F.A.Q.'s 

Non-traditional funding options….what is that?  

It’s the Cash Flow Industry!

And what is the Cash Flow Industry?  

It is a close cousin (do link to my article) to the Asset-Based lending industry but “loans” are not made in the Cash Flow Industry (CFI). Instead, the savvy business owner leverages her liquid (paper) assets to fulfill her funding needs without acquiring debt. Some commonly leveraged liquid assets are unpaid invoices, contracts, purchase orders, merchant future credit card receipts, to name a few.

When the Bank says No? What does that mean?  

The CFI is a very niche-oriented funding industry that works with a business “prior” to that business having the financials required for a traditional banking relationship but also works in “conjunction” with an already established banking relationship. (put links to blog examples)

How is that done… without a “loan”?  

The CFI helps a business to leverage its “liquid” assets (liquid “paper”) to self-finance its own growth and expansion. For example, a large stack of accounts receivable invoices sitting on an owner’s desk represents actual dollars sitting there.

Generally, a funder in the CFI “buys” that liquid asset from the business owner at an agreed-upon price. Just as if you sold your car to your neighbor for an agreed-upon price.

Why haven’t I heard of this before?  

The funding options offered in the CFI have been around for “big” business for many years. Investors looking for alternative investment opportunities have realized what the SBA (link to website article) has been saying for a long time (i.e. the total of small business is larger than big business) and have tapped into this vast (small business) market in the last 15 or so years.

Give me an example I will recognize.

An example of the “cash flow industry” at work is whenever your mortgage company payment changes and you have to change who you make your mortgage payment to. In this case, your mortgage was usually sold in a portfolio of other mortgages to another company.

It means that “paper” was traded in the cash flow industry. But, as you realize from this example, that was a “big” business example you will readily recognize.

An example of small businesses taking advantage of the funding options in the CFI you would recognize is not as readily available but we are working on that daily! Hopefully, in another 15 years that won’t be the case and, in fact, I’m sure of that. I just read an article from earlier this year (2008) which says that “factoring” the most commonly used tool in the CFI is now becoming en vogue (link to blog) with the present credit problems with which we are besought.

See this chart for some of the most commonly used tools of the CFI to leverage a business’ liquid assets.