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For businesses seeking small business loans or working capital loans, the process may seem like a Catch-22, or no-win situation.     Generally, loans are secured by collateral such as accounts receivable, inventory, real estate, and other assets.  But, according to the Wall Street Journal’s article, Collateral Damage in Lending, the collapsing value of assets such as inventory and equipment is causing a collateral gap and resulting in many businesses falling short of loan eligibility.   Thus, these small businesses must still pledge the usual collateral, but, increasingly, small business lenders are requiring cash or other highly liquid assets as secondary sources of repayment.   The Catch-22 is that often these cash requirements are equal to the loan request amount.   As a result, small business owners find themselves asking, rhetorically, “If I have the cash, why do I need the loan?”  

Accounts receivable remain one of the most important assets of a company.  They are the primary generator of cash.  Tighten and reduce your cash conversion cycle by reducing your business’s accounts receivable days outstanding to generate more cash.   To do this, consider your business’s complete revenue cycle from customer acquisition to invoicing to payment receipt.  Is your business following accounts receivable best practices?  What is the propensity to pay and credit worthiness of your customers?   How does the business handle aging receivables?  

Companies such as Ftrans offer complete accounts relievable and credit management solutions that help businesses address cash and revenue cycle concerns.   Implementing these best practices enables accounts receivable funding for your business without a Catch-22.

As reported by the Wall Street Journal, small and medium size businesses continue to have limited access to credit.   According to Federal Reserve Chairman, Ben Bernanke,

“The formation and growth of small businesses depends critically on access to credit,” Mr. Bernanke said in the text of his remarks. “Unfortunately, those businesses report that credit conditions remain very difficult.”

Absent credit availability in the form of small business lending, businesses must actively manage their cash conversion cycle, which is the time it takes to convert a business’s cash consuming activities into cash payments.   In other words, businesses must manage to a low cash conversion cycle which means having cash tied up in business operations for as few days as possible.  Clearly, a shallow credit market highlights the importance of managing to a low cash conversion cycle as this may be one of the few ways for businesses to have the liquidity necessary to fund their operations.   

How do you manage your cash conversion cycle?   Focusing on revenues and expenses is important.   However, equally important, and perhaps more complex is developing a better understanding of your business’s working capital situation.   Analyze your accounts receivable and accounts payable outstanding days, including inventory, to understand how movements in each affect your cash conversion cycle.   Good cash cycle conversion management equates to better revenue cycle management which equates to an increase in the health of a company.   For more information on cash cycle conversion, click here.   Additionally, consider solutions from companies such as Ftrans which provide full accounts receivable management solutions.

We were recently selected among 30 “hot fintech companies” to present at Finovate Spring 2010 in San Francisco.   A great mix of companies presented from large, enterprise companies to start-ups, all with interesting, promising platforms.    

We are pleased to have been selected by Kevin Lawton of as a “Best of Finovate” company this year.

No, we’re not referring to accounts receivable and credit automation, even though we encourage this and a tie in does exist.  To be specific, we are referring to missing in “marketing automation.”  Most businesses, regardless of size, either have a web presence or are contemplating one.  Many of these businesses have no idea who is visiting them or how to nurture their visitors towards conversion.       

Over the last few years, SaaS firms such as Pardot and Marketo have made significant progress in offering comprehensive, cost effective marketing automation solutions to small and medium size businesses.   For as little as $500/month with no contract, a business can implement Pardot and really supercharge the management of their web traffic and leads.  

Automate to intelligently interact with your visitors; know how they are getting to your website; know what content is valuable to them; offer the right solution at the right time; and if you have a CRM system, make sure the MA system integrates with it.   

Now, tying marketing automation to a credit automation solution such as offered by Ftrans can greatly improve decisions about interacting with visitors and prospects.   For example, based on the business credit score of the visitor, coupled with their level of interaction with your website, your business can quickly determine how to prioritize subsequent interactions with the visitor in an effort to convert them to a qualified lead and then client.

Ftrans and Greenwich Associates released the findings of its bank research today in a white paper.    CFO magazine highlighted the findings in an article

Our findings indicate:

  • Banks intend to increase commercial & industrial (C&I) lending and diversify from real estate

However, structural impediments are hampering efforts to increase bank lending such as:

  • Increased pressure from regulators on banks to increase loan-to-deposit ratios
  • A dearth of experienced, C&I lenders
  • Outdated and decentralized systems

Traditionally, banks are slow to resume lending at normalized levels during an exit from a recession.   Yet, we believe the banking industry will overcome these challenges.    Much progress has been made by companies such as Ftrans in providing enabling technologies to the banking industry for enhanced collateral monitoring and risk management to address the systems challenges identified in the research findings.