Faith Funding will purchase the invoice from the landscaping company and finance up to 90% of the amount due, Johnson explained. Once the payment is received, the CUSO will rebate the rest of the money and collect its fee for the transaction. The fee is based on the aging of the accounting. Meaning, the longer it takes for the invoice to be paid, the higher the fee. Johnson said the CUSO's fee will range between 2 ½% to 10%.

"We're very excited. The city of Cleveland is waiting for us to launch," Johnson said. "We think it will be a major home run for the credit union and in the industry."

Faith Funding has several measures in place to protect against risk. Johnson said the CUSO will only work with blue chip companies such as well-known chains, universities and the government. This is to ensure that the invoices are payable.

"If you have a mom and pop restaurant down the street, we will not purchase the invoice from you," Johnson said. "What we don't want to happen is to send the invoice to the payee and an invoice is sent to us so that the person gets paid twice."

To avoid that overlap, Johnson said the CUSO will do the billing and before any money is advanced, a due diligence call will be made to the payee's accounts payable department to confirm the invoice, that it is due and most importantly, is it payable.

New clients working with Faith Funding will get a trial period where only 50% of the invoice will be advanced, Johnson said. After a strong track record has been established with the client, then the advance percentage will move up to 90%.

Johnson didn't just stumble on the idea of creating a factoring CUSO. Prior to his credit union career, he worked at a bank boutique company in the late 1990s that offered business banking products. At the time, some small businesses were having a hard to getting loans. Johnson started researching factoring and presented the idea to his bank colleagues as a means to generate income. That led to Access Cash, a factoring firm that Johnson ran for six years as CEO. It was there that he built a strong foundation on the inner workings of accounts payable and factoring. 

Fast forward to June 2011 when Johnson was hired as CEO of Faith Community United. Small business owners were requesting loans but the credit union didn't offer them. While the community development financial institution was in the process of building a small business platform, the idea of factoring came to mind. He mentioned the idea to some of the business members.

"Most of them knew about it and were excited about the idea," Johnson recalled.

Soon, the concept started to take shape with the board's approval. Indeed, many of Faith Community United's board of directors are small business owners so they understood the importance of cash flow access. The demand is so great that between June 2011 and June of this year, a Cleveland firm approached the credit union with $2 million in invoices but since the CUSO hadn't launched yet, it couldn't process them, Johnson said. He started calculating the potentials.

"Based on $1 million of invoices, that could be $50,000 in fee income a year for the credit union," he pointed out. "That's fee income coming in every 30 to 45 days. We're a $12 million credit union. In order to grow, we need to grow our asset base."

While Faith Funding gets off the ground, Johnson said the CUSO may look into adding more credit unions down the road that are interested in offering factoring services to their business members.

Johnson said even though factoring is now not new and there are companies across the country that offer the service, Faith Funding may be a first within the credit union industry and he is convinced that the CUSO has something different to offer.

"Small businesses understand that factoring can be expensive and they can lose between 5% and 10% over the long haul. While the invoices are factoring, we will work with them to become more credit worthy so that they can qualify for a line of credit or small business loan."

Faith Funding will deploy technical assistance advisers and accountants to sit down with business owners to help put together a traditional business package needed to apply for a business loan, Johnson said.

"Someone said this is like payday lending for small businesses. But we don't want them to be factoring with us forever."

Working closely with Johnson on the CUSO was Brad West, an accounting consultant who said he has experience getting small companies up and running as well as with minority-owned construction firms. West said he has worked with small, church-affiliated credit unions since 1998. After his credit union merged with Faith Community United in 2006, he took on a consultative role dealing with mergers and acquisitions. 

"The biggest problem for them is cash flow," West said of small businesses. "A lot of times, they're sub-contractors and they're at the mercy of prime contractors who hold their money for 45 or 60 days. Now, they can bid on projects and in some cases, become the prime contractor."

West said he set up Faith Funding's LLC, is securing the CUSO's office space and worked with an attorney to tailor the documents to comply with Ohio mandates. He just wrapped up finalizing the master agreement on the LLC and other companies.

Johnson said while he will have oversight of Faith Funding, a sales person will be hired to run the daily operations. One of the new hire's responsibilities will be outreach and working with small businesses.

The credit union's field of membership allows it to serve anywhere but 51% of the CUSO's customers have to be members of Faith Community United. This will give the credit union even more control should any invoices run into problems, Johnson said.

Guy Messick, an attorney with Messick & Lauer P.C., who has extensive experience with CUSOs, worked with Johnson on Faith Funding's legal matters. Messick said there is room to invest and lend. Ohio credit unions have a 3% investment authority for CUSOs and another 3% for loans, he noted.  

Over time, the goal is to invest $1 million in the CUSO for factoring, Johnson said.

That investment may be helped along by a possible partnership with the Ohio Department of Development, which works to attract, create and grow and retain businesses through several alliances. West, who has worked with the department, said the agency has a pretty aggressive minority enterprise program.

"I'm going to work with them to put together some type of partnership to promote participation to get government contracts," West offered.

Johnson is encouraged about Faith Funding's potential longevity.

"After we launch and if we're successful, I think you'll see more credit unions doing factoring, especially as a way to generate fee income."