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We’ve noticed a growing number of business aggregator portals lately. It’s not that aggregating is new, just that there seems to be increasing focus on B2B rather than the more traditional B2C aggregators, like LendingTree.com.
Here’s a couple we think are interesting:
Company.com a vendor marketplace providing personalized vendor comparisons, editorial reviews, Company.com recommendations and, in the future, customer ratings and savings calculators. Vendor participants hail from 50 specific service categories most widely used by small and mid-sized businesses (SMBs), including lead generation, human resources outsourcing and business loans.
Solutions Center (for Peachtree Accounting Business Analytics users) In addition to comparative industry benchmarks and financial analytics, Peachtree small business customers have seamless access to supplementary financial perspectives and services that can help them make critical decisions and implement solutions.
iBank.com enables companies of all sizes to store and organize their business data into a secure electronic “vault” for the purpose of arranging financing to help them grow their business and reduce their costs. The customer can then provide access to this vault to selected lenders, credit rating agencies, brokers and other parties as necessary, thereby eliminating the inefficiencies and costs of typical paper-based transactions.
Intuitworkplace a single location to find and try business applications that work with QuickBooks and with each other. By logging in, you can easily access applications, manage settings and find more applications.
Are these aggregators somewhere you would go to find a solution to a common SMB challenge like financing growth?
“Small businesses can’t survive if they can’t get customers to pay bills,” says Edgar Ortiz, president and CEO of Strategic Analytic Solutions, an Atlanta-based management consulting firm, a guest columnist for the Atlanta Journal and Constitution this past weekend.
I read that, and maybe because of the recent success of the New Orleans Saints, I immediately thought of an expression I heard quite often in the three years I lived in New Orleans, “For True!”
Ortiz opines further:
Credit policy and debt-collection processes are fundamental requirements to run a profitable business.
Knowing who to approve for credit, how much credit to extend and how to collect are key responsibilities of successful business ownership.
I can almost feel heads nodding in agreement. But the reality is that most small businesses are afraid to know the truth about their customers’ credit because they are terrified to turn away potential business.
Small businesses can fail if they don’t understand the value of credit intelligence and accounts receivable and collections practices for all the reasons Ortiz outlines in his article. Kevin Kiernan, FTRANS VP of Sales, just yelled over to me from his office, “Hey, I just scheduled lunch with that Ortiz guy!” Maybe he’ll come back with some more small business wisdom.
Ortiz’ article is a must read for small business owners. For True.
All signs point to this uncomfortable truth: small business owners are less likely to get a loan for the capital they need to grow their business than six months ago. As quoted in CNN Money.com, Ben Bernanke, Federal Reserve Chairman, said in a speech at the Economic Club of New York, “The fraction of small businesses reporting difficulty in obtaining credit is near a record high, and many of these businesses expect credit conditions to tighten further.” Even established small businesses are seeing their credit lines evaporate under the more restrictive conditions. This chart from CNN Money.com clearly shows banks pulling back from small business lending even after TARP.
Small B2B businesses must move quickly to find solid alternatives to traditional lines of credit or term loans. Putting their receivables to work is a strategic solution for a small business. Receivables, typically a company’s largest asset, can be collateralized with the increased liquidity allowing the business to continue growing. Receivables financing is the new black.
The page one article in today’s Atlanta Journal-Constitution tells the story of 600 plus creditors of Peanut Corp. of America probably getting “cents on the dollar” due the bankruptcy of the company. These creditors range from large manufacturers of food product to small growers of peanuts. (I started to say “small peanut growers,” but that opens questions of ambiguity and charges of being redundant!)
This is not the usual bankruptcy that one might have predicted from a decline in the financial condition of the company. This bankruptcy was reportedly caused by the company’s lax enforcement of sanitation practices that resulted in salmonella contanimation, something not visible even if one used a microscope on the financial statements.
Whether financial or bacterial in cause, the result is the same — the unsecured creditors who provided much of the capital for this company are simply out of luck.
What can a company do to protect itself from this risk of customer failure? Traditionally, there were three solutions:
- Require payment in advance or on a credit card, which the CFO likes but the sales team hates;
- Do a really good job of credit decisioning on each potential customer, which is time conuming, requires skills most companies do not have, and will not spot all problems; or
- Buy credit insurance.
The third option, buy credit insurance, is a good option for large companies, but not really an option that is availabile for most smaller companies. And, today, most of the credit insurance carriers are not writing coverage for new clients.
A fourth alternative is now available: Trade Credit Express from FTRANS, which enables a B2B seller to outsource much of the credit administraiton and payment risk of operating an in-house credit system, and be paid for invoices in 5 days rather than 50.
The need to protect your company from the financial failure of your customers has never been greater. And, the economy will probably get worse, but more on that later. Meanwhile, I continue to look at the jars of peanut butter on the store shelves and wonder if they are safe to eat. And, I continue to be proud of the the fact that if an FTRANS client had sold to Peanut Corp., their loss would be minimal.
Never has this statement been more true than it is today for many American businesses. The world credit crisis that began in mid-2007 has caused the global credit markets to contract and US banks to become much more restrictive in their lending.
Over the years, I have started many successful companies, and I am impassioned about the growth of American small business. Particularly in this economy, entreprenuers have to be creative to be successful. While there is a restricted access to capital from traditional forms of financing, in this credit crisis, there is significant opportunity for B2B sellers to grow their businesses by granting to their buyers more credit on more flexible terms. At the same time sellers are growing their businesses, they are building relationships with buyers that can be an enduring competitive advantage for years to come.
I started this blog to explore the many benefits of outsourcing trade credit, and I look forward to discussing alternative sources of financing with you.
