A Publication of The International Factoring Association
November/December 2014 | VOL 16 | No. 6
a look ahead
ALSO INSIDE: Halloween is Over, but Deflation and Demand Ghosts Remain Technology: Solution, Problem or Both? Are Online Business Lending Models the Factoring of the Future?
TABLE OF CONTENTS November/December 2014 | VOL 16 | No. 6
Halloween Is Over, but Deflation and Demand Ghosts Remain By Dean Lyulkin
Technology: Solution, Problem or Both? By Matt Smulski, CFAE
Unconventional Wisdom: Are online business lending models the factoring of the future? By Andrea Petro
let the Good Times Roll at the 2015 Factoring Conference By Heather Villa
Q&A with Economist and 2015 Factoring Conference speaker, Dr. Peter Ricchiuti
A Letter From Your Prospect from 15 Years In The Future By Ryan Jaskiewicz columns
what’s new at ifa
legal factor: Understanding Your Factor Client’s underlying Contracts and Controlling the Invoices By Steven N. Kurtz, Esq.
small ticket factor: 2015:what will it mean? By Don D’Ambrosio
ADVERTISER INDEX Bayside Business Solutions, Inc...... 12 Gibraltar Business Capital ...... 11 BCR Publishing ...... 4, 35 International Factoring Association ...... 2, 15, 17, 19 Big Shoulders Capital LLC ...... 8 Platinum Credit Management LP ...... 10 Capital Software, Inc...... 8 RMP Capital Corp...... 16 FactorFox Software, Inc...... 31 Tax Guard, Inc...... 14 FactorsNetwork ...... 23 Utica Leaseco, LLC ...... 11 First Corporate Solutions ...... 36
The Commercial Factor | November/December 2014 3 M A D RID
15th Annual Global Receivables, Factoring & Supply Chain Finance Convention Receivables Finance International 2015 Managing change in a rapidly evolving environment
25-26 March 2015, The Westin Palace, Madrid www.rfixmadrid.com
‘RFIx’ brings together 200 + high level delegates from factoring companies, banks, trade bodies, and corporates to examine key strategic and practical challenges facing the international receivables industry in the new working capital scenario. At the leading edge of conference thinking, in addition to a high-level programme of expert speakers and panel discussions, RFIx offers extensive networking opportunities. Key themes: • Derisking and linking the physical and financial supply chain • New developments in working capital optimisation • Latest fraud mitigation and risk management strategies • Gaining new customers and markets • Updates on trade receivables securitisation
SPECIAL OFFER FOR ALL IFA MEMBERS! We would like to offer all IFA members a free copy of the World Factoring Yearbook 2015 – the definitive review of the global factoring industry,( $220 RRP) - with every delegate place booked for RFIx Madrid 2015. To receive your free copy, quote RFIXIFA1 when booking.
Sponsors Partners from the executive director
by bert goldberg M A D RID In speaking with IFA members, the overall impression is 15th Annual Global Receivables, Factoring & Supply Chain Finance Convention that 2014 was a good year for the factoring community and the general consensus is that it will continue Receivables Finance International 2015 through 2015. In general, factoring volume seemed Managing change in a rapidly evolving environment to be up and the IFA added approximately 70 new members in 2014. 25-26 March 2015, The Westin Palace, Madrid To kick off 2015, we are bringing back our International Trade and Factoring Workshop (see page 15) to be held this February in Miami, FL. This is an excellent course, designed for those www.rfixmadrid.com who are either conducting or thinking about entering the cross border factoring market. We’ve enlisted six different instructors to assist with this training and we plan to cover all aspects of international trade. As an added bonus, all attendees of this course will receive a 50% discount off of their admission to the annual conference. ‘RFIx’ brings together 200 + high level delegates from factoring companies, banks, trade bodies, and corporates to examine key strategic and practical challenges facing the international receivables I’m really looking forward to the annual conference this year in New Orleans. Not only is it in industry in the new working capital scenario. one of my favorite cities, The Roosevelt is a beautiful hotel and one that I’m sure everyone will appreciate. Originally opened in 1893, it has recently undergone a $170 million dollar At the leading edge of conference thinking, in addition to a high-level programme of expert speakers renovation to make this one of the most beautiful hotels anywhere. and panel discussions, RFIx offers extensive networking opportunities. The conference continues to grow with more speakers and networking time than ever Key themes: before. We have twenty four different sessions and over 60 speakers, including tracks specifically for beginners, advanced, and international factors. We have scheduled more • Derisking and linking the physical and financial supply chain networking time to ensure you have the ability to meet as many attendees and exhibitors as • New developments in working capital optimisation possible. • Latest fraud mitigation and risk management strategies The morning keynote speakers will be Lt. General Russel L. Honoré, Charlie Cook, and • Gaining new customers and markets Dr. Peter Ricchiuti. General Honoré led the command of the Joint Task Force following • Updates on trade receivables securitisation Hurricane Katrina. The title of his discussion will be The New Normal: Leadership and Preparedness in the 21st Century. Charlie Cook is the publisher of The Cook Political Report and he is the leading authority on elections and political coverage. He will be discussing The Current Political and Legislative SPECIAL OFFER FOR ALL IFA MEMBERS! Environment. We would like to offer all IFA members a free copy of the World Factoring Yearbook 2015 – the Dr. Ricchiuti is an economics professor at Tulane University and will be discussing his predic- definitive review of the global factoring industry,( $220 RRP) - with every delegate place booked for tion for 2015. You can catch a preview of his lecture on page 22. RFIx Madrid 2015. To receive your free copy, quote RFIXIFA1 when booking. Other general interest topics that we are featuring this year will be: Colette Carlson spoke at our Women in Commercial Finance meeting and the consensus from the attendees was that she was one of the best speakers ever. Her topic will be What’s Sex Have to do with it? The truth about Gender Intelligence. Another popular speaker and topic that we have returning will be Greg Hartley talking about how to effectively gather information, avoid deception and spot a liar. Sponsors Partners Some of the factoring specific topics will include: • Fraud Forum – What you don’t know can hurt you • Outlook for the Energy Industry and Opportunities for Factors • Working with Difficult transactions – how it starts isn’t always how it ends • Lessons to be learned from this year’s court decisions • How to Find, Grow and Build Lasting Relationships That Are Not Price Centered
Continued on page 6
The Commercial Factor | November/December 2014 5 • Updates and Analysis of the Risks Faced by Factors • Current topics in Transportation Factoring • Legal updates • Factoring 101 • Complimentary Products • Small Factors Roundtable The International Our International track will include the following: Factoring Association 6627 Bay Laurel Place, Ste C • Financing Inventory in Transit Avila Beach, CA 93424 • Legislative Changes in Latin America MAILING: PO Box 39 Avila Beach, CA 93424-0039 • Factoring with the European Community 805-773-0011 • Case Studies in Latin America Executive Director • Doing Business in Québec Bert Goldberg • 10 Must-Have Clauses in your Canadian Factoring Published By Agreement The International Factoring Association Networking events include: & Editor/Design Graphics Golf, Culinary Culture Walking tour, RMP Capital Welcome R&W Publishing Associates, Chelsea Kirtley [email protected] • 727-450-9870 Reception, Bibby Social, Tax Guard Dessert Reception, Closing Advertising Sales Event at the House of Blues, Swamp Tour, Breakout Small Factors R&W Publishing Associates Lunch, Breakout Transportation Factoring Lunch and Idea [email protected] • 610-213-9105 Exchange. Advisory Board You can find a detailed conference write-up on page 19 or Tina Capobianco by visiting the conference website at Vice President, JD Factors www.factoringconference.com. Steve Hausman Triumph Business Capital The IFA will also be conducting our biennial survey of the Michael Hilton factoring industry soon. This is the only survey of the factoring Co-President, Brookridge Funding industry and is extremely beneficial for anyone involved with the Niko Kluyver factoring industry. Please take the time to fill out the question- Partner, FactorPlus naire. All respondents will receive a free copy of the report ($500 Marc Mellman value). Chief Legal Officer, LSQ Funding Group Julie Regenold See you in New Orleans! President, TradeGate Finance, Inc. Stuart Rosenthal Executive Vice President, Prestige Capital Corporation W. David Tull Chairman, Crestmark Bank
The International Factoring Association’s (IFA) goal is to assist the factoring community by providing information, training, purchasing power and a re- source for factors. The IFA provides a way for com- news mercial factors to get together and discuss a variety of issues and concerns about the industry. Member- ship is open to all banks and finance companies that INDUSTRY NEWS perform financing through the purchase of invoices or other types of accounts receivable. Bibby Financial Services Offers Flexible Transportation Factoring Service The Commercial Factor is published bi-monthly by the International Factoring Association. To sub- Bibby Financial Services announced a new factoring service scribe, please email [email protected]. geared toward Canadian transportation carriers. Now customers The Commercial Factor magazine invites the submis- can receive advances of up to 95 percent of their invoices with an sion of articles and news of interest to the factoring additional fuel advance.The service is geared toward mid-market industry. For more information on submitting articles or advertisements, email news@factoring. carriers borrowing between $500,000 and $1 million. org, or call 805-773-0011. The views expressed in the Commercial Factor are INDUSTRY TRANSACTIONS those of the authors and do not necessarily repre- sent the views of, and should not be attributed to, Crestmark’s November Transactions the International Factoring Association. Crestmark secured a total of $14,166,188 in financial solutions for
6 The Commercial Factor | November/December 2014 eight new clients in the first half of for SMB Adviser, headquartered in San that hauls mainly steel, construction November. Francisco, CA. US Capital Partners is a materials, and large equipment. The Utica Leaseco, LLC Announces private investment bank that makes new facility is extended through a Recent Deals direct debt investments, participates multi-year agreement and will be Utica Leaseco, LLC completed a in debt facilities, and arranges equity used for general working capital $500,000 Senior Secured Loan placements for small to lower middle purposes. In addition to the revolving transaction during the first week of market companies. SMB Adviser will credit facility, TAB Bank provided December, 2014. Utica closed and use this growth capital to support the the company with a $2.1 million funded the loan for a helicopter development of its recently launched equipment term loan to purchase 60 charter and tour company that is publishing platform, www.SMBadviser, flatbed trailers. headquartered in the Fort Worth, and to further expand its range of North Mill Capital’s Recent Deals Texas area. Utica was pleased to be marketing services for small and $2.5 Million to a metal fabricator able to provide the needed working medium-sized businesses (SMBs). The $1.5 Million to a manufacturer of capital for the company’s expansion firm has also been developing business garden and patio products and growth by utilizing a combination intelligence services for SMBs across a $10 Million to a metal recycling of credit and collateral criterion to broad range of industries and sectors, operation supply the needed funding. Utica with a special focus on debt and equity $1.5 Million to a gift and glassware worked closely with the borrower, financing data specifically for this manufacturer their management team and their segment. $500,000 to an investigative advisors and was able to close the Eleven Transportation Companies services company Recently Choose Tetra Capital For transaction on an expedited basis. Bibby Financial Services Funds $8.5 Utica Leaseco, LLC relied solely on the Factoring Services Million Facility for Florida-Based company’s helicopter equipment as Tetra Capital, a factoring company Apparel Company the collateral for the transaction. specializing in the transportation Bibby Financial Services funded an DS-Concept Provides $4 Million in industry, provided factoring facilities for $8.5 million accounts receivable and Recent Transactions eleven new transportation companies inventory finance facility for a Miami- DS-Concept Factoring, Inc. provided a in November. The factoring facilities based apparel company.The 30-year- $3 million export accounts receivable included: old business is a major designer and facility to an apparel exporter in China $30,000 to a Pennsylvania based manufacturer of licensed sportswear as well as their US subsidiary. DS- Dry Van Company for big box US retailers and Fortune Concept provided a $1 million export $120,000 to a Florida based 500 companies. Refrigerated Freight Company accounts receivable facility to a home Gibraltar Business Capital textiles manufacturer in India. $30,000 to a Utah based Refrigerated Freight Company Announces Recent Deals Factor Finders, LLC Announces $20,000 to a Washington based Gibraltar’s recent facilities ranged 300th Funding Refrigerated Freight Company from a half-million dollar factoring line Factor Finders, LLC, an accounts $30,000 to a Utah based for a niche electrolyte drink maker receivable factoring broker, recently Refrigerated Freight Company to a multimillion-dollar asset based celebrated its 300th funded deal. $80,000 to a California based revolving line of credit with a TV and Sky Land Express, a Minneapolis, Refrigerated Freight and Dry Van entertainment magazine. MN based trucking business had an Company Loeb Term Solutions Funds 8 Million existing factoring relationship, but $30,000 to a Utah based Dollars in Equipment Financing to a was looking for more aggressive Refrigerated Freight Company West Coast Aerospace Metalworking pricing for its eight truck operation. $20,000 to a California based Firm Factor Finders referred the prospect Refrigerated Freight Company This deal represents one of two large to Phoenix Capital Group (http:// $40,000 to a Iowa based Dry Van additions to Loeb Term Solutions’ www.phoenixcapitalgroup.com), who Company portfolio this month with the other through creative structuring was able $30,000 to a New Jersey based Dry funding totaling just over 12 million to offer a custom program to meet the Van Company dollars. company’s funding needs. The buyout $30,000 to a California based First Capital Announces Over and first funding were completed Refrigerated Freight Company in less than two weeks from initial $60 Million Of New Credit Lines contact. A total of 43 factoring TAB Bank Provides Transportation Originated In Q3 2014 Y companies have funded deals referred Company With a $4 Million Flex Asset- First Capital originated 12 deals with Based Credit Facility by Factor Finders. $62 million of new credit lines in Q3 TAB Bank provided a $4 million US Capital Partners Provides Equity 2014 bringing the year’s total to $180 Flex Asset-Based credit facility for a Investment to Publisher. US Capital million. Working capital lines of credit transportation company located in North Partners Inc. provided seed capital were extended to small and medium- Carolina. The company is a flatbed hauler sized businesses in distribution, food
The Commercial Factor | November/December 2014 7 & beverage, professional services, telecommunication, manufacturing, and oil & gas industries. PERSONNEL Michael Gross Joins Capital Business Credit as Executive Vice President and Senior Business Development Officer Michael will report directly to Andrew Tananbaum, Executive Chairman of CBC. He joins the company with more than 25 years of accounting, operations and financial management experience working with global apparel companies. He will be responsible for growing CBC’s trade finance and factoring for the apparel and retail sectors along with strategic development and advisory for CBC’s other practices and industries. Karrie Inman Joins CapitalPlus Equity as Director of Client Services Karrie will be responsible for customer service and document processing. She has over 9 years experience with customer relations and financial services. Bibby Appoints Tom Whatley to Senior Risk Officer; Lori Alsterberg to Regional Marketing Director, Americas Tom will assist in the management of the company’s North American portfolio and will oversee the compliance and underwriting within the company’s six regional offices. Lori will lead marketing strategies with the goal of leveraging the company’s worldwide position and growing its US and Canadian footprint. •
canada chapter events
December 16, 2014 End of the Year Gathering: TBA
northeast chapter events
2015 Events Schedule TBA
8 The Commercial Factor | November/December 2014 2015: A Look Ahead November/December 2014
Halloween Is Over, but Deflation and Demand Ghosts Remain
Factors, equipment finance firms, and banks of all sizes have expanded their balance sheets thanks to a tidal wave of liquidity created by five years of expansionary global monetary policy. But record stimulus coordinated in an unprecedented way around the globe has only resulted in middling inflation to date.
By Dean Lyulkin
Just as many financial players lay the economy on a skate’s edge of zero inflation for the foreseeable bets that the Federal Reserve under controlled inflation without tipping future, and falling commodity prices Janet Yellen will raise short-term into the realm of deflation and helped cement investors’ conviction interest rates in 2015 for the first broadly falling price levels. Chinese of late that prices aren’t going up. time since the crisis, the specters of consumer inflation slowed to just The nightly news explains falling falling demand and falling prices rear 1.6% year-over-year in September, gas prices as a positive for middle their ugly heads. Any signals worth its lowest reading since 2009, class consumers, but they forget noting are mixed and still uncertain, just as producer prices slid 1.8%. that periods of powerful economic but data suggests the Fed should US and UK inflation has slowed in growth yield higher demand and not remove the financial sector’s recent months, but prices haven’t higher prices. New oil discoveries monetary punchbowl just yet. contracted. Globalization leaves have been used to explain some We first turn to global prices. today’s central bankers with possibly of the price decline, but other Headlines about any type of more limited tool belts to control commodities including metals have “flation,” be it inflation or deflation, monetary forces that can cross been falling in tandem. are always negative. Both are bad borders as quickly as most goods Although the cost of deflation to and scary according to the pundits. and services do in the internet age. lenders is potentially huge, fears Central bankers have spent most Long term government bond yields should be placed in context. Falling of their lives studying how to keep around the world are pricing in near prices cause a transfer of wealth
The Commercial Factor | November/December 2014 9 2015: A Look Ahead November/December 2014
from borrowers and holders of results. Growth now seems tied to small ticket equipment and working illiquid assets to savers and those compromising the underwriting capital loans under $250,000 is with big piles of cash. Deflation guidelines that could help avert facing a similar fate. can discourage private invest- another global financial crisis. There Our firm monitors small business ment, because there are reduced are signs that supply of financial marketing response rates from expectations on future profits when products is quickly catching up with millions of small businesses in a future prices are lower. But modern demand, just as the Federal Reserve wide array of industries and with central bankers are using quantita- winds down quantitative easing wide-ranging borrowing histories tive easing quickly and efficiently, stimulus designed to stave off defla- inclusive of factoring, equipment having learned both Japan’s errors tion and boost capital demand from leasing with banks and indepen- from the lost decade and the Fed’s businesses and consumers. dents ranging from those with top Great Depression era mistakes. Demand for large and mid-ticket tier to sub-prime credit appetites, They can buy and sell a variety of infrastructure and equipment SBA loans, and traditional large bank non-traditional fixed income instru- loans from large public and private lines of credit. The demand side of ments in the open market to impact companies notably tightened as the equation is surely beginning to global money supply. There is no yield spreads compressed over the feel overwhelmed. This does not reason not to have every confidence past few years. The number of new necessarily signal anything tawdry that central banks will fight falling customers and projects has not kept about an economy growing at 2-3%. demand and prices tooth and nail. pace with the supply of new dollars Rather, the appetite of financial With deflation fears set aside, we chasing those customers. This is not firms for assets is simply outpacing turn our attention to an increasingly difficult to understand when central these borrowers’ appetites. competitive financial marketplace banks are pumping new liquidity It becomes increasingly attractive signaling potential shifts in lenders’ into capital markets on a daily basis. to push the gas pedal in the face ability to grow top and bottom line Now the lower end of the market for
250 West 55th Street, 14th Floor | New York, New York 10019 Tel: (212) 582-2222 | Fax: (212) 582-2424
10 The Commercial Factor | November/December 2014 The smallest businesses with satisfactory owners’ credit scores can add enormous leverage, with no review of their financials, by shopping around to a few brokers and direct lenders in short order.
of stiff competition. That means removing structural barriers to risky transactions with smaller security deposits, easier seasonal structures and more limited collateral where logic dictated these enhancements in the past. Lower credit standards are almost surely to follow, pushing rates down for lower tier customers with higher “application only” limits. The smallest businesses with satisfactory owners’ credit scores can add enormous leverage, with no review of their financials, by shop- ping around to a few brokers and direct lenders in short order. Financial industry players agree that demand is not at the same level as the peak of 2007-2008. But marketing and advertising budgets attacking a relatively finite group of small businesses, counted in the single digit millions, are far in excess of that peak. Credit card issuers and business lenders are not likely to share their response metrics with anyone, let alone publications read by their competitors. And there is little interest in paying attention to noise like fluctuations under 20% month to month. Suffice it to say that response erosion has been steadily in effect throughout 2014 and while concerning in Q1-Q2, it reached a frightening 40-50% by Q3. The largest players are best
The Commercial Factor | November/December 2014 11 2015: A Look Ahead November/December 2014
equipped to survive this cycle like the risk of falling prices along with Janet Yellen’s Fed could confront others before it. They can pick and economic contraction far outweigh the strengthening economy with too choose how their deals are origi- the central bank’s need to ratchet much monetary tightening, thereby nated. If their direct sales force gets up short-term interest rates to avert inverting a yield curve that still looks in trouble, they shift to niche third unruly inflation. These factors bear healthy by historical standards with party originators. If direct mail fails, watching even as the US economy yield spreads in excess of 2%. The they can shift to telemarketing and seems on surer footing than many media is unsure whether to focus online ads. But it’s clear that the global economies and the stock on inflation or deflation as the right omen of nasty economic trends. Federal Reserve must avert raising market is near all time highs. From our point of view, battling rates in the near term, meaning that In a dangerous confluence of events, inflation doesn’t make a lot of sense at a time when the economy is on unsure enough footing that financial product yield spreads are compressing and the power of each marketing dollar seems to be in freefall. •
Since joining Commercial Finance & Leasing Bank of Cardiff in 2007, Dean Lyulkin has been instrumental in broadening the firm’s small business product portfolio. The firm has grown from offering clients equipment financing and credit cards to now include non-traditional lending products like working capital loans and factoring. Dean’s day to day responsibilities range from capital markets activities and data analytics to human capital and operations. Prior to joining Bank of Cardiff, he was a shareholder and Group Vice President at Fisher Investments, a privately-held $40 billion asset management firm. Dean held several leadership positions in trading, capital markets research, and direct marketing. He holds a BA degree in Economics from UC San Diego. Dean can be reached by phone at 858-866-9253 or by email at [email protected]. You can learn more about Bank of Cardiff at http://www.bankofcardiff.com.
12 The Commercial Factor | November/December 2014 2015: A Look Ahead November/December 2014
Technology: Solution, Problem or Both?
Chris looks down at his new watch, anxiously awaiting the alert that his wire has hit. This new watch cost him a pretty penny, and to him, it is worth every bit. Operating on his own time, Chris is able to submit his request to his lender with his phone’s camera and sign it with his fingerprint.
By Matt Smulski, CFAE
The system allows his clients to confirm invoices through a link online and finally (or more so, hopefully), Chris gets the confirmation that the money is in his account —all without a single pen stroke. It’s worked flawlessly day after day until now. Now he is just waiting. Waiting for a single beep and vibration that indicates that his funding has gone through, his payroll will go out, and he and his employees will have a great weekend ahead of them.
The Commercial Factor | November/December 2014 13 2015: A Look Ahead November/December 2014
Time seems to slow to a crawl as he burnt it while working last week. emails to find his new contact, and Chris continues to wait, and his Was someone out from his client’s more importantly, a phone number. thoughts get away from him as he office that he wasn’t aware of? He thinks, I should add this person wonders what could be wrong. What could possibly be taking so to my contacts after I make this Did his request not go through? long? It’s always worked before and call. Chris hits the number, clicks No – it says it was submitted here he hasn’t done anything different the fancy pop-up on his cell phone under status. Maybe it was his today. Finally, Chris decides to call to confirm the call and the phone signature; sometimes the finger- his lender; it’s been awhile though, begins to ring. print doesn’t work properly after and he has to dig through some Now, let’s take a step to the side and focus on the lender’s view of the same events. Six months ago, the board met to approve the new use of an automated workflow through their software vendors. With some improvements to integrate the technology within their opera- tions, they were excited about the efficiency and cost saving measures the new system would bring. Faster response time for clients and less overhead for the lender; of course they were thrilled. So much so they even pushed their IT department to ensure the system was ahead of schedule and ready to release one month early. Operations will love it, clients will love it, and all will be right in the world. On the day Chris submitted his request, the lender did in fact receive his information and his signature via that nifty fingerprint scanner on his smartphone, and Chris’s client had even confirmed those invoices online the moment they were sent to them. The lender looked over the confirma- tion, ensured the images received matched the amount requested and completed the release. The opera- tions team marked it as complete and moved on to the next one. The account executive even chuckled to a longtime colleague: “Hey, remember when we did all this by email and phone? Or even better, fax?” But their conversation was interrupted by a phone ring.
14 The Commercial Factor | November/December 2014 Technology is amazing, their push in meeting the demand decide to go in a certain direction. from their clients/consumers. In Chris’ case, it was having the but it causes a bit of alarm Bloomberg estimates there will be client upload a schedule, images of when it doesn’t work over 2 billion smartphones by 2015. invoices, and backup via a mobile Followed by the 2014 AT&T Techpoll device, and then, sending an auto- as quickly as expected; indicating 94% of small business matic message to the client’s debtor, we should keep this in owners use smartphones to conduct letting them know that confirmation business. Both reports suggest that for those invoices was needed. How mind as more processes these numbers (which only account much time would it save your opera- tions if all of that was automated? are moved to automatic for mobile devices) will continue to grow. What’s the likelihood that one Or maybe it’s the change in pace for workflows. of your clients is in that 94%? What’s your communication with clients the likelihood that it’s on your that is appealing – giving them real roadmap to meet the demand? time updates when schedules are received and processed, and when Chris starts to panic as he frantically If we take a look at the process Chris deposits are made to their accounts. hits zero on every voice prompt, went through, some would say it’s Would that proactive communica- trying to reach someone. What was too much, too little or maybe, just tion be helpful in your business? causing the problem? Would he get right. The technology is there for In our world of ever increasing his money? Should he start calling this scenario, just as the technology smart(er) phones, smartwatches, his employees about the possibility is there for many supplements of more powerful tablets, and even all- of payroll bouncing? A seem- your operations. It’s a matter of seeing glasses, we have the ability ingly infinite supply of worrisome choosing the right options when you to truly define a new method of questions came to mind, questions he would ask himself before he found his lender. Finally, someone answered the call with a faint laugh. Chris thought to himself, are they laughing about what’s going on? At that moment, Chris felt a tingle on his wrist, followed by a ding. Looks like he will be getting his money after all. Chris informs the represen- tative on the other end of the line. Both have a good laugh about how technology seems to make us a bit more impatient than we might be without it. The time it took from submission to money in the bank was enough for all the above events to transpire, which makes it about 10 minutes. Technology is amazing, but it causes a bit of alarm when it doesn’t work as quickly as expected; we should keep this in mind as more processes are moved to automatic workflows. Technology is getting increasingly powerful, cheaper and more acces- sible to the masses. This has been encouraging businesses to continue
The Commercial Factor | November/December 2014 15 2015: A Look Ahead November/December 2014
work, providing more and more time having so much information readily they are used to. What impact does for building relationships. Pushing available? How could too much this have, both on the business side more operation tasks to automated information ever be bad? It’s bad of things, as well as on the emotional systems frees up the time for your when it doesn’t work as expected. side? This is when you have to team to do what IT unfortunately There might be a glitch in the matrix remember that technology is a tool can’t; have meaningful conversa- and it might fail. Or maybe it is just to supplement the relationships you tions with your client. delayed 10 minutes and a client have built, not something to come What about the negative side of doesn’t get the immediate response in and replace them. You can never know the impact of the technology you are using without effective communication between your clients and your team. As your business continues to grow its infrastructure to handle increasing demand, remind yourself of Chris’s story. Know that when you make improvements for your opera- tions team with the good intention of making processes easier for your clients, you should be aware of the expectations linked to your new high-speed technology. Be prepared for when it works, when it doesn’t , and when it’s running okay – just on a 10 minute delay. •
Matt Smulski is a Certified Factoring Account Executive and Vice President at Far West Capital in Austin, TX and has been in the finance world for over 10 years. In his role as VP, Matt initiates all IT-driven business projects and ensures that 100% client satisfaction is provided. Prior to joining Far West Capital in 2007, he worked with State Bank in the Working Capital Division. Matt can be reached by phone at 512-527-1120 or email at matt@ farwestcapital.com.
16 The Commercial Factor | November/December 2014 Everything You Need To Know About International Trade & Factoring Workshop A TRAINING COURSE PRESENTED BY THE INTERNATIONAL FACTORING ASSOCIATION The International Factoring Association
is pleased to bring back this intensive two day Register for this course and training course which promises to provide the Receive 50% Off your 2015 Annual latest, most valuable information to help support Factoring Conference registration your clients’ international business. This workshop will provide a complete guide to developing an in- depth understanding of the key areas of global trade and factoring from some of the brightest JW Marriott Miami, FL and most respected February 19-20, 2015 leaders in the industry.
speakers: what you will learn: topics: • How import/export transactions • Introduction to International Trade • Tony Brown are structured - from delivery to Delivery Terms Principal, payment terms, to the risks and • Terms of Payment - Advantages The Trade Advisory and Disadvantages how to manage/credit insure • Risks them and a broad array of Bryan Ballowe • Managing Import/Export Risks Principal, financing options. King Trade Capital • Financing In-Transit • How to provide and underwrite Work-in-Progress and Finished Inventory Parker Freedman Purchase Order Financing, Letters President, • International Factoring ARI Global of Credit, International Factoring, • Reverse Factoring Reverse Factoring and other key Neal Harm • The Legal Aspects of President, techniques that will strengthen International Factoring BB&T International Division your competitive advantage. • Case Histories/Examples Sharyn H. Koenig Managing Director, A deeper understanding of best A comprehensive overview of under- Eastern Region of attendees Export-Import Bank will walk practices in international writing deals & understanding of the U.S. trade & factoring. away clients’ & prospects’ businesses. with Insight into the challenges, risks Ideas to better equip business legal counsel: & legal aspects when engaging developers when evaluating prospective Mike Ullman, Esq. in cross border business. international business opportunities. Principal, Ullman & Ullman, P.A.
A special room rate of $289 has been negotiated for TO MAKE RESERVATIONS Request the International this event. Group room rate expires January 27, 2015 CALL THE JW MARRIOTT: 1-800-228-9290 Factoring Association rate
$945 (IFA MEMBERS) FOR INFORMATION VISIT OR CALL REGISTER TODAY! $995 (NON-MEMBERS) WWW.FACTORING.ORG 805.773.0011 2015: A Look Ahead November/December 2014
Unconventional Wisdom: Are online business lending models the factoring of the future?
Small business lending is the most rapidly growing segment of commercial lending, as measured by year-over-year percentage growth over the past three calendar years, and 2014 will continue this trend.
By Andrea Petro
Regulated depository institutions some regulated financial institutions both commercial and consumer are primarily participating in the - except for SBA lending and small lenders that rely on these strategies trend through the SBA 7(a) and 504 ticket leasing - have had to withdraw have been classified as “FinTech” or programs and through their factoring from this growth market, leaving a the financial technology industry. and small ticket leasing subsidiaries. large, high yield and underserved FinTech has now evolved to become Prior to the 2008-2009 recession, market, which is an anomaly in the a viable alternative and competitor to many banks had robust commercial current historically low yield macro- factoring. credit card or small revolving loan economic environment. In the late 1990’s, the first business programs that were underwritten Over the past fifteen years, innova- model to embrace FinTech was the based on automated credit scoring tions have occurred in small business Merchant Cash Advance (MCA) models. Unfortunately, during the lending that may prove to be as model defined by the following economic contraction, the defaults impactful as the mid-20th century characteristics: generated by these types of models adoption of the Uniform Commercial 1 far exceeded the predicted losses, Code was for asset based lending. Unsecured credit which was and often, were greater than the These innovations generally can be legally not a loan, but a purchase or gross yields (12 -24% per annum) attributed to data gathering and advance on assets without a required that had been previously gener- analysis technology and continu- amortization schedule and fixed ated in positive or neutral economic ously improving predictive credit maturity. environments. Since the recession, scoring models. More recently,
18 The Commercial Factor | November/December 2014 2 Purchasing the right to receive licensed in those states. with the small ticket leasing product future credit card receivables 2 Since credit card receipts are no 5 Less reliance on traditional ISO’s 3 Daily repayment of a percentage longer a requirement, the universe to generate new business. The of total credit card receipts via a of prospective borrowers greatly industry leaders have developed contracted third party credit card expanded to most small businesses online portals to market and process processor with working capital needs. applications. 3 4 Information gathered on prospec- Daily payments made via ACH vs. Some of the larger online retailers tive and existing clients primarily credit card processing and payment facilitators, such from public and private online data- 4 Use of proceeds not confined to as Square One, PayPal, and eBay bases and client banking information purchasing equipment, as it would be have all announced FinTech credit products, similar to direct loans 5 Predictive, highly sophisticated credit scoring models based on a significantly greater number of weighted variables than prior bank models or small ticket leasing credit scoring models 6 Real time information reporting on actual collections compared to predictive model projections
MCA suffered higher than predicted losses during the recession, however, significantly less than the small commercial bank lending programs. In fact, credit losses were ultimately not a significant disadvantage for the MCA model. More importantly, the three major disadvantages were:
1 The product was not a loan or a lease and difficult to explain to prospective clients. 2 The product was limited to retail businesses that generated credit card receipts. 3 The product was traditionally marketed by high fees independent sales organizations (ISO’s), a holdover from an era when ISO’s sold retail credit card payment systems. The next iteration of the FinTech model partially addressed the limits of MCA. This model provides a small business loan, based on the same assumptions as merchant cash advances, with the following differences:
1 Loans must conform to commer- cial usury statutes within each state, where offered, and lenders must be
The Commercial Factor | November/December 2014 19 2015: A Look Ahead November/December 2014
for their vendors, establishing a data analytics, determines the level profitability of asset based lending captive finance program of sorts. If of risk of each invoice within the and factoring will be compared to successful, the high origination costs context of the borrower’s financial that of online lending. It’s too early for direct loans could be eliminated condition. Borrowers repay the loans in the development of online lending and substantially enhance the profit- over 12 weekly installments and pay to make a reasonable comparison; ability of FinTech. For unaffiliated fees comparable to interest rates on however, the two types of lending lenders, there are many small busi- unsecured credit cards. can be compared across several ness apps that can be integrated with attributes (see chart below). As these online business models a cash flow FinTech solution. continue to evolve to the most Many online lenders are attempting Recent alternative small business robust solution, they may ultimately to build highly scalable enterprises lending models provide unsecured offer desperately needed working and are sacrificing current profits to working capital loans to small capital for a significant number of do so. If the models can originate businesses but tie the loans to small businesses, both in the US billions of dollars of working capital unpaid invoices due to the client. As and in international markets. There financing with highly predictive, reported in the American Banker, is no equivalent to the Uniform consistent and moderate losses, the online lenders are attempting to Commercial Code in many European they could become the dominant carve out a niche in small business Union member nations. In fact, small business lending model of the financing by specializing in “micro liens on current assets only attach future. • loans”. But unlike other competitors, to specific accounts receivable and this model targets business-to- inventory, not “replacement” assets business firms in need of funds to which eliminates secured asset monetize unpaid invoices. To apply based lending in many jurisdictions. Andrea Petro is for a loan, small business owners Depending on the availability of data an executive vice connect their accounting software for small businesses in those markets, president and (including Quickbooks, Xero or online small business lending may be division man- Freshbooks) to the online lenders’ a viable model. ager of the Lender websites. The borrower then selects Finance division of However, to assess the long-term unpaid invoices they would like to Wells Fargo Capital Finance, based attractiveness to investors of online monetize. The lender, using deep in Dallas, Texas. With over 20 years lending models, the long term of experience in the asset-based lending industry, Andrea Petro es- FACTORING ONLINE LENDING tablished the Lender Finance divi- sion of Wells Fargo Capital Finance 1 Barriers to Entry Low Higher due to systems in 2000, which was known as Wells and proprietary analytical Fargo Foothill at the time, with models expense the exclusive mission of provid- 2 Origination Expense Moderate Old market higher, ing financing for specialty finance new models lower companies. Her success with the Lender Finance division led to the 3 Net Margin High Higher - due to ability to effectively manage expansion of her role and the for- “micro loans” mation of the Resort Finance and Supply Chain Finance units. Prior to 4 Operating Expenses High due to Low joining Foothill, Andrea was Senior verifications and collection expense Vice President, National Marketing Manager of the Financial Services 5 Losses Can be high due to Primarily due to Funding Division of Transamerica fraud/highly variable borrowers going out of Business Credit. She serves on the business. More predictable board of the Commercial Finance 6 Scalability Low Very High Association as vice president of finance. Andrea can be reached at 7 Current Profitability High Highly Variable 972-851-9119 or at andrea.petro@ 8 Regulatory Concerns Low Medium to High wellsfargo.com.
20 The Commercial Factor | November/December 2014 Let the Good Times Roll at the 2015 Factoring Conference By Heather Villa
service, and historic surroundings. The Roosevelt is at the heart of everything that makes New Orleans so special. Just steps from the French Quarter, it is within walking distance to the city’s most vibrant attractions and entertainment, including Jackson Square, Bourbon Street and the Arts & Warehouse District. Since 1893, this legendary property has represented everything that makes New Orleans one of the world’s greatest destinations. After Hurricane Katrina damaged a great portion of the hotel in 2005, it underwent a $170 million renovation and reopened during the summer of 2009. It revived many of the features The 2015 annual Factoring On April 15th–18th, the Factoring for which it was famed throughout Conference will be my twelfth year Conference will call New Orleans, the 20th century. The Roosevelt with the IFA. When I first started Louisiana, its home. Of all the cities seamlessly blends the glamour and working for Bert at Distinctive that have hosted the Factoring history of New Orleans with cutting- Solutions Corporation in 2003, he Conference, New Orleans is my edge amenities, making it a unique mentioned briefly that part of my all-time favorite. The history, culture, destination for business or pleasure job would also be to help him with music, nightlife, amazing food, and and for tourists and locals alike. an association that he created for Southern hospitality make New Now, about the Factoring the Factoring industry. The IFA at Orleans such a unique place. With its Conference…the world’s largest gath- that time had about 200 corporate historic buildings and grand tradi- ering of Factoring and Commercial members, and the only event we tions, the “Big Easy” has more the Finance professionals! If you can only offered was the annual Factoring flavor of an old European capital attend one event this upcoming year, Conference. Little did I know, that than an American city. Did I mention you won’t want to miss this one. It would change drastically; over the the food? New Orleanians not only truly is a spectacular experience to years, the IFA would be on its own, eat to live, they live to eat! A mix of have the whole Factoring industry more than doubling its member- Creole, Cajun, French, Italian, African, in one place at one time. It amazes ship, and not only putting on the Chinese, and everything in between, me every year how much business annual Factoring Conference, but this eclectic city has cooked up a is taking place and how many new also 10-12 training classes throughout culinary heritage with some of the partnerships are formed, not to the year, multiple webinars, and tastiest and most interesting foods in mention the lifelong friendships that countless networking opportunities, the world. are created. There are still so many and educational offerings through What better hotel to host the familiar faces that I remember from chapter events and online resources. Factoring Conference than the my first Factoring Conference 12 I’ve seen our annual conferences Roosevelt New Orleans? This iconic years ago that have attended every grow from 300-something attendees New Orleans luxury hotel offers year since. I always look forward to to almost 800 attendees. I am an unparalleled combination of seeing my old friends and adding excited to see how much we will Southern hospitality, world-class new ones to my “Factoring Family.” continue to grow this year! I can bet that they all feel the same
The Commercial Factor | November/December 2014 21 way. • The Current Political and Finance and Unsecured Loans.) The invaluable networking opportu- Legislative Environment (Using – Panel poll numbers, economic indicators, nities provide access to some of the • Doing Business in Québec and historical data, Cook discusses highest caliber of industry experts (Explaining the legal and language today’s political and legislative envi- and peers in the commercial finance challenges to work through to tap ronments in a balanced, non-partisan industry. The conference will kick way – from the policy direction of into this very lucrative market.) off with the RMP Capital Welcome the current administration to the - Panel Reception on Wednesday evening. Congressional agenda.) – Charlie Friday Sessions: Companies that have become new Cook, Political Analyst and Publisher • Economic Forecast: How the IFA members over the previous year of The Cook Political Report will also be invited to attend a New Economy Will Affect Factors – Dr. • What Does Sex Have To Do Member Reception that evening to Peter Ricchiuti, Professor at Tulane With It? The Truth About Gender become familiar with the association, University Intelligence (Unlock the secrets of meet industry leaders, and other gender communication to help you— • Report From The Courts (Lessons first-time attendees. Thursday we male or female—influence, persuade to be learned from this year’s court will have a Bibby Social in the evening and communicate more effectively decisions and how the courts treated and a Tax Guard Dessert Reception with the opposite sex to ensure that IFA members) – Bob Zadek, Esq., later that night. Friday evening is our your message achieves maximum Buchalter, Nemer Closing Event at the House of Blues. understanding.) – Colette Carlson, • 10 Must Have Clauses in a Join in our own Mardi Gras parade President of SpeakYourTruth.com Canadian Factoring Agreement as we make our way to the premier • Factoring 101 (The nuts and bolts – Martin Fingerhut, Esq., Fingerhut music venue in the French Quarter. of Factoring.) – Gail Reints, President Global Advisors Food, drinks, and entertainment will and Owner of Sky Business Credit, be provided. If you are bringing your • Current Topics in Transportation LLC spouse along with you, make sure Factoring – David Jencks, Esq., you purchase a Spouse Ticket for • Working With Difficult Jencks & Jencks P.C. Transactions (How it Starts Isn’t them. It includes admission to the • Effectively Gather Information, Always How it Ends) – Jay Atkins, receptions listed above, as well as the Avoid Deception and Spot Liars First Growth Capital and Mike Closing Event. (Learn skills with guiding conversa- Ullman, Ullman & Ullman P.A. The networking opportunities alone tions by gathering information while • Fraud Forum: What You Don’t are worth it, but we also have two looking for key words and phrases Know Can Hurt You (Hear the latest full days of educational instruction that indicate deception in spoken schemes experienced in the market- that is designed to increase your language and text.) – Gregory Hartley, place and what we can do to protect Mind At War awareness within the industry and against succumbing to fraud.) - Panel provide you with new tools to help • Financing Inventory-In-Transit grow your business. The compelling • Outlook for the Energy Industry (Learn how to manage the risks to agenda includes world class speakers, and Opportunities for Factors create new lending opportunities thought-provoking sessions, and (Covering topics such as fracking, with financing in-bound or out-bound its future and opportunities, types unrivaled educational content. Here inventory.) – Panel of energy service companies, the is a glance at what is in store for this expansion of energy production in • Regulatory Environment in year. the US and factoring oilfield trucking Washington D.C. (How the results Thursday Sessions: companies.) – Panel of the 2014 Congressional elections have impacted the industry, and • The New Normal: Leadership and • Legislative Changes and New the risks to Factors, particularly as it Preparedness in the 21st Century Tendencies in Latin America relates to Operation Choke Point.) (Spanning a 37-year Army career, (discussing recent legislative changes – Panel General Honoré has commanded that affect Factoring in Latin America teams through some of America’s as well as the progress of the ongoing • The Keys to Customer Retention most difficult challenges, and brings IFC-World Bank project that was (Focus on creating a corporate these lessons learned to deliver a designed to improve local lending environment that allows for finding, most important message: See First, and factoring laws in the region) building, and growing lasting relation- Understand First, Act First) – Lt. - Panel ships with your clients.) – Panel General Russel L. Honoré (Ret.), • Factoring with the European Commander of Joint Task Force • Complimentary Products 101 Community (Aspects to be consid- Katrina and Global Preparedness (Discussing PO Finance, Inventory Authority & CEO Finance, Leasing and Equipment ered by non-European based Factors
22 The Commercial Factor | November/December 2014 to work with clients and /or debtors opportunities and issues in a round- If you want to spend some extra time based in Europe.) – Panel table environment that provides in New Orleans, which I definitely • Legal Panel (Discuss legal issues enormous opportunities for sharing recommend, we have put together facing today’s Factor.) – Panel ideas. some fun and exciting adventures • Small Factors Roundtable For those that are newer to the Continued on page 35 (Factoring companies who fund factoring industry, you won’t want clients with low sales volumes to miss the Factoring Fundamentals operate in a unique manner. This training course that is all day Heather Villa roundtable discussion is designed to Wednesday before the conference is the Managing give this important segment of our starts. This add-on class will provide Director of the industry a forum to discuss their chal- you with the background you need in International lenges and learn from their peers.) order to become a successful Factor. Factoring As- – Panel Industry experts George Thorson from Triumph Business Capital sociation. She • Case Studies in Latin America and Gen Merritt-Parikh from Allied is responsible for managing and (Interesting A/R financing deals that Affiliated Funding will delve into directing the IFA’s external commu- represented challenges due to their topics ranging from contract basics, nications as well as managing the structure or industry served.) - Panel Uniform Commercial Code, how to business affairs of the Association. Saturday’s Idea Exchange is find clients, credit and underwriting, She assists with event planning, also included in your conference notifications and verifications, the speaker selection and contract registration. From 9am-12pm, this daily business flow, and ending negotiations for all training semi- event brings together small groups the relationship. This is definitely a nars and conferences, including who have a common interest great learning opportunity for new the annual Factoring Conference. in a particular issue. Over the Factoring companies, new employees Heather can be reached at course of the morning, attendees or those wishing to brush up on their 805-773-0011 ext 301 or explore continuing and emerging Factoring knowledge. [email protected].
ConneCt. CommuniCate. Collaborate.
Our goal is to bring the entire factoring community together on one website where we can connect, communicate and collaborate. There are no membership fees and all services are free if you share trade experience data on our FactorsNetwork CreditExchange program. FactorsNetwork develops software that will change the status quo, reduce www.factorsnetwork.com our risk, increase our profit margins and bring the industry into the internet era.
The Commercial Factor | November/December 2014 23 Q&A with Economist and 2015 Factoring Conference speaker, Dr. Peter Ricchiuti
You say that your talk will feature some economic You have taught at Tulane University for the past myth-busting. What are some of the myths out 28 years. What do you see from campus? there today? I have a very different perspective on the “Millennial.” The US economy is a lot better than you’re hearing in This group takes a lot of abuse, but I see this group as the media. I guess bad news sells, but we’re adding the smartest, most creative, and community-oriented about 200,000 new jobs each month; banks are generation that the nation has ever seen. I see outreach starting to loan money, and both individuals and corpo- programs and social entrepreneurship as cornerstones rations have better balance sheets than I’ve seen in my for this age group. I do not worry about turning the reins 35 years following the markets.This is why the stock over to the millennial. • market has tripled since 2009 and trades at near record levels.
Peter Ricchiuti teaches at Tulane What is the single biggest factor making you University’s Freeman School of optimistic? Business where his insight and humor If I had to pick one is would be “energy independence”. have twice made him the school’s top My entire adult life we have been held hostage by professor. Peter started his career OPEC.That’s over. We call our own shots and the story with the investment firm of Kidder behind the growth in natural gas is truly a game changer, Peabody and later managed over three billion dollars as particularly for domestic manufacturing. the assistant treasurer for the state of Louisiana In 1993 he founded Tulane’s highly acclaimed BURKENROAD REPORTS student stock research program. Peter also What keeps you up at night? hosts a popular weekly business show on National Public The national balance sheet (as measured by Deficit/ Radio in New Orleans called “Out To Lunch” and recently GDP) has improved dramatically and keeps getting published his first book “STOCKS UNDER ROCKS”. He better. However, in a few years, we will have to deal has been featured on CNN and CNBC as well as in The with big increases in our obligations to healthcare and New York Times, BARRON’S, The Washington Post, and social security. Now is the time for the White House and The Wall Street Journal. Over the past twenty years, the Congress to sit down and make the “Grand Bargain” Peter has addressed more than 1000 groups in 47 states regarding revenue increases and cost cuts. Both sides and several countries. He has presented to a wide variety have to give a bit to make this work. of audiences including workshops for the New Orleans Saints. Peter can be reached at [email protected].
24 The Commercial Factor | November/December 2014 what’s new at ifa November/December 2014 2015: Looking Ahead By Jeff Rose, CFO/COO, National Bankers Trust
The focus of this issue is looking end, with others having credit cards to see charges filed, lawsuits, and ahead to 2015. For those of us cancelled. maybe even an arrest. However, this involved with the American Factoring Since Operation Choke Point has does not appear to be happening. Association (AFA), 2014 has been a come to the attention of the nation, Instead, what we see are banks being year of worrying about our industry the FDIC list of specific industries pressured to discontinue relation- getting entangled by Operation being targeted has been rescinded, ships with clients who have violated Choke Point, and beginning to share but Operation Choke Point continues. no law, nor have they been charged our concerns with Members of Unfortunately, from the factoring with any wrongdoing, but who have Congress and their staff and officials industry’s perspective, rescission of not been given an opportunity to at the Office of the Comptroller of the the list has made matters even worse appeal. Currency. by leaving banks to guess at what So, as we look forward to 2015, we While the factoring industry has not regulators consider an unacceptable must maintain our focus on how specifically been listed as a target of risk. And we all know that in the Operation Choke Point will impact Operation Choke Point, confusion current environment, if banks have our industry. In addition, it is impor- surrounding the program is causing to guess, they will err in favor of what tant for our industry to continue many banks to err on the side of they think regulators may want and to make Washington aware of the caution and cease doing business not their clients. impact Operation Choke Point is with legally operating factoring The official reason for Operation having on our members. Any of us companies. Operation Choke Point Choke Point is to combat fraud. If this could be the next factoring company has caused some of our members were the case, then we would expect to be impacted. If you have already to have their banking relationships been impacted, we would like to Continued on page 31
2014 Members & Donations As of November 20, 2014
Diamond Member ($10,000+) AR Funding Nationwide Capital Funding, Inc. Advance Business Capital Bay View Funding Northwest Capital, LLC Apex Capital Corp DB Squared, Inc. Paragon Financial Group, Inc. Bibby Financial Services, Inc. Federal National Commercial Credit PRN Funding, LLC Crestmark Bank Gateway Commercial Finance, LLC Prosperity Funding, Inc. D & S Factors Lenders Funding, LLC Saint John Capital Corporation Gulf Coast Business Credit Pavestone Capital SouthStar Capital, LLC International Factoring Association Prime Financial Group Spectrum Commercial Services Company J D Factors Republic Business Credit, LLC Bronze ($500 - $1,000) National Bankers Trust United Capital Funding Corp. Advantage Business Capital TBS Factoring Service, LLC Vertex Financial, Ltd. American Funding Solutions LLC Platinum ($5,000 - $10,000) Silver ($1,000 - $2,500) Brookridge Funding Accord Financial, Inc. Amerisource Funding, Inc. BTB Capital Corp. Far West Capital Commercial Business Finance Commonwealth Capital, LLC Great Plains Transportation Services Durham Commercial Capital Corp. Concept Financial Group Interstate Capital Corporation Entrepreneur Growth Capital, LLC Firmco Business Funding MP Star Financial, Inc. Evergreen Working Capital, LLC G Squared Financial, LLC Phoenix Capital Group, LLC Factor King, LLC Gateway Trade Finance, LLC RMP Capital Corp. FactorPlus Leland Capital Advisors Sunbelt Finance Firstline Funding Group QC Capital Solutions TemPay, Inc. FSW Funding Other (Under $500) TransAm Financial Services, Inc. J.O.B.E. Services, Inc. Downtown Capital Partners, LLC K.W. Receivables Gold ($2,500 - $5,000) Pipeline Financial Services Levinson Arshonsky & Kurtz, LLP Amerifactors Financial Group Match Factors, Inc. Allied Affiliated Funding The Commercial Factor | November/December 2014 25 what’s new at ifa November/December 2014
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.
Associations demanded of an industry leader, FactorHelp strives to world. D&B’s global database contains the deepest, maintain its goal of providing the unparalleled service broadest, most rigorously quality-assured business The following trade associations offer member pricing the factoring industry expects from a solutions partner. insight available, covering more than 210 million for events attended by IFA members: Phone: 972-722-3700 • www.factorhelp.com businesses worldwide. With this insight, D&B has been Colombian Association of Factoring (CAF) Email: [email protected] enabling companies to Decide with Confidence™ for IFA Members receive a discount of 10% on their more than 170 years. Commercial Factoring Expertise consulting fees and 5% discount on all FactorHelp Phone: 973-605-6344 • Website: www.dnb.com Committee of China (CFEC) products in the IFA store. IFA Member Benefits: New & Returning customers: www.cfec.org.cn receive DISCOUNTS off D&B solutions. Discount Credit International Factors Group (IFG) is for IFA members that are not current D&B www.ifgroup.com Ansonia Credit Data customers or have been gone for a period of one With over 150 factors and growing, Ansonia Credit year. Existing customers: receive discounts on other Romanian Factoring Association (RFA) D&B solutions not under contract. (ie: Hoovers, www.asociatiadefactoring.ro Data is the leading provider of affordable business credit reports. They understand the unique needs of Supply, DNBI Modules) Certified Email ABL/Factoring companies. With no set-up or annual Transcredit fees, Ansonia’s reports feature real-time access to a RPost CREDIT SCORING is one of the most important financial global database on companies of every size, industry RPost’s Registered Email services allow factors to end tools that you can use to make sound yet prompt and market segment. Whether you’re looking at a disputes attributed to missing, misplaced or denied business decisions. At TransCredit we know just how company in the USA, Canada, Mexico or beyond, receipt of notification emails for notices of assignment, crucial this data is to keep freight in motion across the Ansonia credit reports are priced at a low $8 with a notices of default, borrowing base certificates, and other USA. In 2011 more than 93 million loads were rated by substantial discount offered for participation in our A/R important notifications. It also helps speed invoice collec- our Credit Score & Days-To-Pay™. data exchange. tions with proof of invoice delivery irrefutably starting Phone: 800-215-8448 • www.transcredit.com Phone: 855-ANSONIA • 855-267-6642 x.103 the accounts receivable aging clock. IFA Member Benefit: Receive a discount of 50% www.ansoniacreditdata.com www.rpost.com/ifa or more. Score your portfolio through Bayside’s IFA Member Benefits: Free VIGILANTE™ Portfolio IFA Members receive a $10 discount per 100 pack. Cadence Factoring Software or directly with Analysis. Try Ansonia’s unique new program for Also, the first order from each company will be Transcredit. monitoring credit portfolio risk. Call today to doubled. receive a comprehensive review of your entire Consulting portfolio. Credit Card Processing
12five Consulting Credit2B ePaymentAmerica 12five Consulting provides technology and social media Credit2B is a transformational cloud-based platform ePaymentAmerica is the nation’s leading provider of consulting to the commercial finance industry. Born out that combines third party credit information with merchant services for the factoring, A/R financing, of its sister company, 12five Capital, 12five Consulting what we call the Intelligence of the Community™, and P/O financing industries. They offer IFA members understands the technological needs of the commercial that is a network of the thousands of leading credit exclusive VISA, MasterCard, American Express and finance industry, as it was their application of these tools professionals and credit grantors that have a common Discover pricing, a discount on their virtual gateway, that lead to their expertise. 12five specializes in software interest in accessing better credit information about and a discount on PCI Compliance Certifications. optimization, cloud computing implementation and their trading partners. Our mission is to provide Phone: 901-385-5335 • www.epaymentamerica.com social media representation. our clients better, timely, more relevant and highly Email: [email protected] Phone: 630-270-3072 • www.12five.com accessible credit information at incredibly affordable IFA Member Benefits: Interchange Plus Pricing* Email: [email protected] prices. We do this through a compelling solution that Bundled Monthly Service Fee of $30.00 (includes IFA Member Benefit: One free hour of initial phone leverages the power of peer network intelligence, IRS regulatory compliance, account maintenance, consultation quality bureau data, and advanced computer analytics PCI compliance, virtual gateway & online manage- to create an unparalleled experience. ment tool.) *Based on volume/ transaction count. FactorHelp Phone: 201-714-4514 • www.credit2b.com FactorHelp has come to be regarded as the factoring Disaster Recovery Services IFA Members receive free trade reports in industry’s premier resource provider. Their manuals, exchange for AR data. Also receive free bankruptcy Agility Recovery in use on every continent of the world, are setting notifications & preferred rates for collections - 15% For the past 22 years, Agility Recovery has been a the industry standard, and their reputation as the contingency fee. premier provider of onsite recovery solutions across one-call solution for factoring problems is growing. By the United States and Canada. When disaster hits, consistently introducing innovative, viable products, Dun and Bradstreet (D&B) Agility will be on the scene, providing you with any, vigilantly cultivating an extensive alliance of Strategic D&B is your source for the best business insight in the or all, of the critical elements you need to keep your Partners and providing the professional expertise
26 The Commercial Factor | November/December 2014 business in business: power, space, technology, faster than any other competitor. Their staff has over Transportation connectivity. Membership also includes access to a 100 years of manufacturing, importing, and exporting ExecuCar dedicated Continuity Planner and secure access to experience to help their clients with their needs. This is a premier luxury sedan service that offers private your myAgility planning portal to assist in building and Phone: 877-340-2388 ext 400 transportation with experienced professional drivers. maintaining your business continuity plan. www.rmptradecredit.com IFA Member Benefit: RMP Trade Credit will offer a Whether you are heading to the airport, a business meeting Phone: 704-341-8700 • www.agilityrecovery.com 15% commission on all PO deals referred by an IFA or social event, ExecuCar will get you there safely, in style Email: [email protected] member. and comfort. IFA Member Benefits: 5% discount to each respec- IFA Member Benefits: Save 10% on your roundtrip tive client’s monthly ReadySuite membership fee. Recruitment Agency transportation by booking online with ExecuCar at www. Funding Commercial Finance Consultants execucar.com. Use the following Discount Code: CLLMC Established in 2002, CFC is the premier provider of SuperShuttle RMP Capital Corp. human talent to the factoring industry. CFC’s goal is RMP Capital Corp. is a best-in-class provider of to provide their clients with the best available human SuperShuttle is the nation’s leading shared-ride airport Rediscounting Lines of Credit to Independent capital and the most current industry information to shuttle service, providing door-to-door ground transporta- Factoring Companies with portfolios from $250,000 assist in accomplishing their growth potential. tion to more than 8 million passengers per year. Their friendly drivers, comfortable vans and reasonable rates take to $3,000,000. Understanding the needs of the Phone: 469-402-4000 • www.searchcf.com the hassle out of getting to and from 33 airports in over 50 Independent Factoring Company is the driving force Email: [email protected] behind a funding program which has helped clients US cities and surrounding communities. IFA members will receive an additional 60 days build their operations and grow their portfolio. With added to the guarantee on all placements. IFA Member Benefits: Save 10% on your roundtrip over 10-years of industry experience, RMP Capital transportation by booking online with SuperShuttle Software Corp. prides itself on taking the time to understand at www.supershuttle.com. Use the following Discount its client’s needs, which helps its clients realize their Bayside Business Solutions, Inc. Code: CLLMC potential and achieve their goals. From providing Bayside Business Solutions is an innovative supplier UCC Search capital to providing support, RMP Capital Corp has the of commercial portfolio management software that First Corporate Solutions solution for you. lets lenders manage factoring, invoice discounting, First Corporate Solutions is a full service public records Phone: 631-738-0047 • www.rmpcapital.com asset based lending, and more on a single platform— provider specializing in the research, retrieval and filing of IFA Member Benefits: RMP Capital Corp. will pay CADENCE (formerly FactorSoft). Control more. public records nationwide and internationally. Their services your IFA membership yearly dues. Monitor More. Lend More. With CADENCE. Phone: 205-972-8900 • www.baysidebiz.com include industry standards such as UCC, lien and litigation Marketing IFA members will receive 10% off license fees searching, UCC and corporate filing services, nationwide and add-on modules. For IFA members who registered agent coverage and real property title searching, 50 Words Marketing, LLC are currently Bayside customers: Free one day as well as unique solutions such as state and county account 50 Words is a marketing outsource firm for companies refresher course, per year, at Bayside’s training monitoring designed specifically for Factors. that either do not have a marketing department or facility in Birmingham, AL. Phone: 800-406-1577 • www.ficoso.com that need to add more manpower to their existing Email: [email protected] FactorFox marketing team. They serve as your dedicated IFA members will receive a 10% discount off of the marketing department. FactorFox Cirrus is a cloud application for factors, their retail rates of their signature state and county account clients, brokers, lenders, and others who enter or Phone: 610-631-5702 • www.50wordsmarketing.com monitoring product. IFA Member Benefits: IFA Members will receive five access data. Entries can be made and reports accessed free hours of marketing services with the purchase from any internet-connected computer, tablet, or of any marketing service. (Offer to new clients smart phone. As a web-native program, there is no only) extra cost for setting up your account or to access your IFA CALENDAR data; further, you receive three hours of free training purchase order financing online. FactorFox’s various versions make it suitable for OF EVENTS Gateway Trade Finance, LLC nearly any size factor. Gateway provides purchase order funding for Phone: 866-432-2409 • www.factorfox.com importers, distributors, wholesalers, and exporters In addition to the one-month free trial for everyone, January 21-23 nationwide. 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Unlike a traditional Luncheon Meeting with NYIC www.gatewaytradefinance.com public record search for federal tax liens, Tax Guard Arno Ristorante, New York, NY IFA Member Benefit: Gateway will pay a 12.5% utilizes a proprietary, patent-pending process, providing referral fee on completed transactions on all deals due diligence and tax monitoring reports to lenders April 15-18 brought to them by IFA members. across the United States. Factoring Conference RMP Trade Credit, LLC Phone: 303-955-3282 • www.tax-guard.com The Roosevelt, New Orleans, LA RMP Trade Credit is the leading source of small ticket IFA Members will receive a 20% discount on the same-day due diligence order. Purchase Order Financing. They do deals from $5,000 For details about IFA events, to $2,000,000 per month. They consider larger deals with participation. RMP Trade Credit closes deals please visit www.factoring.org
The Commercial Factor | November/December 2014 27 legal factor by Steven N. Kurtz, Esq. November/December 2014 Understanding Your Factor Client’s Underlying Contracts and Controlling The Invoices — Part Two of Three
Part One of this three-part article introduced the concept of understanding your factor client’s underlying invoices and contracts. We also discussed the rights of account debtors to raise disputes within the UCC.
This Part Two will focus on the rights reality is that frequently the factor be to bring the account debtor to of the account debtors regarding is often doing business in one state, the factor’s home state. the specifics of the dispute. financing a client in a different Closely related to the issue of Unfortunately, many factors in the state, and purchasing accounts of personal jurisdiction is the concept industry finance millions of dollars an account debtor in a third state. If of venue, which is where to try and fund invoices which contain you bring the case in the wrong state the case. Venue clauses between no terms beyond the price and and lose the motion to dismiss, you business entities are routinely quantity (a “Naked Invoice”). When may have easily taken a three or four enforced. A party may have personal parties have underlying contracts, month detour only to be told to start jurisdiction but may not satisfy which discuss the specifics, then over in a new jurisdiction - not a venue requirements. Absent a the contract will govern how things pleasant prospect. Absent an arm’s venue clause, the court will then work if the deal goes bad. When a length contract between two busi- look to what can sometimes seem Naked Invoice deal goes bad, then ness entities which has a jurisdiction like a complex calculus of rules to all the missing pieces get decided and venue clause, the court decides determine where the case should by the court. For the sale of goods, where the case is to be brought. The be brought. For contract cases, the the court will look to Article 2 of the concept that the court will examine court will look to where the contract UCC, which governs sales of goods. is whether or not the account debtor was entered into, which can some- For services, which are not covered does business in the factor’s state times be where the last person by Article 2 of the UCC, the court or whether or not the account accepted. Sometimes the court may look to the UCC for guidance debtor has minimum contacts with will look to see where the contract or will look to common law (prior the factor’s home state, such that was to be performed. Sometimes cases) or various state law codes, it would be fair to haul the account performance is hard to define, and which may govern the dispute. This debtor to a court in a different state. the factor will try to argue that Part Two will also outline the “gap The smaller and more regional the performance is just the payment fillers” that may happen when a account debtor is, the harder it will of money, and that money needs court has to sort out the rights of a factor and the account debtor, after the factor is called upon to collect Naked Invoices after a default. Steven N. Kurtz, Esq. has represented factors, banks, and asset The first thing that you, as the based lenders on a continuous basis since 1987, and he is the factor, will have to examine in a Co-general Counsel to the IFA. A founding partner of Levinson Naked Invoice case is, where should Arshonsky & Kurtz, with offices in California and Oklahoma, he the case be brought since the Naked practices in the areas of commercial law, insolvency, workouts, Invoice will be silent on this point. loan documentation and trade finance, in both transactions and The factor would prefer to litigate litigation matters. He can be reached by phone at 818-382-3434 or by email at in its home territory. The business [email protected].
28 The Commercial Factor | November/December 2014 to be paid to the factor by virtue of Keep in mind that if you are lawyer on the other side to argue the factor’s notification letter. An that no contract was ever reached additional monkey wrench thrown dealing with federal court because there are too many terms into the venue decisions are when diversity jurisdiction, which left open. you have two parties in different requires citizens of two different In account debtor litigation, the locations, with the rules being issue of performance and whether trickier when one of the defendants states and an amount in or not the goods or services were up is an individual. Venue rulings, much controversy over $75,000, most to par will invariably come into ques- like personal jurisdiction fights, can tion. Under UCC Article 2 in a sale of turn into mini battles, with each federal judges are happy to goods case, the court will look to the side presenting briefs and evidence, throw out a case and streamline concept of merchantability. That which don’t address the merits of means, were the goods fit for their the case, but only decide where the court docket for any reason. intended use? Absent an agreement, the case is to be tried. Keep in mind in the sale of goods, every contract that if you are dealing with federal will have an implied warranty of court diversity jurisdiction, which merchantability. The same will apply requires citizens of two different changes or fluctuations, and time to services. The account debtor states and an amount in controversy for performance. Generally, the must get what it paid for. In a Naked over $75,000, most federal judges court will look to a reasonableness Invoice case, the court will be left to are happy to throw out a case and standard, which is up to the court reasonableness standard, which can streamline the court docket for any to decide, and generally the losing be all over the board. reason. side is not going to think that the Closely related to the merchant- The next gap filler question is which court was reasonable. In addition, ability issue, is whether or not state law to apply. Usually that will in a UCC sales or goods case the the goods or services were timely be the law of the state where the court will often look to the course rejected so that it’s clear that the action is brought, because that’s the of dealing or industry standards to account debtor raised its defenses easiest thing to do. Although courts fill in the gaps. Again, this can be (remember, recoupment and set prefer to apply the law of the state arbitrary. In a UCC sale of goods off from Part One of this Article?). where it’s located, that’s not always case, sometimes the parties send Article 2 of the UCC allows the the case. State law clauses in busi- competing forms which add in account debtor, after a breach, to ness contracts are usually enforced. new and different terms. Couple waive the breach (never happens Absent a state choice of law section, the competing forms with conduct when the factor client goes under), the parties will likely need to review between the account debtor and reject part of the goods, or reject the UCC. Model UCC Sec. 1-301 will the factor client where it’s not clear all of the goods. Rejection must allow the parties to chose the law of if the new and additional terms be in a timely manner and it whatever state they want. However, were agreed to, and you are now must be clear that the goods are many states have not passed this living what is every first year law rejected. The account debtor can, model rule yet. The net effect is, student’s contract class nightmare if it rejects the goods, return the that if you don’t have a state law in figuring out a battle of the forms goods (remember, you own the designated no matter which version test question, or in my case, being returned goods since you factored of UCC Sec. 1-301 is being used, called upon in class by a sadistic the invoice), or liquidate the goods you will be subject to a complex set contracts professor. In service if they can’t be returned or carry of rules known as conflict of laws, cases, where you do not have the out the factor’s reasonable instruc- which is when courts figure which UCC Article 2 to govern the gap tions. The key to whether or not state’s law to apply. fillers, the factor is now in uncharted there was a timely rejection with a What happens when the goods or territory. One would hope that the Naked Invoice contract is what was services which are the subject of court would look to Article 2 of the reasonable under the circumstances. the Naked Invoice gets sold, but UCC for analogy, because at least This means, that generally the the parties do not address all of there is a body of law which governs goods should be rejected quickly. the specifics, and now the missing these gap fillers. However, the However, there are always issues pieces need to be filled in? If you court may look elsewhere. And, that the defects were latent or have a sale of goods, the UCC in to make matters worse, when you there are issues relating to the drop Article 2 has plenty of gap fillers are addressing a gap filler question, which address modification, price you should expect a good defense Continued on page 31
The Commercial Factor | November/December 2014 29 small ticket factor by Don D’Ambrosio November/December 2014 2015: What Will It Mean?
The winds of change are blowing. As of the writing of this article, the Republican Party will have a majority in both the House and Senate as the country moves into the New Year.
No matter which side of the political savings at the pump equivalent Bureau of Labor Statistics, non-farm spectrum you reside, the overall to a tax rebate which is likely to payroll employment grew 214,000 approval rating of Congress was an stimulate the economy. There are in October and the unemployment abysmal 14% prior to the November other factors to consider before we rate edged down to 5.8%. Although elections which tells us they can’t start going back to our gas guzzlers corporations are starting to expand, do much worse in the eyes of their from decades past. Will OPEC cut we still see the need for cash flow constituents. Will the new Congress production or will they continue providers to fuel growth. Banks once again try to repeal Obamacare? to sell at current prices? Time will and other institutional lenders are Will we finally see some meaningful tell. Domestically, the oil boom lending more to businesses but not legislation on immigration, tax originated in the North Dakota enough. The after effects of the reform, and fair trade deals with Bakken Oil region through hydraulic global recession are still being felt, Europe and Asia? Only time will tell, fracking. This process allows for with very tight lending restrictions but doing nothing surely is not a horizontal drilling by pumping and strict requirements for business recipe for success. pressurized liquid deep in shale rock loans. From our vantage point, a As for global events, the Middle East formations, allowing for gas and oil growing economy is good for invoice unrest continues. The situation in to flow freely. More rich petroleum factoring companies and other niche Syria is worsening by the day which and gas deposits are located in lenders. The domestic oil boom has led to the birth of a more potent Texas and the eastern US. This is in North Dakota has proven to be faction of Al Qaeda known as ISIS. still a complicated issue since oil is very prosperous for transportation They have already taken over large traded on the commodities market factors providing capital to small, swaths of land in both Syria and and subject to market fluctuations mid-sized and fleets of trucking Northern Iraq in their quest to create not necessarily tied to supply and companies that are hauling oil a separate Islamic state. The United demand. and gas for large, well capitalized States has maintained a hands-off Using this information as a back- corporations. We believe that one policy, allowing the Iraqi govern- drop, will 2015 be a good year for of the biggest misconceptions with ment to run their country without the asset based lending community? factoring is that our services are US interference. Unfortunately, the It depends. What we do know is that best suited for companies as a last situation has deteriorated, forcing the US economy is getting better. resort to stay afloat. Our experience the United States to provide air According to the United States over the last several years is that support, and ultimately, build a global coalition to combat ISIS. The price of oil continues its down- ward slope with current prices still Don D’Ambrosio is the president of Oxygen Funding, Inc., an below $80 a barrel. To the average invoice factoring company located in Lake Forest, California. Don American, the drop in gas prices is has over 25 years experience working in the commercial and welcome news, especially heading residential finance industries. He previously served as Controller of into the holiday spending season, a commercial insurance agency and as Chief Financial Officer of a with extra disposable income. publicly traded mortgage company. He can be reached at Some economists have likened the 949-305-9300 or [email protected].
30 The Commercial Factor | November/December 2014 expansion creates the cash flow demand from our clients. Many of our past and current clients have business loans that are not adequate to meet their demands. Pop-up lenders are now the rage on the internet, catering to small businesses. I’m sure these providers have found a niche by using social media as a way to get their message out to the masses. We’re sure the surge will end with only the strongest surviving. Whenever there is a herd of folks chasing the same demographic in the business or consumer market, we advise our clients to proceed cautiously. Generally, if something sounds too good to be true, it usually is. As I’ve stated in previous articles, we feel that our services are all about rela- tionships. A good factoring company understands their client’s business model, and most importantly, the reason why they are utilizing the services of that factoring company. Contrary to popular belief, we advise many of our prospects to seek legal factor two parts, and focus on how to get other forms of financing if we feel Continued from page 29 around the problem. We will focus that invoice factoring isn’t the right on forms of invoices for both goods shipments. If the account debtor fit, for example, if the applicant’s and services, and the best practices acts in a manner contrary to rejec- margins are too thin to justify the in financing a contract, which is tion, then the court should find that cost since their sales are in a mature subject to a full-blown agreement the account debtor accepted the period. In other cases, the client may between the factor client and the goods. Generally, the law regarding need a bridge loan to offset some account debtor. • acceptance and rejection is similar short term cash flow crunch or they to services, but depending on the simply may require purchase order nature of the services, there could financing to get parts and materials AFA Update be issues in determining what was a to fulfill orders. No matter what the Continued from page 25 reasonable time for rejection. situation is or where you direct your hear your story. Please contact an prospect, integrity is a cornerstone We’ve just gone through a litany of potential problems, for which attor- AFA Board Member if you would like for every successful business. more information or to share your ney’s fees will be incurred. What’s Nobody knows for sure how experience. missing from the Naked Invoice is an 2015 will shake out for lenders, attorney’s fees provision, which you Founded in 2009, to provide a unified businesses and consumers. The will generally need to recover all the voice for the factoring industry, indicators are pointing in the right the AFA is dedicated to promoting fees being spent. Thus, sorting out a direction at home; let’s hope the and protecting the interests of the problem in a Naked Invoice case can rest of the global community follows factoring community. The AFA board be quite expensive with no possi- suit. At the end of the day, be fair is made up of volunteers who devote bility of recovering your attorney’s with your clients, be prudent in your time and their own funds to travel fees. to Washington, D.C. on behalf of the due diligence, and most importantly, factoring industry. be profitable and successful in the Funding a Naked Invoice can be a New Year! • scary proposition. Part Three of this Article will synthesize the first
The Commercial Factor | November/December 2014 31 2015: A Look Ahead November/December 2014
32 The Commercial Factor | November/December 2014 A Letter From Your Prospect from 15 Years In The Future By Ryan Jaskiewicz
Hello there! My name is John Borrower, and I come to you from the future. I am here to try and help you navigate the future, as you try to understand what that looks like from a client’s perspective. I know how hard it must be to find prospective clients today, but it is only going to get tougher when you meet a prospect like me fifteen years from now. I know this probably won’t be easy to understand, but I think if I can share what we are like and what we are looking for in a lending relationship, it might help make your business thrive into 2030! Not everyone will get on board, believe me; I’ve seen it over these past fifteen years. Let me start by giving you a little background on myself. I’m 40 years old and I own a high growth manufacturing company. I’ll tell you more about my company in a minute, but for now, a little bit more about myself. In the year 2014, the year you are reading this, I was 25 years old. I know...I know, just a little pup. I was the “millennial” that you are all railing against these days. I remember how “entitled” you all thought I was and that with my work ethic, I’d never amount to anything. Now I have a $50 million dollar company. I kept telling you guys, I don’t work hard, I work smart. My company, like many successful companies, started from my condo. We grew by leaps and bounds in the first two years. We used a factoring/asset based lending firm for the first two years because they were the only ones willing to lend to us and learn about our entire business. Banks weren’t really interested early on, but we have now transitioned to a traditional banking relationship. I have three kids and a great wife. Life is great because I work primarily from home, since the advent of the “Work From Home” corporate tax break went into effect in 2022. I get to walk my kids to school every day and enjoy a cup of coffee with my wife before heading into the office now. For my generation, it’s not about work-life “balance”, but work-life harmony. We remember our parents putting in 60 hours a week in the late 90’s, only to have their retirements wiped out in the crash of 2008. This completely reframed the way we look at work and the stresses and time commitments that come with it. I say this to clue you in to how we think in 2025 and how you will market to us. Of course, we have some price sensitivity, but nowhere near as bad as it is in your time now. In a lender, we look for a deeper relationship, versus just the cheapest option. I can hear you now, “...but John, we can work from home already...you can’t run a manu- facturing company from a home office”. I remember that phrase from one lender in 2020 as the excuse for why they wouldn’t lend to us. The difference in my time is that every single, solitary piece of our manufacturing is connected to the internet, which means my
The Commercial Factor | November/December 2014 33 2015: A Look Ahead November/December 2014
real time updates come faster than what we see, which makes under- get on the bandwagon now, because the LinkedIn update on your iphone. writing and due diligence easier. if you don’t, you’ll go the way of the Oh, and not to give away insider info, How do you type into a contact lens Blackberry. Remember, I grew up but Facebook bought LinkedIn in you ask? Keyboards no longer exist. in the days of social networking, so 2025. It’s called Facebook Business They were on their way out in 2015, as your client, I expect to interact now. Anyhow, let’s just say that but now we don’t even have laptops with you on a personal level in our manufacturing system is more or PC’s. We now use thought to these networks. I expect to have advanced than your current inven- “create” our messages and those are a one-to-one relationship with my tory system. My current lender loves sent through the lens. lender because you are the one that it because they get real time updates Companies have made great makes my business keep moving. I of inventory, how our line is moving, strides in trying to keep their teams remember, in the late twenty-teens, and our shipping times. They can productive. In fact, as our lender, the wave of transparency that came also shut down all of our equip- you now ask on a regular basis what over the lending industry. There ment remotely should we miss a the productivity level of our staff is. were a few that didn’t want to ride payment or find ourselves in default. You have seen it directly impact our that wave, and because they were Heck, they can even see when we P&L, so now it is standard operating being reviewed by everybody and have a breakdown on the line for procedure to ask about it. In some anybody, they lost my business and whatever reason, but they generally business circles now, this is called many others. don’t worry because with advanced the “Happiness Factor”. I know it Well I must be going. I hope I was robotics, the line fixes itself in no sounds cheesy, but I didn’t come up able to help in some way. I know we time. with it. Over the years, you realized are different than what you are used Another thing that is different that the value of a company isn’t to, but we have incredible potential in my time is messaging. I know only measured by the product they and want you to help us cultivate you’re going to be sad to hear this, sell. A leading indicator is culture our passion by being our partner and but email is dead. It faded into the and how strong it is within an orga- lender. I look forward to meeting you ether like the fax and the landline nization. You guys are starting to in 2030! • before that. If someone needs to see it now in 2015, but it really takes reach you, it is done through a off here in the late 20’s. How does social networking service or project this apply to you? Simply put, there is an advantage to underwriting the management software. It is received Ryan Jaskiewicz core and character of a company, instantly in your “lens”. What is is CEO of 12five not just our balance sheet. At the this “lens” you ask? It is what we Capital, LLC. He same time, we, as your borrowers, now use for everything. Remember started 12five will be “underwriting” you the same when Apple released the iPhone Capital in early way. It won’t be enough just to offer and changed the world and the way 2006 at the age us money; we will want to see how we interact? Well, they released of 23. Ryan grew up in the finance great your team is and how happy the iLens, which is a removable industry; his father is a 25-year contact lens that functions as your they are to be working for you. veteran of the factoring industry. all in messaging service. Phone, Remember, we don’t just want to Ryan attended University of Illinois messaging, internet are all included make a bunch of money; our genera- at Chicago where he received a in this tiny little lens. Sound over- tion wants to enjoy doing that, and if Bachelor of Arts in Political Science whelming? It kind of is. Just like in you have a company that is a pain to with an emphasis on international your day of email, we are inundated talk to everyday, you can bet we are politics and economic policy. Ryan with messages, ads, and all sorts of less likely to choose you. is married with two little girls and other noise. You love this because Speaking of social networking, lives in La Grange, IL. Ryan can you can target and market to us by remember when you thought it was be reached by phone at what we see and use. As a lender, a fad in 2015? Well, I suggest you 630-270-3072 ext 3 or email at you also like it because you can see [email protected].
34 The Commercial Factor | November/December 2014 2015 FACTORING CONFERENCE Continued from page 23
this year. Our golf tournament will be at the Lakewood Golf Club, which is nestled among beautiful Louisiana cypress and oaks and one of the South’s premier golf destinations. Our golfers always have a fantastic time, and the tournament is our most popular activity every year. Meet new friends, engage in some business, or just stick to the game; it’s up to you! Other activities we have planned are a Culinary Culture Walking Tour (New Orleans history and food; what more do you need?), a Guest Tour that will Festival. These events showcase latest developments, resources and include Houmas House Plantation & the music, culture, and legacy of the trends concerning the factoring and Gardens and lunch (the crown jewel birthplace of jazz. asset based lending industries. The of Louisiana’s River Road), and a Louisiana Bayou Swamp Tour. If you The 2015 Factoring Conference invaluable networking opportunities, would like to really experience New promises to deliver unrivaled compelling speakers, and quality of Orleans, then plan on coming in the educational content, innovative information makes this the must- weekend before the conference for new ideas and compelling speakers. attend event of the year. As they say the French Quarter Festival or staying Connect with influential leaders in New Orleans, “Laissez les bons the week after for the Jazz & Heritage and peers to keep abreast of the temps rouler.” Let the good times roll, and I will see you in New Orleans! •
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The Commercial Factor | November/December 2014 35