Bryan Riordan* is having a bad day. He has been a small business banker for most of his career. Came up through the ranks at a time when a handshake was as good as a signed contract.
Banking has changed a lot since he joined the industry more than 30 years ago, and not all of it for the better, in his opinion. He doesn’t have nearly as much discretion in to whom he can lend. And the hoops he has to jump through to keep the regulators happy. Sometimes it feels as if he works for the regulators, not the bank, or its customers.
Today is one of those days.
Across the desk sits one of Bryan’s best customers, the owner of a thriving electrical supply business, who had come to him requesting a loan to help out with cash flow at a time when high customer demand had him pouring money into inventory faster than he could collect on the orders he’d already delivered.
The loan had been turned down by the loan committee because the bank wasn’t comfortable lending any more money secured by a warehouse full of wires and light fixtures.
Bryan delivers the bad news and watches his customer slump in the chair. Bryan knows that without additional cash, an otherwise healthy business may very well go under. Failure is not an option. Bryan knows that if his bank won’t help, the customer will most likely keep looking until he either had to file bankruptcy or found a bank with a more accommodating loan committee.
Rather than risk losing the relationship, Bryan makes a bold suggestion. He tells his old friend about invoice factoring and recommends that the customer sell some of his growing stack of invoices.
Unlike loans, which can take weeks to close and come with some pretty tight restrictions on how disbursements are spent, factoring transactions take place in a day and business owners can use the cash for any legitimate business purpose. For companies, large and small, factoring is an efficient way to maintain steady cash flow to pursue a range of tasks – everything from hiring more workers to buying more supplies – to grow their business.
Good on ya, Bryan!
*Real story, fake name. TBS. No bull.