Have you ever heard the saying that perception is reality? Although I’ve written tons of articles, spoken at numerous SBA and financing workshops while preaching the benefits of invoice factoring, I’m still amazed about how our industry is perceived in the finance industry.
Those of you in the factoring industry know what I’m talking about.
It’s the negative stigma associated with invoice factoring. So often I’ll be attending a networking event where a CPA will tell me that he consistently advises his clients to stay away from factoring and that they should only use it as a last resort if they need cash. Then there are the small business owners who don’t even know what invoice factoring is or how it can benefit their cash flow.
Invoice factoring has made tremendous strides.
The factoring industry has made tremendous strides in the last few years especially in the wake of the global credit crisis which forced many businesses to seek alternative lending solutions. This opportunity has fueled an impressive growth for funders and brokers alike in the asset based lending community. Along with this growth we have also witnessed an array of new factoring companies, online business lenders and exchanges. Folks in the finance and personal investment community are learning that cash flow is king and many companies need our services. However, as part of this fine industry which I speak so highly of there are issues that need to be discussed as they relate to who we are, what we do and how to best service our clients.
Keeping factoring transactions transparent.
Having over twenty years combined experience in both the mortgage banking and insurance industries as well as reporting to the Securities and Exchange Commission for a publicly traded corporation, I have firsthand knowledge of government regulations and compliance. I also forgot to mention that I was responsible for all external audits required in quarterly annual reporting. Okay, this is starting to sound like my resume but I think you get the point.
The asset based industry on the other hand is highly unregulated and still a wide open frontier. My opinion is that our industry’s transactions are typically between two businesses rather than consumers. Our experience has been that nearly every one of our clients are well informed about their operating margins and appreciate how our services can have an immediate, positive impact to their bottom line. If they don’t understand the process and the costs associated with invoice factoring it is our job to educate our customer so they can determine whether or not our services are the correct fit for them. In some cases they may need purchase order financing, a bridge loan and in many cases a small business startup loan.
The reason why many industries are regulated is to protect the consumer, shareholder or any other invested party from inappropriate business practices and to create transparency. Our industry is fortunate enough where we are not under the scrutiny of many external regulatory agencies. Let’s keep it that way by practicing fair and fundamental lending and purchasing while continuing to educate our clients and colleagues about the fundamentals of our industry.
Don D’Ambrosio is the president of Oxygen Funding, Inc., an invoice factoring company located in Lake Forest, California. Don has over 25 years experience working in the commercial and residential finance industries. He previously served as Controller of a commercial insurance agency and as Chief Financial Officer of a publicly traded mortgage company. He can be reached at 949-305-9300 or don.dambrosio@oxygenfunding.com.
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