uring the credit crisis of
the past 18 months, have
you picked up clients
from industries that have
not historically employed
factoring to finance their
Tracy Eden, national marketing director,
Commercial Finance Group, Atlanta, GA
We’re not seeing clients from new
industries as much as we are businesses that previously wouldn’t have
considered asset-based lending, but
are now, due to difficulty in obtaining
traditional bank financing. Companies
are coming to us with financial challenges as a result of pre-existing debt
structure—they’re trying to find ways
to deleverage their finances.
There’s no question that the interest among all types of industries in
asset-based lending has skyrocketed.
Through the end of last July, I looked
at more deals—nearly 800—than I did
in all of 2008.
There’s a huge demand out there for
financial restructuring due to financing
mistakes that were made before the
credit crisis hit. Companies see that, with
asset-based lending, there are fewer
hurdles they have to jump over, especially in today’s tight credit environment.
A recent survey conducted among
business owners and executives by
Forbes Insights and CIT was interesting.
Only 11 percent of respondents said they
had sought new lines of credit or small
business financing over the past year in
an effort to help improve their cash flow.
While this seems to contradict my
observations, what it tells me is that
many business owners have heard so
much about the supposed credit crunch
that they figure it’s not even worth trying to get financing. These are the types
of companies that I think represent
opportunity for asset-based lenders,
regardless of their industry.
Val Goldstein, executive vice president,
Coface Credit Management North
America, Inc., New York, NY
Coface started factoring in the U.S. and
Canada with the intention of marketing
to nontraditional customers. We’ve been
successful in this regard.
Our target market has been fast-growing
companies. Banks, even when they are
willing to extend credit, can’t keep up
with them. But we can.
For example, one of our clients is a solar energy company. Large cash outlays
for materials, changing energy prices,
variable government subsidies and tax
credits make cash flow volatile. Banks
can’t cope in that kind of environment.
However, we’ve been able to stay with
the client, smoothing out the financial
peaks and valleys along the way.
Private-label food manufacturers are
another good example. Most of their
customers are large supermarket chains
that drag out their payments. Their suppliers, anticipating slower payment, are
charging more. Our clients have broken
that cycle by paying suppliers promptly
in return for lower prices which translate to higher profits.
A manufacturer of plastic packaging
materials is using factoring to optimize the throughput of his factory. His
bank wanted him to use inventory as
collateral. But, instead of sitting in a
warehouse, his product belongs on retail
shelves. Factoring has enabled him to
execute, deliver, collect and move on to
the next deal.
Our nontraditional clients also include service companies.
We have a client that reconfigures
the sales floors of big box stores. When
they secured contracts with three of
the nation’s largest retailers, their bank
was too slow and too small. We helped
our client raise the up-front costs like
payroll, travel and hotel expenses.
Highly variable payroll and payments
based on completed work were the reasons a software development company
turned to us for financing. Waiting for
payment from previous jobs impeded
their ability to bid for new jobs. Factoring enabled the company to grow.
The non-traditional markets offer
plenty of opportunity and Coface is well-