"We were literally running out of money," recalls Larry Baras. Belmont's financial manager." Our choice was to find some way to meet our sales or to lay off people."

The only thing that could save Belmont was immediate cash. Baras and Belmont president. Joe Dietrich believed that the best way to raise the money was to sell their accounts receivable list to a factoring firm. Factors purchase your accounts receivable list and immediately advance you up to 80 percent of its face value. The balance of the funds less the factor's fee and discount is released once the receivables are collected. Unlike other lenders, factors take possession of your accounts receivable list and assist in collections.

A factor gave Belmont $50,000 - the equivalent of 45 days' worth of sales. Baras used the money to buy more containers and expand his sales staff. He was also able to buy supplies in bulk, cutting the cost of raw materials. Perhaps most important, the cash allowed Belmont to go after a mega-customer it had wanted for years: B.J.'s, a Chain of superstores that orders mass quantities.

"Without factoring, we would never have been able to supply B.J.'s," says Baras.

Factoring is undergoing a resurgence. In the past, it was used exclusively by textile and furniture manufacturers. Most entrepreneurs viewed it as a last ditch effort to find money.

But a new breed of factoring companies is serving small and medium­ size businesses that want to grow quickly. They're providing a bridge financing tool for companies unwilling to wait for a traditional bank loan.

"It can take traditional sources 90 to 120 days to make a decision - and longer to implement it,'' says Peter Aransky of the Boston office of Oxford Capital Corporation. "If your business is growing, why lose momentum?"

These new entrepreneurial factors - which comprise more than 90 percent of all U.S. factoring companies - target fast-growing firms with less than $10 million in sales. "Entrepreneurial factoring is ideal for the businesses that have been developing since the 1980s," says Mace Edwards of the Edwards Research Group, a factor consulting firm and publisher of The Edwards of Research on factoring. "Service and technology businesses tend to go through intense periods of growth before they have the collateral for bank financing," he says. "Factoring allows you to take on new business before you've been paid by the old business."

STRUCTURING THE DEAL

Factors typically keep between 1.5 percent and 5 pen cent of the face value of the invoices they purchase, depending on the size of the invoices and the credit history of the customer. Most factors work on a 75-to-25 percent advance-reserve system, With a $100,000 invoice, for instance. the factor would advance the company $75,000 immediately. The factor releases the remaining $25,000, minus the percentage it keeps, after the invoice is collected. The longer it takes to collect it, the more costly it is.

Since its injection of Cash one year ago, Belmont Gourmet has reached $500,000 in sales. Baras says his Belmont, Mass., company is on track to top $I million before the end of this year.

"Factoring is a bridge for us" says Baras." To be eligible for bank financing, you need a couple of years of consistent, profitable performance. We'll continue to factor until we get there."