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Lending to Businesses with Cash Flow Problems
A community bank in Ann Arbor, Michigan has found a way to help businesses in its community that have good credit histories, but problems with cash flow.
The accounts receivable financing program by University Bank, allows the bank to help smaller companies that have trouble getting traditional funding. The bank buys the receivables of these businesses at a discount, thereby giving the companies cash flow they can use to reinvest in their own businesses. The program essentially puts the companies on an all-cash basis with their own customers. This allows them to get discounts when they are available, to offer more competitive payment terms to customers, and to buy supplies when they need them. The program appeals to industries such as printing and trucking, that have notoriously slow-turning receivables and to industries such as temporary staffing agencies and technology firms that typically lack hard assets to secure traditional financing.
Copyright © 2002 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 12, No. 2, 2/02
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