  Cash Management Merriam -Webster defines opportunity cost as the "cost of making an investment that is the difference between the return on one investment and the return on an alternative." By carrying high aging receivables, your actual return on investment is significantly lower than your return on investment would be if you were able to reinvest the cash when it came in sooner. The opportunity cost of lost potential sales is the truly damaging property of long outstanding accounts receivable. The effect of opportunity cost can easily be seen in the following example of a previous client of ours who was involved in the heavy machinery rental business. When the company lent its equipment to slow paying customers, the equipment would sit idle at job sites while quick paying customers went without equipment because it was already loaned out. Had our client sold first to those customers who would pay in quick terms, they would be able to turn their cash around faster. This would allow them to reinvest in more machinery to facilitate those who pay in quick terms, further increasing company sales. Instead of having the company's cash sit idle, cash stream and growth would increase. November's Feature  “An equity investment of any kind can often seem like the easy way to go at first. However, giving up a portion of your company is a very permanent thing. Some situations truly call for an equity partner to come in. However, in the case where working capital is needed, Prairie’s factoring or purchase order financing programs should be considered.” - Dylan Morgan, Executive Vice President What Others Are Saying About Us "Our company had expenses to pay before our customer would pay us. We were looking for alternative financing. Prairie Business Credit was highly recommended from our bankers. Prairie Business Credit completed what they promised and helped us grow. They are very supportive partners."
- President of Disaster Recovery Company
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  Credit Checks While you may not want to take the time to perform a credit inquiry into a company over a small, one-time invoice, taking an active role in assessing potential client's creditworthiness is a critical goal of a successful company. It may be tempting to accept that large order on good faith because you feel asking for credit references may hinder closing the deal, but it is a risk a small and growing business can not afford to take. Credit references are common practice in industry and commerce, and asking for one does not imply a lack of trust. It is simply the prudent thing to do before accepting large orders from unknown customers. Recently, a customer of ours accepted a deal with a company for approximately $30,000 in invoices to be billed in three stages. When the first invoice arrived at Prairie Business Credit, no credit work had been done on the customer. As part of Prairie working guidelines, an invoice of this size for the company in question was automatically subject to a bank and trade inquiry. This simple and standard form completed by Prairie's underwriting department uncovered that not only did the company have poor payment history, they currently did not have enough money to support the project. While our customer was out the value of the first invoice, approximately $12,000, they were saved from a loss of nearly $30,000 by simple bank and trade references. Although Prairie can not provide specific credit information on your clients, we are able to assist you in credit assessments and provide a recommendation to you as to what a credit limit we would assign them. This service is already included in the fee structure. Getting in the habit of requesting bank and trade references on new deals is a practice that can help prevent financial devastation. October's Feature  "This article talks about how the entrepreneurial road is sometimes a lonely one. Running a small business requires the entire team to be focused, and shielding that team from the rigamarole and the ups and downs can be necessary." Dylan Morgan, Executive Vice President, Prairie Business Credit What Others Are Saying About Us "We have never seen such growth in all the past 35 years we've been in business. On our way to a banner year! We appreciate all of Prairie Business Credit's support in the past years to help us get here!"
- President of Welding Company   When Should You Consider Factoring? When lack of cash keeps you from making the next sale, factoring may be a solution. When the benefits of factoring (including immediate access to cash, and the ability to continue production, make payroll, pay taxes, and/or take advantage of vendor discounts) outweigh the costs of factoring, then factoring should be considered. How to tell:
September's Feature  "This article gives an excellent perspective of why a great operating company may not be a great innovator anymore. The great operators of the world certainly do need to have innovative products and processes, but acquiring them may end up being the best path for them." Dylan Morgan, Executive Vice President, Prairie Business Credit What Others Are Saying About Us "Prairie Business Credit quickly assessed an existing borrower's financing needs, and they refinanced us out of that difficult credit. They closed what they proposed, and we've added them to our bank's possible refinance lenders in the Chicagoland marketplace." - Bank C&I Workout Leader 25 Years Has Taught Us... After being in business for 25 years, financing over 500 companies, graduating 70% of them to be bankable clients, we have learned a few things along the way.
Honestly assessing your product and service is what your customers do. Know what they think. An ongoing and built in mistake most entrepreneurs make, especially those with a close knit team, can and often do make is to reassure themselves that they are meeting their customer's/client's needs, without really knowing if that's true. All the best companies we've dealt with in the past few years, survey their buyers constantly. So should you. We're just starting. The answers can be both uplifting and a cold splash of reality. The customer is paying for your product or service so they are really the only opinion that matters.   Advantages of Factoring
August's Feature  "The article leaves me thinking about the wonderful complexity every small business displays. Being educated as an engineer, I do love my models, but to understand a business and its performance, since each business is faced with its own unique set of circumstances, you have to dig into each business individually to understand it. I think this gives great insight to why lending to businesses is so different than lending to consumers. I believe consumer behavior can be modeled fairly accurately, but a business is just too complex." Dylan Morgan, Executive Vice President, Prairie Business Credit What Others Are Saying About Us "Prairie Business Credit quickly assessed an existing borrower's financing needs, and they refinanced us out of that difficult credit. They closed what they proposed, and we've added them to our bank's possible refinance lenders in the Chicagoland marketplace." - Bank C&I Workout Leader 25 Years Has Taught Us... After being in business for 25 years, financing over 500 companies, graduating 70% of them to be bankable clients, we have learned a few things along the way.
"The importance of humor for the entrepreneur. I have always viewed entrepreneurs with a good sense of humor as also being humble and learners. They laugh to acknowledge the limits of their ability to predict their hoped for outcome of success. It impresses me that laughter is an acknowledgement that there exist many things beyond out control. And when those unpredictable situations encroach on our best laid plans they can be responded to with frustration or reluctant acceptance or the humility of self deprecating laughter. Laughter seems to me the most honest and healthiest of reactions. Its an open acknowledgment, regardless of the confidence with which we predicted our solo success, of our minimal understanding of the huge number of variables that must be commanded to achieve success as an entrepreneur. Laughing at our business struggles recognizes that only time and honest assessment and changed behavior will lead us to competent outcomes more than half the time. So I've found it's best to laugh and learn." - Trevor Morgan, Founder & President, Prairie Business Credit   How Does Factoring Work? Prairie Business Credit meets with you to help assess the company's cash needs. An application is completed and a processing fee is generally charged. Within a few days, we complete due diligence and review receivables in order to fund. We purchase collectible receivables for goods or services which have been completed, delivered and invoiced. Typically, Prairie Business Credit advances cash for 60-85% of the face value of the invoice. Your company gets immediate access to cash without waiting 30-120 days for the invoices to be paid. Upon acceptance, you may receive funding within 24-48 hours. Prairie Business Credit is reimbursed by collecting your invoices. Factoring is most often used as a stepping stone, to get your company in the position to take advantage of growth opportunities. Once your financial position makes your company more "bankable," you may qualify for more traditional means of long term financing. July's Feature  "I started Prairie when I was 46 and reasonably confident that I'd gained experience after 20 years in lending to reasonably assure our success. As all entrepreneurs know, starting a business is a journey of learning and no amount of training perfectly prepares you for the reality of making all the decisions when your own bank account is at stake in being correct. As a lender I am always more confident of taking on a customer who is experienced broadly in their specialty and biased towards those who have successfully navigated a downturn or two. Gaining that experience simply takes years and there is no substitute. This study confirms what our own anecdotal experience has been." - Trevor Morgan, CEO & Founder, Prairie Business Credit What Others Are Saying About Us "Prairie Business Credit quickly assessed an existing borrower's financing needs, and they refinanced us out of that difficult credit. They closed what they proposed, and we've added them to our bank's possible refinance lenders in the Chicagoland marketplace." - Bank C&I Workout Leader 25 Years Has Taught Us... After being in business for 25 years, financing over 500 companies, graduating 70% of them to be bankable clients, we have learned a few things along the way.
Good bookkeeping is invaluable. Your financial statements are like your scorecard. Without getting good immediate feedback about how your company is performing, you are operating blind. How can you fix things when they are wrong? How can you do more of what is working? There is no substitute for good bookkeeping and success without it will be elusive.  It's a seller's market for employees Words never before printed or even dreamed of in my lifetime by Bloomberg, June 5, 2018: “Job openings exceed those looking for work”! Like all news of plenty, there are downsides. In this case for anyone hiring who is looking for experienced and talented workers the availability of qualified help is very thin. It’s a sellers’ market. Good for employees and tough competition for employers. For small companies the difficulties in this kind of market are magnified tenfold. There is one absolutely common, huge problem for all entrepreneurs: hiring competent employees. There is almost no trauma our client’s have experienced that we haven’t. We’ve lost clients/customers money, we’ve been defrauded. We’ve had capital and borrowing problems. But none has had the power and effect of trying to hire good long term employees. The numbers are a cool objective explanation from a distance but nothing compares to the emotional and non objective toll a good or failed hire take on a small entrepreneurial company. When a company of 10 hires one employee, they’ve increased their work force by 10%. Boeing would need to hire 14,000 plus for the same effect, all on one day. We and our small clients have lost key employees and it's been enormously disruptive. We've hired some great employees and they've have an immediate positive affect. Our clients usually have fewer than 50 employees and their losing one key employee out of 50 is roiling. That is magnified tremendously as the total number of employees decreases. The one thing all of our thousand plus clients and prospects have agreed on over the past 25 years agree on is that finding reliable and productive employees is their single most nagging challenge. A friend who worked for several Fortune 500 companies in his 45 year career said the company he worked for with the best record of successful hiring (defined as keeping new employees longer than 2 years) succeeded 50% of the time. He claimed they were the best because they identified and removed the unsuccessful quickly, usually within 90 days. So large companies with full blown professional HR staffs are unsuccessful half the time in making good hires. Our conclusion is that the scientific method is the best in finding good help in small companies, i.e. theorize, test and measure the results. We’ve tried a variety of formal tests and worked hard to uncover who the successful will be by honing our interviewing skills. But we reflected that it’s best to do all those things, then hire on a trial basis only. The successful hires will reveal themselves, early, say in the first 3 weeks. Others will take longer but on reflection, we believe that you will know everything you need to know within 30 days. But even when you know, making a change is enormously difficult for the small company. Everyone is already fully occupied in performing the work of the company, not dealing with personnel problems and nobody wants to keep dealing with them. But it’s best to move on quickly when someone proves they will never work out and move on to finding the next candidate. I’d like to say we’ve been more successful than my friend’s low bar of 50% but like every entrepreneur we know, we haven’t solved the problem either, even after 25 years. And with all the good employment news it’s about to get much tougher for small companies to hire well. June's Feature  ""Positive talk" has been popularized in professional sports, especially golf for the past 20 years. There are astounding anecdotes especially in sports. Sports psychology is an obviously very good experimental laboratory because of the tremendous rewards and penalties and the immediacy of the feedback from implementation of the theory. The current advice to succeed at going from negative talk to positive talk is following routines similar to physical training, always a challenge." - Trevor Morgan, CEO & Founder, Prairie Business Credit What Others Are Saying About Us "We have never seen such growth in all the past 35 years we've been in business. On our way to a banner year! We appreciate all of Prairie Business Credit's support in the past years to help us get here!" - President of Welding Company 25 Years Has Taught Us... After being in business for 25 years, financing over 500 companies, graduating 70% of them to be bankable clients, we have learned a few things along the way.
A business should focus on the things they do best. Most times, their expertise lies solely with the product or service they provide. For all the other things that a business owner has to get done, find qualified professionals to do it for you. A business owner's time is far too valuable to spend on things not core to their business or expertise.   Who are Good Candidates for Factoring?
May's Feature  What Others Are Saying About Us "We have never seen such growth in all the past 35 years we've been in business. On our way to a banner year! We appreciate all of Prairie Business Credit's support in the past years to help us get here!" - President of Welding Company 25 Years Has Taught Us... After being in business for 25 years, financing over 500 companies, graduating 70% of them to be bankable clients, we have learned a few things along the way. When you as a business owner enter into a contract with a customer, make sure you understand everything it entails. Before you agree to bind yourself into any agreement, you must know what you are agreeing to do. Can you live up to your potential customer's expectations? Do you understand what your customer expects of you? Too many times we have been the ones explaining some potentially devastating provisions in vendor agreements that our clients have agreed to. Provisions they never would have agreed to if they had read the entire agreement. The time to negotiate those things is before you sign.   Is Prairie Business Credit Expensive? How Much Do They Charge? The fee varies with the amount of time it takes to collect the receivables. The average fee is often in the range of 2%-5% of the face amount of the invoice. Factoring costs are tied only to sales. Will the benefits of factoring outweigh the cost? This is the most critical consideration. The cost of capital should be viewed as an investment which will advance the business, just as is a new piece of equipment is an investment. You shouldn't spend money on a piece of equipment unless it increases sales and profit or reduces costs. The cost of acquiring cash through factoring should be weighed in the same way. The immediate and ongoing availability of cash must help to increase sales and profits. The following exhibit summarizes the financial impact on an actual company that uses factoring to fund its sales growths. This company began with $1 million in total sales. By factoring, they were able to double sales to $2 million in the following year. They paid $40,000 in factoring costs, and increase their profit nine times, to $180,000. The factoring cost is 4% and $1 million of receivables were factored in the second year.  April's Feature  What Others Are Saying About Us "We have never seen such growth in all the past 35 years we've been in business. On our way to a banner year! We appreciate all of Prairie Business Credit's support in the past years to help us get here!" - President of Welding Company 25 Years Has Taught Us... After being in business for 25 years, financing over 500 companies, graduating 70% of them to be bankable clients, we have learned a few things along the way.
A shipment isn't a sale. New opportunitues are great, but make sure you know who your customers are. Do they have the wherewithal to pay for your product? Do you understand the terms on which they have agreed to buy from you?   In the Age of the Internet, We Still Do Business Face to Face Prairie Business Credit has been meeting with entrepreneurs face to face for 25 years. We get to know our clients to develop a trusting relationship and do our best to understand their cash flow needs. Whether our clients are in Hong Kong, Oshkosh or South Carolina, meeting with our clients face to face is a crucial element to a successful partnership. When you are trying to provide an entrepreneur the cash they need to grow, communicating over the internet or over the phone just doesn't work. March's Feature  What Others Are Saying About Us "From my first meeting with Prairie Business Credit, they have gone out of their way to meet with my executive team to gain a better understanding of our current and future lending needs. They have since come back with a very attractive, flexible, comprehensive and competitive contract that puts us in a stronger position to grow and go after the doors that God continues to open. I would highly recommend Prairie Business Credit!" - President, Lighting Company 25 Years Has Taught Us... After being in business for 25 years, financing over 500 companies, graduating 70% of them to be bankable clients, we have learned a few things along the way.
Never be afraid to admit that you don't understand. Simply take the time to admit what you don't know and learn. Everyone is better off for it.   A Leap of Faith; Our Number One Goal is that Our Clients Leave Us 25 years ago Prairie Business Credit started doing business like every other factor. Soon we changed the way we do business dramatically. Prairie Business Credit's number one goal is to graduate our clients to traditional banking or self funding. The leap of faith was choosing a business plan that makes the client so successful they no longer need us. Choosing our client's success as our primary goal was simply the right thing to do. We strive to graduate our clients to traditional banking and allow them to leave Prairie Business Credit, penalty free. We are absolutely confident that there will always be not yet bankable entrepreneurs who need money to seize fleeting opportunities. February's Feature  What Others Are Saying About Us "A special thanks to all of you who have been so welcoming to our new Vice President, Dave Krause. We are pleased to share this letter from one of our newest Wisconsin clients." - Trevor and Dylan Morgan February 23, 2018 To whom it may concern, I am the owner of a LED lighting consulting firm. I rely on a secondary lender to finance many orders for our clientele and I have recently made the decision to move from a nationwide lender to Prairie Business Credit. Dave Krause was the first member of Prairie Business Credit that I met and after my first meeting I knew that this was a man I could trust and wanted to do business with. His character, personality and honesty won me and my executive team over from day one. He has also invested a lot of time and energy to get to know me and my team personally as well as our lending needs. Dave has then gone above and beyond to help us find the best lending options and has also gone out of his way to refer our services to his circle of influence. I was then introduced to Trevor, Dylan and Ron from Prairie Business Credit and was pleased to find out that Dave is a true reflection of who they are and what Prairie Business Credit stands for. The personal and professional attention that we have been shown is second to no other lender that I have dealt with over the past 25 years of business. I am pleased to say that Prairie Business Credit is truly there to help find the best lending solutions for your needs while being treated fairly, respectfully and honestly. If a secondary lender is a solution to your lending needs, then I cannot recommend strongly enough that you consider partnering with Prairie Business Credit. God bless, - President, Lighting Company in Wisconsin 25 Years Has Taught Us... After being in business for 25 years, financing over 500 companies, graduating 70% of them to be bankable clients, we have learned a few things along the way.
Prospects often withhold information that they think is embarrassing which it never is. It's just information; clues to the success puzzle. |
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