Blue Barn Funding Podcast: Why Factoring?

How Small Businesses Can Access Quick Cash with Factoring.

Listen to our latest podcast to understand how small businesses could benefit from factoring.

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Transcript:

1:22

businesses especially in Industries

1:24

where you have clients that are known to

1:25

pay slowly you know those with those

1:27

really long payment Cycles think like

1:30

manufacturers or government contractors

1:32

even oh yeah and speaking of government

1:34

contractors there’s one article that

1:36

really gets into like the whole dynamic

1:37

of working with the government reliable

1:39

customer but uh a lot of paperwork huh

1:41

that’s paperwork they actually lay out

1:42

the good and the bad even some of the

1:45

more specific things you know like all

1:47

the Hoops you had to jump through to get

1:48

approved or how payments can sometimes

1:51

get delayed because of well you know

1:53

yeah administrative processes yeah ah

1:57

and this is where I think it gets really

1:58

um really interesting it forces you to

2:00

really think about it you know is it

2:02

really worth it I mean yeah government

2:04

contracts are nice and stable but you

2:06

might have to deal with all that red

2:08

tape the Articles kind of hint at this

2:10

tradeoff you know you’ve got that steady

2:12

revenue on the one hand but you might

2:14

have to deal with a much stricter system

2:16

definitely something to think about it’s

2:17

not just about getting paid right it’s

2:19

about getting paid in a way that uh that

2:21

really works for you that matches up

2:23

with you know your business goals so

2:25

going back to factoring in general Blue

2:27

Barn funding really emphasizes how fast

2:29

it is

2:30

we could be talking funding within a

2:31

wreck sometimes even the same day you

2:33

send the invoice for businesses that are

2:36

you know working with tight margins or

2:38

if they suddenly have to deal with

2:39

unexpected expenses that speed can be a

2:42

total game Cher oh yeah for sure and you

2:45

know that speed is especially important

2:47

for new companies startups and also for

2:49

businesses in industries that move

2:51

really quickly like the tech world for

2:54

example think about a sauce company they

2:56

often have to spend a lot of money up

2:58

front you know on development and

3:00

marketing M but then they depend on

3:02

people paying those subscriptions every

3:04

month which can take a while to actually

3:07

you know turn into real money and so

3:09

factoring can help bridge that Gap it

3:11

can give them the money they need to

3:13

keep innovating and doing their thing

3:16

without having to constantly worry about

3:18

you know having enough cash on hand yeah

3:20

and it’s not just tech companies either

3:22

the Articles talk about how medical

3:23

practices benefit too dealing with

3:25

insurance companies and government

3:27

Healthcare programs it’s notoriously

3:29

slow right the worst and that can put a

3:32

real strain on a practice like can they

3:34

actually provide quality care to

3:36

patients if they’re always struggling to

3:38

you know make ends meet factoring helps

3:41

with that it keeps things stable they

3:42

can pay their staff they can invest in

3:44

the equipment they need and ultimately

3:47

you know they can really focus on what

3:48

matters taking care of their patients

3:50

yeah absolutely what I find really

3:51

interesting here is that doesn’t really

3:54

matter what industry you’re in the need

3:56

for steady cash flow is like a universal

4:00

thing whether you’re making software or

4:02

providing healthare or even fulfilling a

4:04

government contract that challenge of

4:06

making sure you have the money to

4:07

operate and grow your business it’s the

4:10

same everywhere it’s like they’re all

4:12

playing the same game just with uh

4:14

slightly different Rule books exactly

4:16

and factoring it kind of um it adapts to

4:19

those different rules speaking of

4:21

different rules one thing that the

4:22

Articles do mention is that there can be

4:25

downsides to factoring specifically when

4:27

it comes to um the fees and discount

4:30

rates involved they don’t really go into

4:31

a lot of detail but it’s definitely

4:33

something that’s worth you taking a

4:34

closer look at because you really need

4:35

to understand the true cost before you

4:38

make any you know financial decisions

4:40

for sure it’s like anything else there

4:41

are uh always trade-offs but even with

4:44

those trade-offs I think the Articles

4:46

make a really good case for factoring

4:47

they even talk about a benefit that

4:49

people often Overlook the fact that the

4:51

factoring company actually takes over

4:54

collecting the money so you can free up

4:55

your own internal resources and focus on

4:58

you know the core stuff oh for sure

5:00

that’s a huge Point especially for

5:02

smaller businesses or for businesses

5:04

that just don’t have a lot of Staff time

5:05

is money you know and so if they can

5:08

Outsource that collection’s process well

5:10

they can save money on overhead costs

5:12

they don’t have to worry about as much

5:14

uh administrative stuff and they can

5:15

just spend more time and energy on what

5:17

they do best it’s almost like

5:19

um like having a silent partner yeah to

5:23

help take care of the uh the really

5:25

heavy Financial stuff but like you said

5:27

those fees and rates they need to be uh

5:31

they need to be looked at carefully

5:33

because it’s easy to get caught up in

5:35

the excitement of getting cash quickly

5:37

and not think about the um the longer

5:40

term impact on your finances right and

5:42

that’s actually a really important point

5:43

because remember these articles are

5:45

coming from a company that’s literally

5:47

selling these services so it’s important

5:49

to keep that in mind and remember that

5:50

there’s always you know another side to

5:52

the story yeah that’s a great reminder

5:53

always do your own research compare

5:55

different companies really weigh the

5:57

good and the bad before making any

5:59

decision decisions absolutely you’ve got

6:01

to empower Yourself by learning as much

6:03

as you can so you can make those um

6:06

informed choices that actually match

6:08

your business needs and your goals yeah

6:11

and that’s exactly what we’re trying to

6:12

do here you know give you the

6:13

information you need so you can navigate

6:15

this whole world of uh business

6:19

financing now before we move on let’s

6:21

take a closer look at how factoring

6:23

actually plays out in different

6:25

Industries starting with those sauce

6:27

companies that we mentioned earlier what

6:29

are some of the unique challenges they

6:30

face that make factoring so appealing

6:33

yeah sauce companies are um they’re

6:36

fascinating really they’re built on like

6:38

constant Innovation always evolving but

6:41

traditional lenders they often have a

6:42

hard time really figuring out how to you

6:44

know assess their value yeah and that’s

6:47

where factoring could be it can be a

6:49

really good solution because it’s so

6:50

much more um agile yeah it’s almost like

6:54

they’re speaking two completely

6:55

different languages right traditional

6:56

financing it wants to see you know

6:58

physical assets predictable Revenue but

7:01

it’s all about future potential and

7:03

those recurring subscriptions exactly in

7:05

the Blue Barn funding articles they

7:06

actually highlight that um that

7:09

disconnect they talk about how sauce

7:10

companies often they don’t have a lot of

7:13

you know operating history their profits

7:15

might be pretty small yeah especially in

7:17

the early stages and they might not have

7:18

a lot of physical assets to you know

7:21

yeah use as collateral that’s so

7:23

traditional lenders they tend to see

7:25

them as

7:26

um risky yeah but factoring kind of

7:29

flips that whole thing on its head right

7:31

instead of looking at the sauce company

7:33

itself they’re looking at the

7:36

uh the credit worthiness of their

7:39

clients yeah so if those clients are

7:40

good the factoring company is more

7:42

likely to you know approve the funding

7:44

yeah the total shift yeah and how

7:46

they’re um how they’re looking at the

7:47

whole thing suddenly those recurring

7:49

subscriptions which traditional lenders

7:51

see as like unpredictable they become a

7:53

good thing because they represent future

7:55

revenue from reliable sources yeah and

7:58

that brings us to another point that the

7:59

Les make factoring isn’t just a way to

8:01

you know fix cash flow problems it can

8:04

actually be a tool to help sauce

8:05

companies grow and what’s really cool

8:07

about that is it gives them the um the

8:10

financial flexibility to jump on

8:12

opportunities when they come up so let’s

8:14

say a sauce company they land a huge new

8:17

client right they need to like scale up

8:20

their infrastructure maybe hire more

8:21

developers but that costs money upfront

8:24

yeah factoring can give them the money

8:25

to do that yeah without you know slowing

8:28

them down like giving them Wings right

8:30

they can fly higher and faster exactly

8:33

and the Articles even go as far as to

8:35

say that factoring can help sauce

8:37

companies get better deals with their

8:40

suppliers that’s interesting yeah I

8:41

hadn’t thought about that before so by

8:43

showing that they have consistent cash

8:45

flow thanks to factoring sauce companies

8:48

can negotiate better payment terms which

8:51

means lower expenses and a healthier

8:53

bottom line it’s like this um ripple

8:56

effect of positive Financial impact

8:58

exactly but okay

8:59

let’s switch gears for a second and talk

9:01

about those fees and discount rates we

9:03

mentioned them earlier but can we give

9:05

our listeners a um a more concrete

9:07

example of how those costs might

9:10

actually play out oh yeah for sure so

9:12

let’s say a sauce company has a $10,000

9:13

invoice from a really good client and

9:16

they want to factor it right the

9:17

factoring company might say okay we’ll

9:19

give you 80% upfront which would be

9:21

$8,000 now there’s also going to be a

9:23

factoring fee maybe 2% of the invoice so

9:26

that’s another $200 so right off the bat

9:28

they’re down $200 and we have haven’t

9:29

even factored in the uh the discount

9:31

rate right the discount rate is

9:33

basically the cost of using the

9:34

factoring cerice it’s kind of like the

9:35

interest that you’re paying for that

9:37

advance and it can change depending on

9:39

things like how trustworthy the client

9:41

is how big the invoice is and what

9:43

industry you’re in so let’s just say in

9:45

this case the discount rate is 1% per

9:48

month if the client takes 30 days to pay

9:51

the total discount cost would be $100 so

9:54

in the end the sa company would get

9:57

$7,700 out of that original $10,000

9:59

pretty big chunk yeah but they did get

10:01

that money up front which lets them you

10:03

know take care of immediate needs or

10:05

invest in growing their business exactly

10:08

it’s a trade-off but it could be a

10:09

really good one depending on you know

10:13

what the company needs and there’s

10:14

another thing that the Articles

10:15

mentioned recourse factoring ah yeah the

10:18

what if the client doesn’t pay scenario

10:21

exactly so with recourse factoring if

10:24

the client doesn’t pay the invoice the

10:26

factoring company can come back to the

10:27

sauce company and say Hey you owe us

10:30

this money so the risk it kind of shifts

10:33

back to the SAU company yeah that’s

10:35

definitely something to think about

10:36

especially if you’re working with

10:37

clients that maybe don’t have the best

10:40

payment history yeah for sure and it

10:42

also highlights how important it is to

10:46

choose a good factoring company oh

10:48

absolutely you need to find a company

10:49

that’s you know reputable they have a

10:52

good track record they’re financially

10:54

solid and their practices are

10:56

transparent yeah it’s not just about

10:59

getting the lowest rates it’s about

11:00

finding a partner that you can trust to

11:03

handle your invoices and to work with

11:06

your clients in a way that’s you

11:09

know professional and ethical it’s like

11:12

any other business relationship right

11:13

totally you want to make sure that your

11:15

values are aligned exactly so let’s talk

11:17

about medical practices for a minute the

11:19

Articles paint a pretty uh a pretty

11:23

vivid picture of the cash flow problems

11:26

they face but they also talk about some

11:28

interesting

11:29

Solutions through factoring yeah and

11:32

what I find really interesting about

11:33

medical factoring is it’s almost like a

11:35

whole separate thing right within the

11:37

larger world of factoring right because

11:39

you’ve got all these third-party medical

11:42

accounts receivable and you have to

11:44

navigate all those insurance regulations

11:47

and understand the specific billing

11:49

codes it takes a lot of

11:52

um expertise there a lot of General

11:54

facturing companies just don’t have yeah

11:56

the Articles actually say that some

11:58

traditional accounts receivable

11:59

financing companies they actually avoid

12:01

the medical industry oh wow cuz it’s so

12:03

complicated it’s a high stakes

12:04

environment that’s for sure accuracy and

12:06

compliance are like yeah super important

12:09

I mean if you make a mistake in medical

12:10

billing it can have serious consequences

12:13

so finding a factoring partner that

12:15

really knows their stuff in the specific

12:17

area it’s crucial it’s almost like they

12:18

need a translator right to bridge the

12:20

gap between the language of medicine and

12:24

the language of Finance that’s a great

12:25

way to put it and it’s not just about

12:27

expertise either it’s about um

12:30

sensitivity medical practices are

12:33

dealing with you know pe people’s Health

12:35

yeah and well-being so the factoring

12:38

company needs to be able to handle those

12:40

invoices and interact with clients in a

12:43

way that’s compassionate and

12:45

understanding right they’re not just

12:46

numbers they’re real people who are

12:48

going through you know potentially

12:50

stressful situations exactly it’s a good

12:52

reminder that even though factoring is a

12:54

financial tool it still operates within

12:56

a um within a human context totally and

12:59

speaking of human context let’s go back

13:00

to that Government Contracting stuff we

13:02

were talking about the Blue Barn funding

13:04

articles they have some interesting

13:05

things to say about this unique World

13:08

highlighting both the uh the appeal and

13:11

the challenges you know it’s funny these

13:13

Blue Barn funding articles they’re

13:14

really pushing factoring right but they

13:16

also end up highlighting all the

13:18

challenges businesses face when they’re

13:21

trying to work with the government they

13:23

talk about the really long procurement

13:25

processes the crazy competition to

13:28

actually win contract TR and uh yeah the

13:31

possibility of those payment delays it’s

13:34

a tricky situation yeah you know on the

13:36

one hand getting a government contract

13:39

it can be a really big deal it’s steady

13:41

income and it can even give your

13:43

business like a boost in reputation but

13:46

on the other hand all the paperwork and

13:49

all the rules you have to follow it can

13:50

be really hard yeah especially for

13:53

smaller companies they even use the

13:54

phrase limited flexibility which makes

13:57

it sound like like you’re kind of stuck

13:59

You Know M signing up for a very

14:01

specific way of doing things yeah that’s

14:03

a good point and it might not be for

14:04

everyone right it’s really important to

14:05

understand those limitations you know

14:07

yeah before you too deep into it like

14:09

the Articles mentioned that government

14:11

contracts often come with specific

14:13

reporting

14:14

requirements and quality control

14:16

standards yeah that you have to meet and

14:19

that can add a whole lot of uh

14:21

administrative stuff which can cost

14:23

money yeah it’s almost like you have

14:25

another boss that you have to answer to

14:28

and what about those stringent

14:30

requirements we keep talking about what

14:32

are some examples of those well imagine

14:34

you’re a construction company and you’re

14:36

bidding on a government contract to

14:38

build a new bridge the contract might

14:41

tell you exactly what materials you have

14:43

to use and those materials might have to

14:45

come from specific vendors who have

14:47

already been approved it might also tell

14:48

you what labor standards you have to

14:50

follow maybe you have to use union labor

14:52

or make sure that all your workers have

14:54

certain safety certifications and then

14:56

you might have environmental regulations

14:58

reporting deadlines just a whole bunch

15:00

of things that add

15:02

complexity and cost to the project so

15:04

it’s not just about building a bridge

15:06

anymore it’s about building a bridge in

15:08

a very specific way yeah and they’re not

15:11

going to let you uh they’re not going to

15:14

let you stray from the plan exactly and

15:17

while those

15:18

requirements they’re there for a reason

15:21

yeah you know to make sure things are

15:22

done right and everything’s transparent

15:24

they can also make it really hard for

15:26

businesses to even get into the game

15:28

especially if they don’t have a lot of

15:29

resources or experience it’s a real

15:32

tradeoff the stability of a government

15:34

contract it might sound great oh yeah

15:36

but all those headaches and hidden costs

15:39

they can hat up quickly yeah they can if

15:42

you’re not careful have good reminder

15:43

that even those government contracts

15:45

which seem so secure they still come

15:47

with risks like the Articles mentioned

15:50

payments can be delayed because of you

15:52

know yeah bureaucracy or budget problems

15:54

like waiting for a giant ship to turn

15:56

around it takes forever not much you can

15:59

do about it and that’s where factoring

16:01

can actually be really helpful even for

16:03

government contractors yeah because it

16:05

gives them that cash flow right away

16:07

even though the payments are delayed so

16:09

it can help them keep things running

16:10

smoothly it’s like a safety net right

16:12

yeah that’s a good way to think about it

16:13

you hit some turbulence uhhuh but you’re

16:15

prepared exactly it gives you that

16:17

cushion so you can focus on doing the

16:20

work without having to worry about

16:22

whether or not you’re going to be able

16:23

to you know keep the lights on

16:26

yeah so as we’re wrapping up our deep

16:28

dive here into accounts receivable

16:31

factoring I think we’ve learned a lot

16:33

it’s not a one-size fits-all solution

16:37

but it’s definitely a versatile tool

16:39

that businesses can adapt to different

16:42

Industries in different situations yeah

16:44

it’s been really interesting to look at

16:46

all the um the nuances of this financing

16:49

method we’ve seen how it can help

16:51

businesses that had to deal with clients

16:53

who pay slowly we’ve seen how it can

16:55

help startups grow how it can give

16:57

stability to medical practices and even

16:59

it canate the risks of contract but I

17:03

think the biggest take is that it’s all

17:05

about making informed decisions the Blue

17:07

Barn funding articles they were trying

17:08

to sell us on factoring right yeah but

17:10

they also reminded us that we need to

17:13

look beyond the surface to weigh the

17:16

pros and cons and to ultimately choose a

17:19

path that aligns with our own uh

17:22

business goals it’s about being

17:24

empowered by having the knowledge

17:27

understanding the true costs yeah and

17:29

the benefits and then making choices

17:31

that are going to lead to long-term

17:33

success not just you know short-term

17:36

games and that’s the power of knowledge

17:38

right gives us the tools to deal with

17:40

all the uh the complexities of the

17:42

business world to make good decisions

17:45

and to build a more stable and

17:47

prosperous future for everyone it’s been

17:49

great talk about all this with you yeah

17:51

thanks for joining me until next time

17:53

keep exploring keep learning and keep

17:56

pushing the boundaries of what’s

17:57

possible