A Publication of The International Factoring Association

November/December 2016 | VOL 18 | No. 6 2017: A Look Ahead

ALSO INSIDE: Transportation Factoring PO Finance Fintech Credit Insurance Technology

TABLE OF CONTENTS November/December 2016 | VOL 18 | No. 6

Transportation Factoring in 2017: A Familiar Road By David J. Jencks

The Future of PO Finance: Where Have We Been and Where Are We Going? By Paul Schuldiner

Farmers Talk About the Weather; Factors Talk About Fintech By Tony Smith

credit Insurance Technology for an Uncertain World By Tessa Payne

everything’s Bigger in Texas—Including the 2017 IFA Factoring Conference By Heather Villa

columns

legal factor: Participation Agreements— A Brief Overview By Steven N. Kurtz, Esq.

What’s new at ifa

small ticket factor: a look ahead to 2017 By Don D’Ambrosio

ADVERTISER INDEX

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The Commercial Factor | November/December 2016 3 from the executive director

by bert goldberg

Planning for the future is necessary, both in your business and personal life. In our annual “Looking Ahead” issue, we connect with experts to help us with this forecasting.

As the results of the US election have shown, even experts have a hard time predicting what may happen. That said, it is still better to operate with a plan than to simply “fly by the seat of your pants”. A prediction that everyone can agree on is the fact that technological innovation will continue to occur. Factors who do not evolve and keep pace with technology will find themselves unable to compete. When I first started working with Factors, many were still operating on manual ledger cards and fought the switch to computers. Those Factors are long gone. The term Fintech refers to bringing new technology into the financial space. During the IFA’s recent Fintech course, we spent time discussing how Fintech affects the marketing and operational function of finance companies and Factors. Factors should always be looking for new technologies that can assist with efficiencies. This year’s Factoring Conference will focus on Fintech and modernization. The conference will take place April 5th – 8th at the Omni Fort Worth in Fort Worth, Texas. The conference will feature over 60 speakers and moderators speaking about a variety of topics designed to help you increase the efficiency and productivity of your company. Our keynote speaker is Dan Burrus. His session will focus on the topics of Using Hard Trends to Anticipate Disruptions, Problems and Opportunities, and Creating and Sustaining Competitive Advantage using Technology-Enabled Innovation. Our other keynote speaker is Dr. Beck Weathers. If you saw the movie Everest or read Into Thin Air you remember Beck as the climber who was left for dead twice on the mountain.

We will again be featuring various • Cultivating a Culture of Success • What to do When Your Canadian roundtables. Designed to promote (Half Day Session included with Client Goes Bankrupt networking and interaction among Conference) • Canadian Legal Update those attendees with similar inter- • Economic Projections Additional courses that are being run ests, each roundtable will be led by Additional sessions that are specific in conjunction with the conference moderators familiar with the specific to the Factoring / ABL community are: group. The roundtables we will be are: running for the conference are: • Factoring Essentials (Wednesday, • Current Topics in Transportation April 5th) • Senior Executives Factoring • Women in Commercial Finance • Face Reading Certification • Report from the Courts Workshop (April 4th & 5th) • Young Professionals • Solving Client Issues • Operational Issues • Legal Panel Networking events will be: • Small Factors • Fraud Panel Golf, Texas BBQ Food Tour, Bibby Sessions designed specifically to We also have sessions specifically Welcome Reception, Lone Star assist you with planning are: designed for Factoring internation- Reception, Tax Guard Dessert • What You Can Learn From the ally. They include: Reception, Closing Event at Billy Bob’s, JFK History Tour, Spouse Tour Fintech Disruption • Documenting Latin American • Blockchain – Is it the Future at Fort Worth Museums, Breakout Factoring Transactions Small Factors Lunch, Breakout Currency of Trade? • How to Factor Chinese Receivables • Monitoring Social Media for Fraud Transportation Factoring Lunch and • Using PO Finance to Facilitate Saturday’s Idea Exchange. • Recognizing Portfolio Warning International Trade Signals It’s no wonder that the IFA’s annual conference has become the must attend event of the year for the Factoring and Asset Based Lending community. You can find a detailed conference write-up on page 30 and read more on the confer- ence website at www.factoringconference.com. See you in Fort Worth!

4 The Commercial Factor | November/December 2016 news

The International Factoring Association INDUSTRY NEWS 6627 Bay Laurel Place, Ste C Avila Beach, CA 93424 New Research from Bibby Financial Services Finds Mostly MAILING: PO Box 39 Optimism for US Economy Avila Beach, CA 93424-0039 805-773-0011 Results of the inaugural Global Business Monitor by Bibby Financial Services found that US business decision makers are markedly Executive Director more optimistic about the current state of the domestic economy Bert Goldberg than that of the global economy. 49 percent of respondents Published By describe the US economy as performing positively, while only 12 The International Factoring Association percent said the same about the global economy. Interestingly, the Editor/Design & Graphics negative global outlook was the same both before and after the & R W Publishing Associates, Chelsea Kirtley recent Brexit decision. In addition to conclusions about 2016, the [email protected] • 727-450-9870 research also presents findings on the domestic economy, global Advertising Sales outlook and key business challenges looking ahead to 2017. An R&W Publishing Associates [email protected] • 610-213-9105 infographic outlining key findings can be found at www.bibbyusa. com/blog. Advisory Board

Robyn Barrett NewStar Sells Equipment Finance Business To Radius Bank Managing Member, FSW Funding NewStar Financial Inc. announced the sale of its equipment finance Glen Dalzell business and related assets to Boston-based Radius Bank, a federal VP of Sales & Marketing, Liquid Capital Corporation savings association, for approximately $140 million in cash. Harvey Friedman COO, Lenders Funding INDUSTRY TRANSACTIONS Tony Furman President, Interstate Capital Group of Companies DS-Concept Provides $5 Million Export Factoring Facility To Crystal Han Apparel Exporter In Hong Kong Managing Director, Pipeline Financial Services, LLC DS-Concept, a global commercial finance company specializing in Cole Harmonson non-recourse factoring and trade finance, provided a Hong Kong President, Far West Capital based apparel exporter with a $5 million export factoring facility. John La Lota President, Sterling National Bank The client, who exports to Europe and United States, was seeking a Factoring & Trade Finance Division flexible, reliable and long-term financing partner to create liquidity L. Gabriel Segura and accelerate cash flow without increasing liabilities. With DS- President, CV Credit Inc. Concept’s export facility and support, the client forecasts $18MM- $20MM in annual factored volume.

The International Factoring Association’s (IFA) goal is to Utica Leaseco, LLC Completes Two Transactions Totaling assist the factoring community by providing information, $1,300,000 during the week of November 28, 2016 training, purchasing power and a resource for factors. The Utica Leaseco LLC completed the funding of a $600,000 equip- IFA provides a way for commercial factors to get together and discuss a variety of issues and concerns about the ment lease on brewing equipment for a new craft beer company industry. Membership is open to all banks and finance in the Western US. Utica provided the needed capital by unlocking companies that perform financing through the purchase of invoices or other types of accounts receivable. the equity in the current equipment and provide financing on the new equipment based solely on the equipment value. The Commercial Factor is published bi-monthly by the International Factoring Association. To Utica Leaseco LLC completed the funding of a $700,000 equip- subscribe, please email [email protected]. ment lease on paper making equipment for the acquisition of The Commercial Factor magazine invites the submission a company in Wisconsin. Utica provided the needed capital by of articles and news of interest to the factoring industry. For more information on submitting articles or advertise- unlocking the equity in the current equipment based solely on the ments, email [email protected], or call 805-773-0011. equipment value. The views expressed in the Commercial Factor are those of the authors and do not necessarily represent the views of, and should not be attributed to, the International Factoring Association. The Commercial Factor | November/December 2016 5 Wells Fargo Capital Finance ing of branded beauty and cosmetic used in gasoline and diesel engines. Structures $185 Million Credit products to fulfill a major order from The credit facility consists of a working Facility for Heidtman Steel a large retailer. Rosenthal will provide capital revolver and two term loans. Wells Fargo Capital Finance acted as a combination of letters of credit and Proceeds of the financing were used lead arranger on a $185 million senior cash funding for the transaction. to refinance the company’s existing secured credit facility for Heidtman indebtedness, finance capital expen- Steel Products, Inc. that will be used TAB Bank Provides Trucking ditures, and supplement ongoing to support the company’s working Company in Minnesota with a $1.5 working capital needs. capital needs. Million Revolving Credit Facility TAB Bank provided a $1.5 million MidCap Business Credit Completes Rosenthal Trade Capital Provides revolving credit facility for a trucking $3.5 Million ABL to Unified Logistics $4 Million Purchase Order Finance company located in Minnesota. The Holdings Facility to Solve Complex Supply new facility is extended through a MidCap Business Credit completed a Chain Requirements for New York- multi-year agreement and will provide $3.5 million asset-based line of credit Based Consumer Products Holding for the company’s ongoing work- to Unified Logistics Holdings, LLC. Company ing capital needs. In addition to the Headquartered in Bethesda, MD, Rosenthal Trade Capital (RTC), a divi- working capital facility, TAB Bank has Unified provides specialty hauling sion of Rosenthal & Rosenthal, Inc., also provided the company with $1.4 and trucking services in the Eastern announced completion of a recent million in equipment financing. portion of the United States through purchase order finance deal with a its multiple operating entities. The major New York-based investor and Ares Commercial Finance Provides credit facility is comprised of advances operator in the consumer products $18 Million Credit Facility to Hastings against accounts receivable. The industry, specifically in the health, Manufacturing opportunity was sourced and closed beauty and wellness categories. As Ares Commercial Finance provided out of MidCap’s headquarters in West part of the transaction, RTC will pro- an $18 million senior secured credit Hartford, CT. vide a $4 million production finance facility to Hastings Manufacturing facility to assist with the component Company, a Michigan-based manufac- procurement, assembly and packag- turer and distributor of piston rings

6 The Commercial Factor | November/December 2016 Sallyport Commercial Finance, LLC Mark Sheehan Joins Crestmark as Pastor, Senior Executive Vice Presi- Closes Three Apparel Deals in Two National Account Executive for its dent, Global Business Development Days Equipment Finance Division will be promoted, effective November Sallyport Commercial Finance, LLC, Crestmark Equipment Finance (CEF), 1, to President, Global Commercial closed three apparel deals in two based in Bloomfield Hills, Michigan, Operations. He continues to report days in October, totaling $11.5 million. welcomes Mark Sheehan, national directly to Ansgar Hütten, CEO & All three companies have their own account executive. Mark is based in Executive Director. unique brands and are located across Flower Mound, Texas, and represents the breadth of the USA from Califor- the equipment finance division in the DS-Concept also announced that nia, to Massachusetts and all the way South. He will work with companies Peter Maerevoet will join the company to New York. The three companies to maximize their equipment budgets as Chief Financial Officer (CFO) & Chief cover wide ranging demographics with customized financing and leasing Human Resources Officer (CHRO), a including Design and Manufacturing solutions. Mark reports to Chris Emge, newly created role. He will be respon- for youths as well as Premium Denim regional vice president at CEF. Mark sible for leading all aspects of the glob- for plus sizes, and Alma Mater pride comes to Crestmark with more than 15 al finance and HR functions, including for the “super fan”. years of sales experience in the equip- controlling, reporting, recruitment, ment finance and leasing industry. talent planning and organizational Loeb Term Solutions Provides Term development. • Loan on Equipment Valued at over Wells Fargo Capital Finance $8.25 Million to Southern Oilfield Strengthens Middle Market Team in Service Company Canada Loeb Term Solutions provided an Wells Fargo Capital Finance an- canada chapter events equipment term loan to a Texas-based nounced that Richard Zeni has joined contract packaging facility specializing its Loan Originations team in Canada Events to be announced. in fluid management for oil and gas as a business development officer. well drilling, production and servicing. Based in Toronto, Richard is primarily Meetings Location: The client was in need of additional responsible for sourcing and structur- Mississauga Living Arts Centre working capital in order to restructure ing flexible asset-based financings for Scotia McLeod Room their debt and expand their opera- companies with credit needs of $5 mil- 4141 Living Arts Drive tions. Loeb Term Solutions provided a lion and above. He will cover Ontario Mississauga ON L5B 4B8 term loan on the equipment valued at and Manitoba provinces. In addition, over $8.25 million. he will be responsible for sourcing For more information, financings for other specialty units Crestmark Closes 16 Transactions within Wells Fargo Capital Finance, contact Oscar Rombolà at Totaling Nearly $20 Million in the including retail, commercial finance, (905) 603-6284 or orombola@ First Half of November and technology. Richard will report to accutraccapital-itc.com. Crestmark secured a total of Steve Bishop, executive vice president Visit IFA Canada’s website at $19,811,000 in financial solutions of Wells Fargo Capital Loan Origina- www.FactoringAssociationCanada.com. for 16 new clients in the first half of tions for Canada November. Bibby Financial Services Hires PERSONNEL Jim Vargo as SVP, Business northeast chapter events Development Crestmark Promotes Three Bibby Financial Services (BFS) an- February 9 Employees at its Corporate nounced the addition of Jim Vargo Save the Date Headquarters: Josh Beauvais, as Senior Vice President of Business Heather Weir and Eric Ball Development. Jim will lead the Asset Arno Ristorante, New York City Mick Goik, president and chief operat- Based Lending (ABL) division of the March 7 ing officer of Crestmark Bank, an- company’s Midwest office in Lombard, Luncheon Meeting in Conjunction nounced the promotions of three em- working to build long-term relation- ployees at its corporate headquarters with NYIC and IFA ships with stakeholders, referral Arno Ristorante, New York City in Troy: Josh Beauvais was promoted sources and banks. He brings more to vice president, special assistant than 20 years of experience in the April 5 to Chief Credit Officer Mark Mathe- financial services industry to BFS. IFA Annual Factoring son; Heather Weir was promoted to assistant vice president, learning and DS-Concept Names René Pastor Conference—Chapter Reception development specialist; and Eric Ball President, Global Commercial Fort Worth, TX was promoted to operations officer, Operations & Peter Maerevoet CFO/ senior client analyst, and team leader CHRO For more information, contact for the Midwest Region. DS-Concept announced that René Harvey Gross at (732) 672-8410 or [email protected].

The Commercial Factor | November/December 2016 7 “THE MUST ATTEND For Anyone Involved with the Factoring EVENT OF THE YEAR” and Asset Based Lending Industry

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THE WORLD’S LARGESTThe CONFERENCE world’s largest FOR THE FACTORING conference INDUSTRY Over 50 Exhibit Hall with Hospitality Suites Activities including Golf, BBQ Tour, Speakers over 50 Vendors and Closing Event Spouse Tour & JFK History Tour dedicated to Accounts Receivable CALL TO OR REGISTER PurchasingREGISTER TODAY! ®ISTER: Factoring805-773-0011 ON-LINE AT: sponsoredfactoringconference.com by International Factoring Association, 6627 Bay Laurel Place, Ste. C, Avila Beach, CA 93424, mail to: P.O. Box 39, Avila Beach, CA 93424-0039 factoring.org

The International Factoring Association is registered with the National The IFA offers CLE credits for the Factoring Conference. Information on the InternationalAssociation of State Boards of Accountancy (NASBA) as a sponsor Factoring Association approved states is available at [email protected] or contact the IFA at of continuing professional education on the National Registry of CPE 805-773-0011. Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE This conference has been approved for CAEF credits. For information Sponsors through its website: www.learningmarket.org. on approved programs and courses, please contact the IFA. 2017: A Look Ahead November/December 2016

Transportation Factoring in 2017: A Familiar Road

The road for transportation factors in 2017 looks much like the one traveled in 2016. This assessment is based on economic, industry, political and competitive considerations. Let’s look at what these collective components are telling us. By David J. Jencks

Economic Considerations longer term predictions of GDP show 2018 retreating 1 Gross Domestic Product (GDP), a major indicator of from 2017 levels back to approximately 2.5% . The three- economic trends, measuring the total goods and services year range of 2.5% to 3.0% in GDP growth likely means a produced by a country in any one year, is predicted to very similar freight volume, freight rate, and over capacity remain tepid. 2015 GDP registered a 2.5% growth rate environment from 2015 into 2018. with 2016 GDP falling to 2.0%. 2017 is predicted to show Political Considerations a moderate increase to 3.0% which should produce a At the time of writing, John Mica, the former Florida nominal increase in available freight shipments. However, Congressman who has served on the House’s

The Commercial Factor | November/December 2016 9 2017: A Look Ahead November/December 2016

Transportation and Infrastructure will likely yield no major positive or measures the amount of freight Committee, is rumored to be a negative changes for motor carriers carried by for-hire carriers each leading candidate for the next from political influences. month and measures month to 2 Secretary of Transportation . Mr. Industry Considerations month changes in freight trans- Mica’s previous focus and public portation in tons and ton-miles statements have shown an interest A telling metric regarding the which are combined into one index. in the Northeast rail corridor, stagnation of the transportation The below table highlights the privatizing Amtrak and dealing with industry is Class 8 truck orders. Class minimal changes in freight volume nationwide infrastructure issues. His 8 trucks involve the typical over the over a two-year period. And while previous public statements show no road semi-truck with which we are freight volume remains strong on a repudiation, support or advocacy all familiar. Class 8 truck orders have historical basis, there is no evidence of issues that negatively affect dropped 38% compared to one year of an ascendant trend. Freight 3 motor carriers such as the Carrier ago . The demand for additional volume in 2017 is widely expected Safety Accountability scheme, hours trucks is in significant decline as to remain within the range shown of service, or a nationwide driver an over capacity of for hire trucks on the below Freight Transportation database. However, Mr. Mica may remains the norm in 2016 and is Services Index table with some not even be selected, only adding to expected to remain the case in the predicted improvement later in the 4 the high level of uncertainty of what coming two years . year5. the transportation sector can expect Freight volume, possibly the most Freight rates, another telling metric from the new administration and its telling metric of the state of the as to the state and direction of the cabinet. It is reasonable and prudent transportation industry, is stagnant transportation industry, fell as much to assume that no matter what posi- and moving in a tight, year over year as 15% from 2015 to 2016 year over tion the new administration takes range. The Freight Transportation year, and are widely expected to with respect to motor carrier regula- Services Index, a service of the remain that way for part of 2017 tion, it will take one year before we Department of Transportation’s before seeing improvement6. have a clear picture. Therefore, 2017 Bureau of Transportation Statistics,

Freight Transportation 100 = 1.2 TRILLION FREIGHT Published by Bureau of Services Index TON MILES Transportation Statistics Month 2015 2016

January 122.7 122.6 February 120.9 120.9 March 122.4 119.7 April 121.3 121.5 May 122.2 121.8 June 121.8 122.1 July 122.8 124.7 August 122.8 122.2 September 122.3 121.5 October 122.8 November 121.1 December 121.4

10 The Commercial Factor | November/December 2016 2017 will be a year of the formulation of regulation small carriers, have stalled. Hours experienced transportation finan- of Service regulations have been ciers. These programs put pressure or deregulation of the absorbed with no apparent effect on on carriers to use the broker or ship- motor carrier sector, but it carrier capacity. per’s system or risk losing coveted 2017 will be a year of the formulation loads. This pressure is increased is unlikely any regulation of regulation or deregulation of the because of the overcapacity truck will be passed, adopted motor carrier sector, but it is unlikely environment. any regulation will be passed, Conclusion or repealed. adopted or repealed. Industry Competitive forces, stagnant observers will be closely watching economic and industry dynamics, further revisions or dismantling of and a new and uncertain political Regulatory the Federal Motor Carrier Safety environment will leave 2017 looking Considerations Administration’s Carrier Safety and feeling quite similar to 2016. The Accountability (CSA) safety and After 8 years of active regulatory good news is that 2016 was a fair to enforcement program after years attempts in the name of improved good year for many transportation long challenges and criticisms based safety, current regulatory actions factors. The bad news is that the on unfairness to small carriers. directed at motor carriers are possibility of substantive year over minimal. With no clear signal Competition year growth will be a significant from the incoming administra- Considerations challenge. • tion regarding transportation and Transportation Factoring continues motor carrier priorities, it is virtually to be a crowded space. Brokers 1 Forbes, Sep. 16, 2016. U.S. Economic Forecast impossible to know or predict what continue to test the segment with 2017-2018: Mild Rebound, Bill Conerly. regulatory activity, or efforts to roll factoring divisions. Factors with 2 Business Travel News, Nov. 18, 2016. Rumors back regulation, will occur in 2017. Hint at Trump’s Transportation Secretary Pick, a transportation focus continue Michael B. Baker to register with the International The electronic logging device (ELD) 3 http://www.ftrintel.com/news/ftr-reports-final- mandate will apparently occur in Factoring Association at approxi- net-trailer-orders-for-october-at-20200-units 2017. This mandate, which requires mately three each month. 4 April 19, 2016, Here come the headwinds for nearly all motor carriers to use Adding to the crowded space, many Class 8 production, Sean Kilcarr, Fleetowner.com 5 electronic logging devices to track Merchant Cash Advance lenders will Mar 10, 2016, Trucking Outlook: Better Days Ahead, Sean Kilcarr | Fleet Owner. Fleetowner. duty status, has been upheld in now lend in the transportation niche com court, meaning the December 18, and can effectively compete with 6 Jun 21, 2016, Trucking Rates Soft Now But 2017, compliance date remains highly automated and fast accep- Should Rise in 2017, Sean Kilcarr, Fleet Owner. effective. The 7th Circuit Court of tances with less oversight than the Fleetowner.com Appeals, the federal court hearing transportation factor requires. the case, ruled to keep the mandate Lastly, and perhaps as the biggest in place, securing a victory for competitive force to enter the David J. Jencks the Federal Motor Carrier Safety industry, is the concept of trade is an attorney Administration and its ELD rule. Its finance programs where brokers and consultant decision was issued Oct. 31, 2016. and shippers are now offering loads to factors and The decision does not change the on an exclusive or priority basis to lenders in the rule’s exemption for pre-2000 year carriers who will participate in their transportation model trucks, which are allowed to industry. He also represents brokers, payables finance programs where operate without an ELD. Based on carriers and forwarders. David is the financer handles the payables the cost and role the ELD plays, the a member of Delta Nu Alpha, the for the broker or shipper and also burden of ELD implementation will professional fraternity involved in offers to purchase the invoice of the not serve as an operating or entry the education of transportation carrier at a discount in one seamless barrier for even the smallest carriers. professionals. He can be reached at online transaction management [email protected]. Legislative and regulatory efforts portal. Citibank and Bank of America to raise liability insurance limits on are offering such programs in the motor carriers, a potential major transportation sector and more operating and entry barrier for such programs are coming from

The Commercial Factor | November/December 2016 11 legal factor by Steven N. Kurtz, Esq. November/December 2016

Participation Agreements—A Brief Overview Planning for one’s capital structure is paramount to the success of any finance company. You need money to make money. Capital planning becomes even more important in uncertain times. During economic downturns, factors and ABL lenders are poised to take on more deals, because the traditional bank lenders tighten up their credit standards which provides more funding opportunities for non-bank lenders. However, although there may be more business opportunities in an economic downturn, it’s also harder for factors and ABL lenders to find capital sources because many of the same lenders who are tightening up credit standards are the same lenders who finance the factoring and ABL industry. A viable way to plan and increase your capital structure is to have a dependable partner or two for participation deals.

The Commercial Factor | November/December 2016 13 A participation transaction is where The first thing From the participant’s standpoint, two or more parties share in all any person special attention should be paid to aspects of a financing, including the Article 9 compliance. As most of our fundings, fees and collateral. The should do who is readers know, factoring is structured parties to a participation are the lead as a sale of accounts and compli- and the participant. The lead is the contemplating ance with Article 9 of the UCC is person who originates and manages required. Otherwise, if the deal goes the deal, usually on the lead’s a participation bad and the factor is not secured on financing documents. The participant deal is to know its accounts or its other collateral, it is, more or less, the passive person will lose its priority to a bankruptcy who provides a percentage of the the other side and trustee or lien creditor. The same funds for the transaction and shares thing should apply for a sale of a in the revenue and assumes the risk, assess that person’s participation interest. Participation based upon the percentage that the deals are set up such that the participant puts into the deal. The competence, participant is buying a share of the lead provides information to the honesty and lead’s financing deal with its factor participant so that the participant client/borrower, which is basically can know how the deal is doing at all financial strength. a sale of accounts from the lead to times, gives regular accountings and the participant. Surprisingly, most pays the participant its share of the participation transactions are not set revenue at designated intervals. up where the participant is granted a of partner is a participant who is The first thing any person should do security interest in the portion of the primarily a factor or ABL lender, and who is contemplating a participation financing that it purchases. This puts is looking to deploy capital and for deal is to know the other side and the participant in danger of losing more business opportunities. The assess that person’s competence, its investment in the event that the second type of participant is one who honesty and financial strength. lead fails and could be considered is engaged in the business of funding Often, participation deals come an unsecured creditor of the lead. participations, aka a professional about during cocktail receptions and The better practice is for the lead participant. A participant who is a not enough scrutiny is given to the to grant the participant a security fellow factor or ABL lender typically other player in the deal. Thus, there interest in the financings that it requires less control and allows for should be a level of underwriting that purchases and for the participant to a lower standard of care as to how goes into a participation deal, both file a financing statement to perfect the lead will manage the deal. The at the factor client/borrower level as its lien. The participant should also professional participant will require well as to the participation partner. have a form of a simple consent from a greater say in the transaction and Throughout my practice, I have seen the lead’s lender, which states to require a higher standard of care. some very successful participation the effect, that the lead’s lender will The level of the standard of care is relationships, but I have also seen honor the participant’s purchased important because the participant my share of unsuccessful deals that interest in the transaction. This basic assumes all risks of loss unless the could have been averted with some intercreditor agreement between the lead’s management of the deal falls due diligence. Once the parties to the participant and the lead’s lender will below the agreed upon standard participation have gotten past their also serve to protect the participant of care. The tradeoff and business due diligence stage, then there is from the lead “double dipping” which decision that a lead looking for a potential for a good relationship and would occur if the lead sells a partici- participant should make is balancing the parties have the ability to service pation interest to the participant and the more stringent requirements of larger deals which they normally then turns around and includes the the professional participant, coupled would not transact and earn fees that same transaction in its borrowing with a more dependable source of otherwise would not be available. base with the rediscount lender, funds, versus having less stringent because the percentage of a deal Generally, there are two types of requirements, but a potentially less where the lead sells a participation participation partners. One type dependable partner.

14 The Commercial Factor | November/December 2016 interest is always excluded from a always assess some level of blame happens if the lead or participant borrowing base. when a deal goes bad. The reason- breaches. If the participant breaches, An important item that must be able financier standard of care is a this usually means that the partici- addressed in any participation agree- way to recourse the participant’s pant is not putting in its money, and ment is the lead’s standard of care loss back to the lead, by claiming the remedy is for the lead to basically in how it manages the deal. If the that it was negligent in handling the take over the deal, and the partici- lead causes a loss by acting below deal. This level of care is subjective pant is responsible for the damages the standard of care, it will incur because the reasonable financier can that the lead will incur. When the liability to the participant. Business only be proven by expert testimony, lead breaches, it will usually be more moves fast and it is necessary for thus, leading to either litigation complicated for the participant the lead to be able to manage the or protracted negotiations if the because its role in the transaction has day-to-day aspects of the transaction participant asserts blame on the lead. likely been passive and is a stranger without the requirement to consult Generally, the professional partici- to the deal, meaning that the partici- with the participant. This is the main pant wants the reasonable financier pant cannot typically step in and take reason why the parties have to know standard of care, while ABL lenders over the deal. This is why the parties and trust each other before they and factors will live with a fraud and need to know and trust each other jump into deals together. Because willful misconduct standard of care. before they begin doing business the lead will have the day-to-day Setting aside the standard of together. responsibility and there is always a care, special attention should also While there are some complexities level of risk built into every financing be given to what happens if the in a participation, much of which is transaction, the lead and participant financing transaction goes bad. The not covered in this short overview, must address the standard of care participant, who had little to no say participations can and do serve an that the lead is held to in managing in the day-to-day operations, should important purpose in the market. the deal. Generally, there are two now have the right to be involved It will allow the parties to expand levels of standard of care that are in decision making. The participant their business, take on larger deals, most common in the marketplace. should be required to share in the and earn fees that otherwise would One form is willful misconduct or extraordinary expenses, like lawyers, not have been earned. Since it’s not fraud. This means that the lead is appraisers, and other professionals readily apparent where the economy only responsible to the participant that often are called upon where is heading, it is important to secure for a loss if it engages in fraud or there is an event of default. The financing partners because when the commits a horrible act that amounts agreement should also address economy heads south, many of the to willful misconduct. The second whether or not more advances will be lenders providing financing to factors most common standard of care is the made to the factor client/borrower and ABL lenders will exit the market, reasonable financier standard. This who is now in default, and what will thus tightening up the pricing for means that the lead is responsible to happen if one party does not want to those who stay in the market. A the participant if it acted below the make further advances. In addition viable participation partner will be level of a reasonable financier. The to addressing what happens when helpful when the credit markets issue with the reasonable financier the factor client/borrower goes bad, tighten. • standard is that one can almost the parties should also address what

Steven N. Kurtz, Esq. has represented factors, banks, and asset based lenders on a continuous basis since 1987, and he is the Co-general Counsel to the IFA. A founding partner of Levinson Arshonsky & Kurtz, with offices in California and Oklahoma, he practices in the areas of commercial law, insolvency, workouts, loan documentation and trade finance, in both transactions and litigation matters. He can be reached by phone at 818-382-3434 or by email at [email protected].

The Commercial Factor | November/December 2016 15 2017: A Look Ahead November/December 2016

The Future of PO Finance: Where Have We Been and Where Are We Going?

16 The Commercial Factor | November/December 2016 To truly understand what’s in store for the future of PO Finance, one must go back to the very beginning. By Paul Schuldiner

PO Finance’s origins date back as far as the early Over the past three decades, the market for 17th Century. The Dutch East India Company, PO Finance has grown almost exponentially. the first multinational corporation in the world, PO Financing has become a more sophisti- established a complex trade system among Asian cated and intuitive funding method and has companies to ultimately finance the thriving spice transformed into a reliable tool to comple- trade market in Europe. It was a revolutionary ment existing factoring solutions. With a PO solution to a difficult problem at the time and Finance company funding the purchase of paved the way over the next several hundred pre-sold inventory and a factoring company years for the development of more sophisticated providing a “takeout” once accounts receiv- channels and methods that encouraged trade able are generated, it essentially can be the around the world. perfect marriage. Modern PO Finance as we know it today didn’t One of the other interesting developments really enter the picture until the late 1980s and over the years has been the relative accep- early 1990s. It came about because factoring companies were struggling with moving out of tance of the intercreditor used between their comfort zone of funding domestic produc- the factoring company and the PO Finance tion of consumer products and reacting to the provider. This area used to be a major seismic shift of imports from China. Letters of stumbling block when trying to conclude a credit (“LCs”), as a method of funding imports PO Financing arrangement for a borrower. As from overseas, were not well understood by the intercreditor agreement developed and factors and resulted in a conservative view by was refined over time, the concerns over lien reserving 100% of a borrower’s availability when priority and what is considered an accept- issuing LCs. Over the years, as big box stores able “takeout” have been worked through. like Wal-Mart became more significant players Examples of this are what happens if there is in the retail space, many businesses were faced dilution on accounts receivable resulting from with new obstacles that inhibited their potential PO Finance, what happens if the PO Finance growth and the stability of how they managed transaction has gone sideways and alternative cash flow. From large bulk orders that seemed forms of repayment need to be addressed, or almost impossible to fulfill, to seasonal cash if the borrower is failing and a wind down is flow challenges that exposed business owners required. Essentially, the intercreditor agree- to added risk, to a growing market for lower- ment between the factor and the PO Finance cost Chinese imports, these new and exciting company has become tried and tested. opportunities also brought new difficulties. Chinese manufacturers were able to finance While the PO Finance product is clearly their production when they received LCs from needed, for prospective borrowers it can US-based importers. These LCs were pre-export be a psychological struggle to justify what finance tools for Chinese manufacturers and is perceived to be a high cost of capital. really were PO Financing in reverse on their end Many of these prospective borrowers like of the production cycle, as Chinese banks were PO Financing because it’s a viable alterna- aggressive in their support. Turning back to the tive to raising equity and giving up control. US, this created an opportunity for a select group The cost of using short term transactional of specialty finance companies that emerged with equity (which is what PO Financing is) will a solution for fixing the financing deficiency in the almost always be less expensive than raising market. This cadre of problem solving compa- permanent capital at a much higher cost nies ultimately evolved into the stand-alone PO in the long run. This is something we see Finance companies we know today.

The Commercial Factor | November/December 2016 17 2017: A Look Ahead November/December 2016

business owners and entrepreneurs The other area of PO Finance that want, nor should they want, to struggling with all the time on the has been used somewhat gingerly run their borrower’s business. In popular Shark Tank reality televi- in the market has been production terms of production finance, a PO sion program when they are looking or work in process finance. When Financing source needs to be ready for capital to fill what amounts it comes to production finance, to do so if the transaction falters and to an influx of sales orders. The it’s something more risky for PO overall cash flow of the business is prospective borrower must always Financing sources and not for the tight. It is a skill set that goes beyond be brought back to this point when faint of heart. It requires the ability simply managing collateral. At times, discussing the cost of capital for PO to analyze and assist in managing it resembles more of an art than Finance. Raising equity to fill sales the borrower’s cash flow, as these science. orders or a backlog is a mismatch of are ultimately project finance So what does the market for PO capital to the required need. transactions. Lenders don’t typically Finance look like today and what can we expect to see more of in 2017? For starters, the new administration has claimed it will loosen regulations such as Dodd-Frank that may make the banks more aggressive in the credit markets. This could mean we see more banks partnering with FinTech providers, which many have already started to do as a means to lend more efficiently to the small and lower middle market. This will definitely bear watching as it could directly impact the factoring and trade finance world. Banking and funding in China is also becoming much tighter and more restrictive than ever before. Pre-export loans (i.e., Packing Credits) are becoming more difficult —and more expensive—to obtain for Chinese manufacturers. Many domestic importers are continuing to provide deposits to their Chinese suppliers, something that is very disturbing as it’s essentially unse- cured lending and not a customary or particularly desirable funding mechanism for typical PO Financiers. Prospects are sometimes being forced to put up their own cash to Chinese suppliers and PO Financing funds the balance upon shipment of the product from overseas. In some cases, the PO Finance company may consider reimbursing their client for the deposit they provided to the Chinese supplier but only after the product has been inspected and shipped by the supplier. We’re also seeing more and more diversification of sourcing across the board and suspect that will continue into 2017. US importers are simply

18 The Commercial Factor | November/December 2016 going elsewhere to buy goods and become more relevant in 2017, need or opportunity that really are increasingly doing business in especially if on-shoring increases in requires non-bank financing. countries like Vietnam and Thailand. the currently unpredictable political A relatively new development, Though costs may be higher on and economic climate. This may some PO Financing providers are average than China, LCs are more not affect companies that produce beginning to offer back office func- readily accepted, which is a huge consumer products, but it’s possible tionalities and monitoring (“private draw. we will see an increase in production label”)—and some allow factoring financing for growth in industrial Reverse factoring is also being companies to fund PO Financing products. As a general rule, PO transactions using the knowledge of considered more and more as Financing companies are still far the PO Finance company to manage an option worth considering. It’s more nimble than waiting for EXIM the transactions. In these scenarios, appealing because it’s possibly more providers to react to an immediate cost effective than PO Financing but Continued on page 34 reverse factoring is predominantly a “post-shipment” financing tool based on a receivable that gets created after the financing is needed by a medium to larger Chinese think you know your stuff? manufacturer. Credit insurance (and the ability to obtain adequate Prove it! amounts to mitigate risk) is almost always a part of a reverse factoring Certified ACCount exeCutive in fACtoring transaction. For most businesses in the small to lower middle market, You are eligible to sit for the Certified Account reverse factoring has not been as readily utilized but bears watching executive in Factoring exam if you have been in the future as credit markets and involved in Factoring for at least two years and technology adapt together to serve you are or have been in an the small to lower middle market Account Executive role, or you company. have managed such a Production financing will likely position.

tHe ProCeSS iS eASY... Paul D. Schuldiner is Senior Vice Any qualified candidate can sign-up, there is no need President at for employer sponsorship. Qualified candidates can Rosenthal & Rosenthal, a schedule the exam at a supervised testing center commercial finance in a nearby city and will take a 100 item, multiple company specializing in factoring choice exam. and asset based lending. Paul leads the firm’s newest division, ProudLY diSPLAY tHe CAeF deSignAtion Rosenthal Trade Capital, and is Do responsible for driving the overall The exam was not designed to you business strategy for Rosenthal’s be easy; many candidates or your purchase order financing and alternative inventory financing report that taking the exam employees solutions. He is a seasoned financial took every bit of the two possess the executive with over 20 years of hours allotted and not everyone who takes the knowledge experience in the purchase order exam will achieve this prestigious credential. base to become and trade finance business and has Certified? previously held senior leadership Candidates who pass the exam can proudly display roles at King Trade Capital, Wells Fargo Capital Finance and as a their CAEF designation by using the Join The Growing principal of Transcap Associates. CAEF logo and C.A.E.F. initials to Ranks of CAEF’s Paul can be reached by phone show the world they are proficient and Sign-up Today! at 212-356-1703 or by email at in the field of Factoring. [email protected]. visit www.factoring.org for more information or call 805-773-0011

The Commercial Factor | November/December 2016 19 2017: A Look Ahead November/December 2016

Farmers Talk About the Weather; Factors Talk About Fintech

2017 and Beyond: For many factors, Fintech is an all too real threat, and their very survival is at stake. With Donald Trump in the White House, the situation could become tougher for factors outside the Fintech space. The current trends in regulation involving closer monitoring of bank and non-bank finance providers, including Fintech, will likely be reversed. By Tony Smith

Fintech companies are rapidly gaining What can you do about it? in basically the same way and broad- market share with enhanced tech- As Fintech continues to change the cast their service to a wider audience. nology for finding, qualifying, and dynamics of the market, factors have This might help relieve the pain for a landing business. With the pending a choice of what actions (or lack while, but as Fintech’s market share changes in Washington, that process thereof) they can take. The choices grows, you will be chasing a smaller will likely accelerate. Fintech is here you make now can—and will—affect portion of the market. Additionally, to stay and it only makes sense for how successfully your business can you probably will see less credit- providers in that space to begin deal with the evolving market. So worthy prospects. With the right seeking larger pieces of business, what are your options? pricing and risk management, that thereby expanding the threat to could work, however, it is a risky and larger, traditional factors. Do Nothing dangerous game to play. Here is what Ben Van Zee, president You could stick your head in the sand Evolve of Commonwealth Capital, has to and hope for the best. You might be OK, but your company will probably The only real choice for factors today say: “In the same way that Barnes is to make significant product and not live long and prosper (thanks, Mr. and Noble’s business was completely process changes. If you are managing Spock). The fundamental question disrupted by Amazon, factors need your business the same way you is likely to be: will it be a quick and to think of how technology, being did five or even ten years ago, you relatively painless death or a long, applied to commercial finance, is have not evolved. With the way going to change our business. It is not painful slog to the end? the market continues to change so enough to take our paper applica- Ramp up your marketing rapidly, the same may also be true if tions and turn them into PDF’s.” you are managing your business in Factors can also keep doing business

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EVENT APP SPONSOR the same way you were six months ago. So what changes should you be making? New Products Factors need to consider offering new products. This may be purchase order, inventory, or supply chain finance, to name a few. The products should be something that requires the expertise and resources unique to your business, something the Fintech finance providers cannot offer. In every case, bringing new prod- ucts into your business requires an investment. This includes analysis of the potential market and development of a strategy. Your management team will also need to invest in people and systems to support the new initiatives. Customer Experience According to W. Edwards Deming: “The customer’s definition of quality is the only one that matters.” The customer begins judging the quality of your operation before they become a customer. How easy is it to get a “Yes” from them? Fintech providers start with slick onboarding tools. The prospect fills out a form online and they are off to the races. At times, the money is in the client’s bank account within 24 hours. What do your prospects experience? The North American CEO for a multi-national factoring company described the following scenario. The potential client completes a form online requesting a factoring line because they are looking at an eminent cash crunch. Then the factor asks for a list of documents and other information. The pros- pect may take several days to pull together the required items. In the meantime, the prospect gets paid by a couple of their customers. The cash demand has evaporated (for now) and the process of completing the application stops. If the factor makes the process easier, the onboarding time is compressed.

22 The Commercial Factor | November/December 2016 The money is out the door; both the • Continuing to extract invoicing that the survival of the business is at client and the factor are happy. information directly out of the stake. The investment can come in The key elements for factors to stay client’s accounting system. many forms, including: competitive is to strike a balance • Providing the client with online • New employees. between speed, an easy-to-use access to their position with the • Training. customer interface and security. ability to run reports, request funds, All of this can be done while still and upload data. • Technology. controlling risk from the beginning • Systems that are compatible with • Changing their own mindset. and not doing anything stupid. It mobile devices, including smart In many cases, it is worth bringing requires a laser focus on speed phones and tablets. in consultants to help develop the and the right technology. Your strategy and coordinate the imple- • Providing lightening quick funding. onboarding tool needs to include mentation. These people know how Responding to client questions and interfaces with credit rating agen- to make changes. They should be requests as fast as humanly possible. cies and databases of legal records trained in process improvement. (UCC and court filings). On top of • All the while, they should be Another positive step is seeking all that, electronic access to the continuously monitoring the credit out opportunities to network with clients’ accounting system is key. rating agencies and legal databases. The client should only have to click a others who are facing the same chal- How do you do it? link that allows the factor to down- lenge. Consider attending industry load historical data directly from Having the vision is the easy part. events, such as the IFA Annual Conference, and training programs the prospect’s accounting system. At this point, the problem written That data should include invoices, that provide ideas and the chance to large has been acknowledged. Now learn from others. customers, payables, and vendors. you need to have a clear strategy With this information in hand, the and plan in place to implement these Staying current on trends in your factor can quickly: industry is extremely important. changes—complete with a way to As Sun Tzu said in his book, The Art • Assess the business and its measure success. owner. of War: Communication is a major compo- “If you know the enemy and know • Create a winning proposal. nent of the change process. yourself, you need not fear the result Everyone in the company needs • Sign on a—hopefully long of a hundred battles.” standing—new client. to know that change is the ‘new normal’. They need to know—and Fintech companies are investing • Provide funding. understand—why the changes are hundreds of millions of dollars When done right, the new process being made and that those at the in their business. What are you should include digital signatures on very top of the organization are investing in yours? standard contracts. Also, the data behind them. Remember, you are Summary captured during the onboarding probably asking people to get out As a factor, you have choices. To process should feed directly into the of their comfort zones and drop prosper in this new competitive software the factor uses to monitor old habits while learning new ones. the arrangement going forward. environment, you need to invest in This includes accounting, business people, technology and the overall As a result, the factor has development, operations, risk customer experience. This is not compressed the length of time management, and relationship thinking outside the box. The old box it takes to bring in new business, management. No one is immune. has been recycled. There is a new provided a quality experience for Ownership needs to want to invest box. Come on in. • the new client from the start, and in the company. They have to realize controlled the risk, while becoming more efficient. As an aside, the factor is not wasting time on unacceptable prospects. Tony Smith is the CEO Americas for HPD Software, having joined Going forward, the factor must the company in 2008. Prior to his employment with HPD, Tony continue to meet the customer’s worked as a service provider in the ABL industry. He holds a definition of quality. That means degree in accounting from Saint John’s University in Collegeville remaining customer-focused and and is CPA certified. He worked 5 years as a public accountant easy to do business with. This and 20 years in various accounting positions including CFO strategy should include: responsibilities. Tony can be reached by phone at 805-544-5821 Ext. 17 or by email at [email protected].

The Commercial Factor | November/December 2016 23 Credit Insurance Technology for an Uncertain World

Lending internationally is often seen as a risky endeavor because of complex regulations, fluctuating currencies, and lack of transparency. The current economic uncertainty facing the entire world has only made cross border lending even more challenging. Today’s instability has made it problematic to predict what the global landscape will look like in a year or even six months from now. By Tessa Payne

24 The Commercial Factor | November/December 2016 On the domestic front, many credit insurance, making it far more US businesses have seen their Highlighted by the recent effective and easy for international margins tighten and revenues Brexit vote for the UK to lenders. decline as certain commodity prices leave the European Union, When credit insurance is managed dropped significantly this year. properly, it alleviates most risks that Since November 2015, there has lending across borders come with cross-border lending, and been a rise in past due reporting, seems riskier than ever. The acts as a safe backstop in the case of causing banks to scrutinize their a critical failure such as bankruptcy, borrowers’ customers very closely. departure leaves the E.U. political turmoil, regulatory changes, While consumers may have been economically weaker than or foreign currency fluctuation. It saving at the pump, there are signs also gives you the ability to oversee the economy may be weakening before, and other countries all exposures on an ongoing basis, as retailers such as Macy’s recently such as Belgium and France allowing you to maneuver from a announced closures of over 100 top-down view to more granular stores. Further uncertainty is are expressing their interest detail in real-time. brought about by the presidential to follow suit. election, as nobody is sure how These technologies have enabled that could affect existing or new the efficient centralization of poli- monetary or trade policies. cies, greatly reducing the risk of So why is credit insurance human error or discrepancies. The international economic waters on the rise? are proving to be even chop- The bottom line? pier. Highlighted by the recent Credit insurance is proving to be EDI technology has been the driving Brexit vote for the UK to leave the a more cost-effective, safe, and force behind the rising popularity European Union, lending across efficient way to protect receivables. of credit insurance in cross-border borders seems riskier than ever. It is easy to provide global coverage deals. It brings an increased level The departure leaves the E.U. because of the way credit insurance of transparency to credit insurance economically weaker than before, policies are structured. It can even management, making it easy and and other countries such as Belgium help protect against political and efficient to oversee multiple policies and France are expressing their economic risks, in addition to the from multiple carriers across a port- interest to follow suit. Outside of more common situations such as folio of borrowers, all in real-time. the E.U., plenty of countries are bankruptcies or slow payments. When credit insurance is monitored experiencing political and economic Additionally, it is possible to main- properly, coverage is maximized, crises. Brazil, for example, is in the tain several different policies tailored premiums are optimized, and most midst of political turmoil; inves- specifically for different clients. importantly, claims get paid. • tors are pulling out, which will only That said, credit insurance is not serve to worsen the downward 100% guaranteed unless it is moni- spiral. Countries once thought safe tored correctly and the borrower is Tessa Payne to operate in, such as Argentina or in compliance with the policy at all serves as Managing Turkey, are now considered too risky times. This is where the use of credit Director of Business by most lenders. insurance can get complex and Development at FGI, So, all of this considered, how can why many companies and lenders a global leader in commercial finance. one feel comfortable about lending have had bad past experiences. She is responsible for overseeing globally? Effectively tracking a large number of policies from multiple carriers business development initiatives All of this uncertainty has caused manually is practically impossible, across multiple FGI verticals throughout North America. She is lenders to look for additional ways and credit insurance that is not to protect themselves against non- also responsible for spearheading properly managed will not protect business strategy planning, payment. Many lenders are now the policy owner. looking to credit insurance as a risk implementation of new product offerings, partnership programs and mitigation tool to allow them to lend This is where EDI (Electronic Data content development. Tessa can be safely abroad. Though widely used Interchange) technology comes in. This technology, which includes reached by phone at 312-474-6011 throughout Europe for some time, or by email at [email protected]. it is a newer practice for US lenders services such as FGI T.R.U.S.T. and and it is gaining in popularity. HighRadius, is standardizing and automating the management of

The Commercial Factor | November/December 2016 25 what’s new at ifa November/December 2016

2017: All Bets are Off By gage price, President, MP Star Financial, Inc.

As you all are aware, the AFA has aisle, and we are going to spend increasing importance as the next spent a lot of time developing rela- 2017 looking for new friends on the Chairman of Senate Appropriations tionships on the Hill in Washington, Hill and in the new Administration. in two years. Senator Shelby under- on both sides of the aisle. This is In that regard, it is important to get stands our industry and has been a crucial in that we will need friends a feel for the various Congressional strong advocate for us. who understand our industry and committees of relevance to factoring In his place, Senator Mike Crapo the positive contributions we make in terms of their leadership, as well (R-ID) is slated to be the next in helping businesses gain access as the chance for meaningful reform Chairman of the Senate Banking to the capital they need in order to of Dodd-Frank and the CFPB. This Committee. Senator Crapo has very grow. debate could be of tremendous similar views and philosophies on The election last month has vindi- importance to factoring. the role of government in regulating cated that strategy. In an election In the Senate, as a result of term the financial services and is a very in which virtually no one saw the limitations on Senate Republican capable legislator. He will lead a very outcome, the best that anyone can chairmen, Senator Richard Shelby pragmatic group of senators on the say is, “All bets are off.” But we are (R-AL) will be stepping down as the Republican side of the Committee. glad we can say that the AFA has Chairman of the Senate Banking On the Democratic side of the emerged with many, if not all, of its Committee. He will remain on Senate Banking Committee, friends intact on both sides of the that committee, but he will have there are several Senators that also have strong reputations for being pragmatic legislators. Those Democratic Senators are Senator Heidi Heitkamp (D-ND), who has extensive experience in the banking industry; Senator Jon Tester (D-MT), who the AFA has met with several times and who understands our industry well, and Senator Joe Donnelly (D-IN), who is a former businessman. While it is too early to make any predictions as to what legisla- tion may emerge from the Senate Banking Committee, the makeup of the Committee may lend itself to some bipartisan reforms to the current Dodd-Frank regulatory framework. In the House of Representatives, there has been less turnover, and Chairman Jeb Hensarling (R-TX) will remain the chairman of the House Financial Services Committee. Chairman Hensarling has a good working relationship with the new Administration and a strong

26 The Commercial Factor | November/December 2016 background in financial services. It is http://www.financialservices.house. and, as a result, 2017 may spell the expected that Chairman Hensarling gov/choice/. end of the current structure of the will quickly revive the CHOICE Act, Regarding the Consumer Financial CFPB. At the very least, significant which he sponsored and which Protection Bureau, you will recall changes to the CFPB are quite passed the House Financial Services that the AFA and our friends on possible. Committee this summer. While it the Hill, led by Senator Shelby and In 2016, the PHH Corporation sued passed along party lines without others, fought to make the single the CFPB over the imposition of any amendments offered by the director makeup of the CFPB into a an enhanced penalty by Director Democrats on the Committee, it board of governance. Our argument Richard Cordray of $109 million may be reasonable to assume that was that a single person with unilat- retroactively applied against PHH. the advent of a new Administration eral authority to make regulations The United States Federal Court of will encourage greater involvement and unchecked ability to penalize Appeals for the D.C. Circuit rejected on the part of the Democrats on the parties was too much power in the the penalty and, in a landmark Committee. If you would like to read hands of one person. In that regard, decision, ruled that the CFPB was more about the CHOICE Act, you 2016 was a very consequential year, can read the bill and a summary at Continued on page 35

2016 Members As of December 8, 2016 Diamond Member ($10,000+) AmeriFactors Financial Group, LLC AmeriTrust Capital Corp. Apex Capital Corp Assist Financial Services, Inc. Brookridge Funding Bibby Financial Services, Inc. Bay View Funding Commonwealth Capital, LLC Crestmark Bank Commercial Finance Consultants Coral Capital Solutions, LLC D & S Factors (Diana Luoma, President) (David Rains, Owner) Exchange Capital Corporation Gulf Coast Business Credit DB Squared, Inc. (Scott Coffey, President) International Factoring Association Debra Wilson—President, Vertex Factor King, LLC J D Factors Financial Ltd. FactorPlus LSQ Funding Group Durham Commercial Capital FirstLine Funding Group MP Star Financial, Inc. FSW Funding J.O.B.E. Services, Inc. (Gage Price, President) Great Plains Transportation Services, Inc. Levinson, Arshonsky & Kurtz, LLP TBS Factoring Service, LLC Jencks & Jencks, PC (David Jencks, Esq.) Match Factors, Inc. (Wood Kaufman, President) Lenders Funding, LLC Multiple Funding Solutions, Inc. Triumph Business Capital Mick Goik—President, Crestmark Bank Nationwide Capital Funding, Inc. Mickey Seeman—Owner, Sunbelt Primary Funding Corporation Platinum ($5,000—$10,000) Finance Spectrum Commercial Services Company Accord Financial, Inc. Paragon Financial Group, Inc. The Hamilton Group CapFlow Funding Group (Jon Anselma, President) Far West Capital Bronze ($500—$1,000) Pavestone Capital Federal National Commercial Credit ACS Factors (Tim Valdez, President) (Kwesi Rogers, President) Advantage Business Capital Prime Capital Group, Inc. Gateway Commercial Finance American Funding Solutions LLC (Vincent Galano, President) Goodman Factors, a division of Business Finance Corporation PRN Funding (Phil Cohen, President) Independent Bank Business to Business Capital Corp. Prosperity Funding, Inc. Interstate Capital Corporation Camel Financial, Inc. Saint John Capital Corp. Millennium Funding Capital Funding Solutions, Inc. SevenOaks Capital Associates, LLC Pavestone Capital Commercial Business Funding Sky Business Credit Phoenix Capital Group, LLC Concept Financial Group (Gail Reints, President) Republic Business Credit, LLC Cross Key Capital LLC SouthStar Capital, LLC Sallyport Commercial Finance, LLC CV Credit, Inc. United Capital Funding Corp. Sunbelt Finance Evergreen Working Capital, LLC (Ivan Baker, Managing Partner) TAFS, Inc. Greenback Capital Vertex Financial, Ltd. (John Adler, President) Gold ($2,500—$5,000) Silver ($1,000—$2,500) Interface Financial Group AGR Financial, LLC Allegiant Business Finance, LLC Mazon Associates, Inc. Allied Affiliated Funding Amerisource Funding, Inc. QC Capital Solutions

The Commercial Factor | November/December 2016 27 what’s new at ifa November/December 2016

Our Preferred Vendors have undergone a screening and evaluation process. When you contact the Preferred Vendors, you will need to indicate that you are an IFA member to receive your benefit. If you offer a good or service to the Factoring Industry and are interested in applying for Preferred Vendor Status, please contact the IFA at 805-773-0011.

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(ie: Hoovers, Supply, DNBI Modules) and ability to collect quickly and efficiently, they’ve in data, Ansonia provides Factors and ABL lenders worked with many Fortune 1000 companies over the Credit Card Processing an innovative way of managing debtor and fraud years. Their expertise on client service and collection risk. Our business credit reports feature current and ePaymentAmerica results makes them a perfect fit for your company in historical days-to-pay information collected directly ePaymentAmerica is the nation’s leading provider the management of delinquent accounts receivables. from the accounts receivable departments of small of processing services for the factoring, A/R Greenberg, Grant and Richards will monitor each IFA and large factors, and other companies across all financing, and P/O financing industries. They offer member to its fullest to create a successful collection segments. IFA members exclusive VISA, MasterCard, American program to fit each member’s needs. Phone: 855-ANSONIA • 855-267-6642 x.103 Express and discover pricing, a discount on their Phone: 800-497-5332 ext 4006 • www.ggrinc.com www.ansoniacreditdata.com virtual gateway, and a discount on PCI Compliance Email: [email protected] IFA Member Benefits: Free VIGILANTE™ Certifications. IFA Member Benefits: Preferred contingency Portfolio Analysis. Try Ansonia’s unique new Phone: 901-385-5327 • www.epaymentamerica.com rates for all members. Monthly status reports program for monitoring credit portfolio risk. Email: [email protected]

28 The Commercial Factor | November/December 2016 IFA Member Benefits: Interchange Plus Pricing* Phone: 866-432-2409 • www.factorfox.com roundtrip transportation by booking online with Bundled Monthly Service Fee of $30.00 In addition to the one-month free trial for SuperShuttle at www.supershuttle.com. Use the (includes IRS regulatory compliance, account everyone, IFA Members receive an additional following Discount Code: CLLMC maintenance, PCI compliance, virtual gateway month to try the complete program. UCC Search & online management tool.) *Based on volume/ ProfitStars® transaction count. First Corporate Solutions As a diverse, global division of Jack Henry & First Corporate Solutions is a full service public Disaster Recovery Services Associates, Inc.® (JHA), ProfitStars combines records provider specializing in the research, Agility Recovery JHA’s solid technology background with the latest retrieval and filing of public records nationwide breakthroughs. Our Commercial Lending Solutions For the past 25 years, Agility Recovery has been and internationally. Their services include industry help financial institutions and alternative finance a premier provider of onsite recovery solutions standards such as UCC, lien and litigation searching, companies expand commercial credit, increase across the United States and Canada. When UCC and corporate filing services, nationwide their spread through higher returns, and outpace disaster hits, Agility will be on the scene, providing registered agent coverage and real property title the competition through the solutions and services you with any, or all, of the critical elements you searching, as well as unique solutions such as state of the Commercial Lending Center Suite™, including need to keep your business in business: power, and county account monitoring designed specifi- FactorSoft®, Commercial Lending Management space, technology, connectivity. Membership also cally for Factors. System™, Commercial Lending FinancialCenter™, includes access to a dedicated Continuity Planner Phone: 800-406-1577 • www.ficoso.com Commercial Lending BusinessCenter™, and secure access to your myAgility planning portal Email: [email protected] BusinessManager®, and LendingNetwork®. to assist in building and maintaining your business IFA members will receive a 10% discount off Phone: 205-972-8900, option 3 continuity plan. of the retail rates of their signature state and www.profitstars.com/commerciallending county account monitoring product. Phone: 866-364-9696 • www.agilityrecovery.com IFA members will receive 10% off new Email: [email protected] ProfitStars lending solutions product purchase. IFA Member Benefits: 5% discount to each For IFA members who are currently ProfitStars respective client’s monthly ReadySuite customers: Free one day FactorSoft refresher IFA CALENDAR events membership fee. course, per year, at ProfitStars’ training facility in Birmingham, AL. and webinars Marketing Tax Compliance 50 Words LLC 50 Words is a marketing outsource firm for Tax Guard January 18 companies that either do not have a marketing Tax Guard fills a critical gap in a commercial lender’s Factoring, Accountants and department or that need to add more manpower to credit risk management toolset with efficient, real- their existing marketing team. They serve as your time and actionable insight into the true, non-public Bookkeepers Webinar dedicated marketing department. IRS tax compliance status of their prospects and 1pm-2pm PST Phone: 610-631-5702 • www.50wordsmarketing.com clients. Our due diligence reports, tax compli- January 25-27 IFA Member Benefits: IFA Members will receive ance monitoring and resolution solutions support five free hours of marketing services with the commercial lenders throughout every stage of the 2017 Presidents & purchase of any marketing service. (Offer to funding life-cycle. Senior Executives Meeting new clients only) Phone: 303-953-6308 • www.tax-guard.com Casa de Campo, Contact Heather Love Recruitment Agency La Romana IFA Members will receive a 20% discount on the Commercial Finance Consultants same-day due diligence order. Dominican Republic Established in 2002, CFC is the premier provider of Transportation March 7 human talent to the factoring industry. CFC’s goal is to provide their clients with the best available ExecuCar Luncheon Meeting with NYIC human capital and the most current industry This is a premier luxury sedan service that & IFA Northeast Chapter information to assist in accomplishing their growth offers private transportation with experienced Arno Ristorante potential. professional drivers. Whether you are heading to New York, NY Phone: 469-402-4000 • www.searchcf.com the airport, a business meeting or social event, Email: [email protected] ExecuCar will get you there safely, in style and April 4-5 comfort. IFA members will receive an additional 60 days Face Reading Workshop added to the guarantee on all placements. IFA Member Benefits: Save 10% on your roundtrip transportation by booking online Omni Fort Worth Software with ExecuCar at www.execucar.com. Use the Fort Worth, TX FactorFox following Discount Code: CLLMC April 5 FactorFox Cirrus is a cloud application for factors, SuperShuttle their clients, brokers, lenders, and others who enter Factoring Essentials Training SuperShuttle is the nation’s leading shared-ride or access data. Entries can be made and reports Omni Fort Worth airport shuttle service, providing door-to-door accessed from any internet-connected computer, ground transportation to more than 8 million Fort Worth, TX tablet, or smart phone. As a web-native program, passengers per year. Their friendly drivers, comfort- there is no extra cost for setting up your account April 5-8 able vans and reasonable rates take the hassle out or to access your data; further, you receive three of getting to and from 33 airports in over 50 US 2017 Annual Factoring Conference hours of free training online. FactorFox’s various cities and surrounding communities. versions make it suitable for nearly any size factor. Omni Fort Worth IFA Member Benefits: Save 10% on your Fort Worth, TX

The Commercial Factor | November/December 2016 29 2017 Factoring conference update November/December 2016

Everything’s Bigger in Texas—Including the 2017 IFA Factoring Conference

On April 5-8, 2017, the largest gathering of commercial finance professionals in the world will take place in Fort Worth, Texas. With over 800 commercial finance professionals anticipated, over 55 exhibitors showcasing products to the commercial finance industry, and over 60 world class speakers, the 2017 Factoring Conference is shaping up to become the biggest and finest event for the Factoring industry ever. What better place to have this grand event than in the state where everything is bigger….Texas!

By heather villa

The City of Cowboys and Culture will host the 23rd museums and arts, walkable downtown, diverse dining Annual Factoring Conference at the Omni Fort Worth options, and major sports events offer numerous itiner- Hotel. Conveniently located in the heart of Fort Worth’s aries for every taste and budget. exciting downtown, the hotel is walking distance from Masterpieces abound in the museums of the Fort Worth the city’s cultural center, restaurants and nightlife. The Cultural District, located a few miles west of downtown. Omni Fort Worth Hotel represents progressive luxury Known as the “Museum Capital of the Southwest,” in and its casual yet sophisticated style showcases a Fort Worth you can explore a variety of galleries that personality that’s as gracious and dynamic as Fort Worth are world-famous for the architecture and quality of itself. their collections—The Kimbell Art Museum, Modern Art As the 16th-largest city in the US, “Cowtown” Fort Worth Museum, Log Cabin Village, National Cowgirl Museum embraces and celebrates its western heritage without and the Texas Cowboy Hall of Fame, just to name a few. being entirely defined by it. Fort Worth’s premier

30 The Commercial Factor | November/December 2016 If Texas heritage is what you come to see, join in the Fort • Economic Forecast—Hear how the economy will affect Worth Herd. Each morning in the Historic Stockyards, Factors by a senior economist and economic advisor 15 Texas longhorn cattle are rounded up from their in the economic research department at the Federal corral and driven by cowhands in authentic dress down Reserve Bank of Chicago. (William Strauss, Federal Exchange Avenue to the delight of tourists and locals Reserve Bank of Chicago) alike. Visitors are drawn to the Old West feel of the • Blockchain—Blockchain is the ledger that records Historic Stockyards District’s brick streets and restored bitcoin transactions. This technology has the potential buildings which boast rodeos, western events, restau- to drastically change the way monetary transactions are rants, retail outlets, and much more. Make sure to see conducted and recorded. Blockchain technology is set where infamous outlaws, Bonnie and Clyde, used the to revolutionize the mechanism in which international Stockyard Hotel as one of their hideouts! payments are made. Learn what it is all about and the When the sun goes down, Fort Worth really comes alive. global implications, how it will affect finance and trade Hotspots such as nightclubs, restaurants, movies, and and if it is the currency of the future. (Jamie Smith, The live theaters flourish in the downtown area. Sundance Bitfury Group) Square buzzes with a high-energy ambience as this • Report from the Courts—Hear the lessons learned 35-block district is filled with shops, restaurants and a from this year’s court decisions and how the courts variety of entertainment options. treated IFA members. (Bob Zadek, Esq., Buchalter Conference at a Glance Nemer) The 2017 Factoring Conference will provide two full days • Transportation Factoring—Receive an update on the of educational instruction from some of the greatest transportation industry as well as time for discussion minds in the industry. Learn from industry experts and on key topics related to Transportation Factors. (David your peers as you gain insight into current industry Jencks, Esq., Jencks & Jencks, P.C.) trends that will allow you to grow your business. The • Factoring 101—Learn the nuts and bolts of Factoring educational spotlight this year will focus on the disrup- for beginners or those wishing to enhance their previous tions within the commercial finance industry and how to knowledge. Topics include: What is Factoring?, Factoring position your company for the future. Terms, The UCC Code, Finding the Right Client, Five C’s of • Miracle on Everest—Inspiration for the Major Motion Credit, Resources to Assist You. (Brian Center, Far West Picture, Everest, Dr. Beck Weathers will take you back to Capital) the fateful day on Everest, reflecting on his harrowing • Legal 101—Whether you are new to factoring or looking tale of survival, the lessons he learned, and his supreme for a legal update, this session will cover how factors appreciation for getting a second chance at life, operate in regard to the law. We will be discussing topics encouraging others to cherish every moment. (Dr. Beck such as notification, UCC, and your legal documents. (Jim Weathers, Survivor of the 1996 Mount Everest Tragedy) Cretella, Esq., Otterbourg, P.C.) • Anticipate Disruptions, Problems and • Solving Client Issues—Every day issues that arise may Opportunities—Learn how to accelerate growth by force a factor to consider whether it should continue using hard trends to anticipate disruptions, problems or should cease purchasing accounts from a client. This and opportunities within our industry. Gain insight into session will explore extraordinarily creative measures how a technology-enabled innovation approach can that may be considered or taken to preserve a client create and sustain the competitive advantage you need relationship when the vast majority of factors may, in to succeed. (Dan Burrus, Author, Business Strategist and a knee-jerk reaction, consider it necessary and elect to Technology Futurist) terminate a relationship which may prove costly and a • Monitoring Social Media for Fraud—Social media loss of valuable revenue. (Michael Ullman, Esq. & Jared investigations are now an accepted investigative and Ullman, Esq., Ullman & Ullman, P.A., Jay Atkins, Seacoast fraud analysis tool when used properly. Fraudulent Business Funding) behavior, illegal intentions, asset reallocations and the • Cultivating a Culture of Success—(Half day training characteristics of associates are all widely available for session included)—Organizations are often burdened smart fraud examiners who can decipher the social with mediocre or poorly performing employees—costing network to build their case. Discover free and fee-based billions of dollars a year. This poor performance is often resources available to fraud examiners for monitoring attributed to an employee’s individual qualities or attri- social media as well as open sources for detecting butes, such as personality, motivation and/or skillsets. fraudulent behavior and obtaining alerts on potential However, within the field of psychology, we know that incidents. (Cynthia Hetherington, CFE, Hetherington context is a better predictor and controller of behavior Group) than individual attributes—and inside an organization,

The Commercial Factor | November/December 2016 31 this “context” is what we also refer to as “corporate International Sessions: culture.” Culture trumps everything. In a participant- • Factoring in Latin America—These panelists will driven program, attendees will leave with actionable discuss the documents that are necessary to successfully information regarding: understanding the profit paradox, factor receivables from Latin America. classic capitalism vs. social capitalism and their impli- cations; a clear definition of organizational culture; • How to Factor Chinese Invoices—China has seen examples of the successes and failures created by unprecedented growth in the factoring industry. This organizational culture; and Steps for Creating a Culture presents many opportunities for factors around the of Success: Identifying the four factors which predict world to partner with factors in China. We will discuss success in organizations. (Dr. Gustavo Grodnitzky, various methods for working with Chinese based factors. Consultant) • Canadian Legal Update—Canadian legal experts will Panel Sessions: review case rulings from various Canadian jurisdictions over the past year and discuss their practical implications • The Fintech Disruption—Whether they are called for Factors and Asset Based Lenders operating in the Fintech, MCA’s or ACH Lenders, these companies are a Canadian marketplace. disruptor to the factoring model. Although much more expensive, they have been able to deliver funding to the • Dealing with Bankruptcies in Canada—This panel small business community more quickly than the typical will be discussing the intricacies of dealing with the factor. Learn how these companies operate and if there bankruptcy laws in Canada; discussing specific steps that are any of their operating efficiencies that factors can need to be taken to secure your collateral rights. emulate. Roundtable Sessions: • Portfolio Warning Signs- Problems may exist in your • Women in Commercial Finance—Women in current portfolio. This panel will be discussing indicators Commercial Finance shouldn’t miss this opportunity that could reveal these issues. Knowing how to spot to openly exchange ideas and experiences with other these red flags will give you advance warning of any women on various topics relevant to the commercial potential problems. finance industry. Three prominent industry professionals • PO Funding—Purchase Order Funding can be used to will lead the discussion which is open to women at all facilitate international transactions. Our panel of experts stages of their career. will be discussing how PO funders work with Factors to • Senior Executives—This high-level gathering provides facilitate transactions. Some of the topics covered will a platform for Senior Executives to share best practices be: How has the market changed in the PO funding space and discuss the challenges that often come with being over the past few years, what are some of the risks of PO top decision makers. Senior Executives will discuss funding or factors working with PO funders, what are several key issues and topics while expanding their some of the challenges PO funders face, how do Letters networking circle. of Credit work with PO funders, and will PO funding work • Young Professionals—This valuable networking with domestic suppliers. opportunity will provide a forum for young professionals • Legal Fintech Issues—This diverse panel of legal under 40 years of age who are early in their careers to experts will address the key legal issues pertaining to discuss valuable ways to learn and share from others the commercial finance sector. Panelists will cover a in similar positions. Young professionals face unique wide range of legal matters and keep attendees up to challenges on the road to success and this gathering date on the latest industry developments. Some of the provides an ideal atmosphere to discuss and exchange topics they plan to address are: How to deal with Fintech experiences. Continued on page 35 companies when they fund behind you, dealing with UCC issues in relation to Fintech companies, notifica- tion issues in relation to Fintech companies, Torturous Heather Villa is the Managing Director Interface from Fintech companies, and perfection of the International Factoring Association. requirements in non-US jurisdictions. She is responsible for managing and di- • Fraud—Our panel of experts will be discussing actual recting the IFA’s external communications fraud cases against Factors. They will focus on spotting as well as managing the business affairs the warning signs that go beyond the obvious red flags of the Association. She assists with event and how many small details add up to a big clear picture. planning, speaker selection and contract negotiations for all training seminars and conferences, including the annual Factoring Conference. Heather can be reached at 805-773-0011 ext 301 or [email protected].

32 The Commercial Factor | November/December 2016 small ticket factor by Don D’Ambrosio November/December 2016 A Look Ahead To 2017

I’m not sure if anyone in any business circle can speculate about the new year without discussing the recent presidential election. As of the writing of this article, the country has a new president elect by the name of Donald J. Trump.

For the last eighteen months or so, greatly during the shale oil boom providing wealth for lower income all of us had to endure one of the in the Bakken Oil region in North earners and creating jobs. The nastiest presidential campaigns Dakota. However, as OPEC countries biggest point of contention is that in recent history. No matter what such as Saudi Arabia are continuing the benefits are rarely trickled down side of the political aisle you reside to increase their oil output along to the lower and working classes. on, it was just ugly. Whether it was with the newly found reserves in Another hot topic on the campaign the string of shouting matches North America, the price of oil has trail was healthcare reform. The under the guise of political debates, fallen below $50 a barrel. Because president elect has repeatedly accusations of criminal behavior, of this glut, many US oil companies stated that one of his first orders sexual misconduct or leaked emails, have chosen to suspend opera- of business will be to repeal the this was one campaign that had tions until price levels reach a point Affordable Care Act, frequently something for everyone. There where it is profitable for them to referred to as Obamacare. The wasn’t much middle ground when commence drilling. new administration prefers letting it came to choosing the presidential While on the campaign trail, candi- individual states deal with health- candidate that earned your vote. date Trump has stated that he is care policy for their residents. This The real question now is, “What deeply in favor of lowering corpo- includes modifying the existing effect will a Trump presidency have rate taxes to 15% and decreasing tax law that inhibits the sale of health on small businesses”? rates for top earners to 33% from insurance across state lines, tax Since president-elect Trump has the current rate of 39.6%. Many deductions for monthly premiums spent his entire life in business republicans and democrats believe and removing barriers of entry it’s obvious that his policies and this could be a good thing for the for drug providers. One of the appointments will be in favor of economy if it can eliminate lobbyists biggest issues for small businesses less government regulations, lower seeking loopholes in the current is the cost of the Affordable Care corporate taxes, strict immigration tax code. Opponents of lowering Act. According to an online survey policies, and changes to the North corporate taxes frequently refer to produced by LevelFunded Health, American Free Trade Agreement the “trickle-down theory” which a national health insurance agency (NAFTA). The new administration claims that benefits provided to “with a hyper-focus on Affordable has also indicated they will take upper income level earners will help Care Act ‘alternative’ employee a pro energy policy, favoring the society. In theory, their extra wealth benefit programs for the small expansion by unleashing America’s will be spent into the economy, employer market segment,” 87 $50 trillion in untapped shale oil, natural gas reserves, plus hundreds of years in clean oil reserves. The Don D’Ambrosio is the president of Oxygen Funding, Inc., an goal is to become independent invoice factoring company located in Lake Forest, California. Don from OPEC and any countries that has over 25 years experience working in the commercial and are hostile to the United States residential finance industries. He previously served as Controller of interests. It was back in 2010 where a commercial insurance agency and as Chief Financial Officer of a many asset-based lenders and publicly traded mortgage company. He can be reached at factoring companies benefitted 949-305-9300 or [email protected].

The Commercial Factor | November/December 2016 33 the future of po finance Continued from page 19

the PO Financing company’s funding risk decreases (especially if they have a high cost of capital or insuf- ficient capital), but yield and upside go down as well. Inventory financing is also expected to see an uptick in activity in 2017. With a growing focus on e-commerce-based business models, the ability to fund inventory (with both B2B and B2C elements) combined with PO Financing may represent an opportunity for the lender with requisite skills in both segments. Improved technology and need to increase speed in the supply chain continues be a driver and this is especially so in consumer goods. The net for PO Financing is that it has steadily become a legitimate and worthwhile solution. The new frontier may be having to deal with a borrower’s desire for a “one stop shop” to their supply chain finance requirements. A funding source that combines the best of both the factoring and PO Finance worlds percent of those small businesses younger participants living with their so that the entire supply chain can who offer “group health care” parents should be able to keep their be efficiently financed will become saw health insurance premiums coverage for an extended period. more commonplace. This will result rise by 25 percent since 2014, This is a complicated issue that will in offering a more competitively with 12 percent seeing premium require much negotiation from both priced product, while more effec- increases of 50 percent or higher. parties requiring compromise from tively controlling risk. That means The survey also found that 56% both the house and senate. that the potential scalability of PO Financing is significant. of the businesses polled stated I can go on to discuss many of the quality candidates are leaving issues facing the new administra- The business of PO Financing has because of the costs associated tion and speculate how each one witnessed great change over the with Obamacare. It is important to is going to be handled as it relates past several years and will no doubt remember that there are roughly to small business. Whether it’s continue to evolve in response over 11 million participants in how to tackle the economy, trade, to the changing marketplace. With capital markets now more Obamacare and any change to the infrastructure or foreign policy, we unpredictable than ever, selecting act would have an effect on a large just don’t know how all of this will the wrong PO Financing partner segment of the US population. shake out for the country. Time can be detrimental to everyone Interestingly, in a recent interview will tell how effectively the Trump on 60 Minutes, president elect involved. It’s become absolutely team can deliver on their campaign critical for borrowers, lenders and Trump looks like he has softened his promises. Vice President-elect Mike stance on some parts of the current intermediaries alike to partner with Pence has already told his former a well-capitalized, well-rounded and healthcare policy. Although he made colleagues in the house to buckle it clear that he still will be in favor of experienced provider in the supply up for an ambitious opening to the chain finance world. • repealing the plan, there are several new administration. I think an entire parts of it he would like to stay in nation, along with the rest of the place. For one, he stated that partic- world, has already fastened their ipants with pre-existing conditions seatbelts. • should be allowed coverage and

34 The Commercial Factor | November/December 2016 AFA Update 2017 Factoring Conference Continued from page 27 Continued from page 32 unconstitutional in its makeup. • Operational Issues—This is Networking Opportunities What the Court essentially said was an open forum for operations You won’t want to miss all of that the single director setup of the personnel to discuss relevant the socials, activities and other CFPB, without any “critical check” by commercial finance issues. networking opportunities that are the President or “substitute check” • Small Factors—Factoring compa- available to you throughout the by a board of governance, was a threat to individual liberty from nies who fund clients with low week. Not only is one of the best arbitrary use of the director’s unfet- sales volumes operate in a unique ways to learn about the industry tered power. As a result, the Director manner. This roundtable discussion through the experience of others, of the CFPB now serves at the will is designed to give this important but expanding your networking of the President. If you would like segment of our industry a forum to circle allows you to gain resources to read more about the case, you discuss their challenges and learn for future business. As one attendee can find the details at https://www. from their peers. from last year’s conference said, cfpbmonitor.com/2016/10/11/ “The networking opportunities breaking-news-in-phh-v-cfpb-d-c- • Idea Exchange—Saturday morn- alone are well worth the price of circuit-holds-that-cfpb-structure-is- ing’s Idea Exchange is also included unconstitutional/. in your conference registration. admission!” Some of the events we have planned this year include: This decision is being appealed, From 9am—12pm, this event brings but it is unclear whether President together small groups who have a • Bibby Welcome Reception Trump will pursue that appeal. common interest in a particular issue. • Golf Tournament Further, it is unclear whether Over the course of the morning, President Trump will keep Director attendees explore continuing and • Lone Star Reception Cordray in place in 2017. Several emerging opportunities and issues • Texas BBQ Food Tour distinguished legal academicians in a roundtable environment that have opined that President Trump • Guest Museum Tour provides enormous opportunities for would have the right to immediately • Breakout Small Factor Lunch dismiss Cordray without awaiting sharing ideas. further judicial review. Thus, it Additional Workshops and • Breakout Transportation is very likely that the CFPB will Training Factor Lunch become more accountable to the • Tax Guard Dessert Reception Executive and Legislative Branches Back by popular demand, Mac Fulfur of the Government. (President, Amazing Face Reading) • Closing Event at Billy Bob’s will provide an in-depth and interac- Predicting the future of Dodd- • JFK History Tour Frank and the CFPB is difficult, if tive workshop aimed at teaching you not impossible, at this point, other how to connect with and under- Come see for yourself why the 23rd than to say that the Congress and stand others. This two-day Face Annual Factoring Conference will be President Trump appear open to Reading Certification Workshop, the biggest event of the year for the act on both Dodd-Frank and the to be held April 4-5 before the Factoring industry! The compelling CFPB and make some substantial conference begins, will assist you in speakers and invaluable networking changes. How extensive those interviews, client interactions, and in opportunities makes this the must- changes may be will be determined your personal life, as well. attend event for anyone involved in by how much support the legislation the Commercial Finance Industry. gets in Congress because many of Also before the conference starts, In the “most typically Texas of all the potential changes may require we will be offering our Factoring Texas cities”, Fort Worth is where 60 votes in the Senate to clear any Essentials Training Course with Texas’ storied history meets its busy filibusters. However, the AFA will George Thorson (Executive Vice present. Join your peers deep in the be there to protect the interests of President, Triumph Business Capital) our industry in this time of major heart of Texas! • and Gen Merritt-Parikh (President, change. We will continue to build relationships and to educate those Allied Affiliated Funding). If you are For more information in Washington on the crucial role a new Factor, an individual new to and to register, go to that factoring plays in our economy. Factoring, or just wish to enhance factoringconference.com. And as always we want to thank you your knowledge, this course will for your generous contributions as provide you with the background members of the AFA. However, our you need to become a successful work is not done and we need your Factor. continued support! •

The Commercial Factor | November/December 2016 35