Financing - Then and Now
We here at Prime Financial Recruiting have been in the industry for years, but we confess we don't know everything. We sat down with those who have been in the industry for longer to discuss how things used to be, how they are now, and what they see coming.
Q: How has financing changed over the past few decades?
A: "Forget decades ago, even the last year or two [things] have been changing dramatically. Where multiple locations had to have inventory, now they share the same pool of inventory. Where people would come in and buy locally, they can now ship all over the world. It's a wonderful time to be in the industry. [...] Growing up, credit was considered part of being an adult. Now, people associate credit with debt, which they don't want. So you give them a product like factoring and tell them, 'We will take away their debt from you and deal with it. You don't need to go into debt.' The younger generation especially are loving it, and [my company] has found a way to target them and bring them on board with our products."
Q: Is it easier now to obtain financing than before?
A: "Absolutely. Some industries are seasonal; sales are up, sales are down. It used to be very difficult to get approved for financing, especially for an inventory loan that was not capped at the same amount of a receivable loan. Now you have people shopping online, which does not generate as much in receivables but requires a bigger inventory loan. A few years ago, stores were brick and mortar or a mix of that and internet. [My company] now finances companies that are purely internet-based, something we never would have considered before. Companies used to need a thick book of solid proof; now, if you can demonstrate growth, there's a financing option available."
Q: Have changes prompted new financing options, or just new ways of doing things?
A: "Both. Factoring has been around for ages, but supply chain finance is relatively new, only a few decades old, so you have a new financing option, but with the internet allowing companies to ship to countries they never would have before, we are now able to access more of the supply chain more often, a new way of doing things. At [my company] we thrive on being able to provide that flexibility. I know of some finance companies that are shifting away from the brick and mortar and focusing solely on ecommerce."
Alternate point of view
A: "Personally, I've been in the industry for quite some time, and I don't see that it's become easier or harder to obtain financing. It all relies on the same basic ideas. If you have poor credit, you won't be able to obtain financing."
Q: What do you see happening in the coming years?
A1: "You're seeing it now. Companies who are not keeping up with the times are going the way of the Dodo. A few years ago, you had Blockbuster, Toys 'R' Us, and Kodak. Now, you see companies that could have evolved who chose not to, and they're going extinct. You see other companies who used to focus on the US now expanding internationally, reaching countries they never would have dreamed of a few decades ago. Demand for quality American products is high; smart businesses will take advantage of that. Every company, no matter the industry, needs to meet changes with flexibility and innovation, they need to monitor monthly trends both internally and externally. This applies to finance companies as well. Possibly one of my current favorites is the ability to sign in to your factor account with your accounting system login, much as you would log into YouTube using your Google credentials. The factor can receive updates immediately, instantly, and are able to make decisions faster than ever before."
A2: "I see more competition as more companies enter the space and the banks start getting on board more and more. More lenders means lower interest rates and more businesses receiving funding. Bigger finance companies will come in and buy out the smaller ones. It could get interesting."
A3: "With technology comes the amazing access to data. You can know everything about any customer that isn't Amish. You can buy it, sell it. The business you may once thought of as untouchable, you can obtain the information you need to make it a reality. The numbers businesses would try to hide are readily available. The more risk lowers, the more companies will be able and eager to finance. I see products like factoring and trade finance not only growing, but becoming a basic way of life for companies for the foreseeable future."
We would love to hear your own thoughts on the subject. How have you seen financing change, and where do you see it going? Let us know at firstname.lastname@example.org.