back Office Staff Doing Accounts Receivable Work

To Initiate A Creative Marketing Concept
By utilizing consumer receivable financing a small business owner can create liquidity through selling their consumer notes and thereby not having to qualify for a loan or a line of credit.  By factoring their consumer receivables the small business owner  is not taking on the burden of bad debt; because they simply are not taking out a loan, they are selling an asset.

In many instances where the business owner’s profit margin is considerable and cash flow is of utmost importance this makes sense to do.  In today’s market place where the small business person has to compete with giants, the small business owner needs to take advantage of every asset they have in order to be competitive.  Consumer contracts are one asset which many people are not aware that they can put to use for themselves in order to create immediate cash flow, and so increase their profitability.  The beauty of this method of non-traditional financing is that it does not show up as debt on your balance sheet, because you have not taken out a loan, rather you have sold an asset.  ​