Small business A/R lending or factoring experience?

[Community Development Banking List]

Original message from: rbgeorgejr@gmail.com

Dear colleagues,

In response to a clear need among our clientele, our loan fund is looking
into developing a way to expand capital access using accounts receivable
lending or some kind of factoring service. Having only recently commenced
our research, we are looking for experiences, anecdotes, articles, advice,
potential models or examples, etc. related to this type of financing in the
context of community development. Has yours or any other organizations you
are aware of experimented with anything similar? We may well determine that
there is far too much risk involved or that the infrastructure/staff time
required would be too onerous for a small operation like ours, but
according to many entrepreneurs with whom we have spoken, some kind of
asset-based lending would prove a highly valuable service were it feasible.

If there is additional interest, I will compile and distribute any
responses I receive.
Thank you for your responses in advance.


Ross George

--
1436 U Street NW, 4th Floor
Washington, DC 20009
office • 202-745-4486
fax • 202-232-2880
rbgeorgejr@gmail.com

[Community Development Banking List]

Original message from: mark.barbash@gmail.com

Ross:

I think that you will find that in many cases, many of the microloan
programs around the country are in effect AR financing. At one point in the
past, I was with a CDC/CDFI that established a microloan program to provide
working capital financing, and we acted very much like a factor, utilizing
the value of the receivable as our lending base and taking the A/R as the
collateral. Short version of the experience: The amount of labor that we
had to dedicate to technical assistance, handholding and workout far
exceeded the value to the borrower or to the CDC. I have recently been
doing some research in this area for a CDFI for whom I am consulting and
generally came to the same conclusion (for the moment). A primary issue is
attempting to provide a community benefit through providing capital where
no capital access existed and at the same time taking significant risk with
start-up, new or businesses with higher risk. Once we ratcheted up the
interest rate to attempt to cover the cost of operating the program, we
lost the balance. I have heard from others (not experienced first hand)
that such programs can exist in the context of a single location incubator,
where the program managers can work with the clients on a day to day basis
and be able to assess whether the businesses are having difficulty first
hand.

I will be interested to hear from others on this.

Thanks.

Mark Barbash

*Mark Barbash
Economic Development Consulting
**mark.barbash@gmail.com* <mark.barbash@gmail.com>
*(614) 774.7599*
*www.linkedin.com/in/markbarbash* <http://www.linkedin.com/in/markbarbash>
*www.markbarbashconsulting.com* <http://www.markbarbashconsulting.com>


On Thu, Mar 8, 2012 at 11:25 AM, Ross George <rbgeorgejr@gmail.com> wrote:

Dear colleagues,

In response to a clear need among our clientele, our loan fund is looking
into developing a way to expand capital access using accounts receivable
lending or some kind of factoring service. Having only recently commenced
our research, we are looking for experiences, anecdotes, articles, advice,
potential models or examples, etc. related to this type of financing in the
context of community development. Has yours or any other organizations you
are aware of experimented with anything similar? We may well determine that
there is far too much risk involved or that the infrastructure/staff time
required would be too onerous for a small operation like ours, but
according to many entrepreneurs with whom we have spoken, some kind of
asset-based lending would prove a highly valuable service were it feasible.

If there is additional interest, I will compile and distribute any
responses I receive.
Thank you for your responses in advance.


Ross George

--
1436 U Street NW, 4th Floor
Washington, DC 20009
office • 202-745-4486
fax • 202-232-2880
rbgeorgejr@gmail.com



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CDB-L list instructions at www.opportunityfinance.net/CDB-L<http://www.opportunityfinance.net/cdb-l/>




--
*Mark Barbash
Economic Development Consulting
**mark.barbash@gmail.com* <mark.barbash@gmail.com>
*(614) 774.7599*
*www.linkedin.com/in/markbarbash* <http://www.linkedin.com/in/markbarbash>
*www.markbarbashconsulting.com* <http://www.markbarbashconsulting.com>