Podcast: “The Big Picture with Joel Goobich

Interview Questions Include:

I recognize that many business owners are not familiar with your product, account receivable factoring, can you explain in simplest terms what factoring is and how it works?

1)   Not a loan, but purchase of an asset

2)   When a B2B business completes a sale – product or service

3)   Invoice issued

4)   Verify

5)   Advance 75%

6)   Collect from customer

7)   Fee determined based on time 2.5% – 3.0%/mo

8)   Balance less fee paid to client

9)   Use like a line of credit

10)        No caps – can grow as a business grows

 You described the cost of your financing as 2.5% – 3.0% per month, that sounds expensive.  How do you justify that cost to your customers?

1)   Only expensive if compare to bank financing

2)   Not an option for our clients

3)   If can get bank loan, do it

4)   VC /Equity – give up ownership, share of profits, voting rights

5)   Incremental business

6)   Stronger margin businesses

 You mentioned that part of your process is to be in direct contact with your clients’ customers.  I can imagine that might make some business owners nervous.  How do you interact with their customers and how do you put your clients’ minds at ease that you will not do anything to jeopardize their customer relationships?

1. Every prospective client concerned about this
2. Worried about perceptions
3. Never a problem
4. Larger companies – flip a switch in AP system
5. Will notify by letter of financing arrangement
6. All payment flow through factoring company
7. Late payments are handled collaboratively
8. Can provide comfort by speaking to existing clients

What types of businesses are good candidates for factoring?

1. Wide variety of B2B businesses with good quality customers
2. Mfg
3. Wholesalers
4. Distributors
5. Staffing
6. Consulting
7. New, Quickly Growing or struggling
8. Not Bankable, good customers

For what purposes can a company use factoring proceeds?

1. Factor does not control how funds are use
2. Project financing
3. Bridge financing
4. Inventory purchase
5. Business acquisition

What information should a business owner expect to provide to apply to be approved for a factoring facility?

1. Very simple application process
2. No financial statements, no tax returns, no personal credit check
3. AR Aging
4. Customer list
5. Lien on AR

aa. Margins

1. Our analysis is on the creditworthiness of the customers, not the financial condition of client

How long does the process take?

Proposal in 24 hours

Funding in 3-5 days with no surprises

Longer is bank in place

 Can you give some examples of businesses you have worked with and how factoring was able to help them?

Consumer Electronic Manufacturer

Established Business

Seller of low-end tables, e-readers, mp3 players

Great customers – Wal-Mart, Target, Amazon, Kohls

Defective product shipped

High returns rates

Defaulted on bank covenants

Paying down bank loan, but need financing ASAP to meet working capital needs

No other banks would touch it and other factors turned down due to size and industry

Introduced to them last week, expect to fund this week

Commercial Printer

 

Well-established

Recently acquired by our client using seller financing

Relationship with seller was strained but operating results not strong enough to support bank loan

Client leveraged equipment to raise cash to pay off seller, but was not sufficient to meet working capital needs

We factored receivables to provide the operating capital they need until business qualifies for bank financing

 

Security Software provider

Merger planned, but fell through

Neglected financials, product development

Revenues down – no longer  bankable

Other factors shied away due to industry and past issues with management

How does Versant Funding differentiate itself from all the other factoring companies out there?

Small company

Nimble

Easy access to decision maker

Larger, more complex transactions

Reporting capabilities – information is vital

Since any company in the factoring business must have significant expertise when it comes to account receivable management, what tips could you provide our listeners on how best to handle their accounts receivable.

Be cautious of excitement over a new sale

Know your customer

Show care in terms you offer

Research credit worthiness of customer

Say no

Reporting system

Assign responsibility for AR management

Stay on top of accounts

Contact customers regularly

Avoid customer concentrations