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									the commercial                   A Publication of The International

                                 Factoring Association

                                                    SUMMER 2008 • VOL 10 / No. 3

                                 IN TOdAy’S
                                         ALSO INSIdE:
                                         8 Tips for Thriving in
                                         an Economic downturn
                                         Motor carrier
                                         compliance: Why
                                         Should the Factor care?
The International
Factoring Association                    Risk Management
2665 Shell Beach Road, Suite 3
Pismo Beach, CA 93449                    in a changing
                                         Economic climate

12   Factoring and A Recessionary Environment:
     Addressing the Inherent Risks
     By Roger Allen

16   Are You Prepared? 8 Tips for Surviving and
     Thriving in an Economic Downturn
     By Vince Mancuso

20   People: “Your Most Valuable Asset”
     Part 3: How to Retain the Best People
     in Your Company
     By David Rains

25   Risk Management in a Changing Economic Climate
     By Dugan Smith

35   Motor Carrier Compliance:
     Why Should The Transportation Factor Care?
     By Kim Kringen

38   Jumping Into the Factoring Water
     By James DiCamillo

departments                                           25
     6    IFA Member News                                                     38
     23   Legal Factor
          By John A. Beckstead, Esq.

     29   Sales & Marketing
          By Thomas G. Siska

     37   Small Ticket Factoring
          By Jeff Callender

     42   Technology Factor
          By Clint Carter

                                                           cOMMERcIAL FAcTOR | SUMMER 2008   3
                                                                                        The commercial Factor

                         From the                                                               The International

                         Executive Director
                                                                                              Factoring Association
                                                                                           2665 Shell Beach Road, Suite 3
                                                                                              Pismo Beach, CA 93449

                                                                                        Executive Director
                                                                                        Bert goldberg

                                                                                        Published By
                                                                                        The International Factoring

            ecretary of Treasury Henry M. Paulson Jr. recently stated that the
            economy is “Facing a trio of headwinds – a housing correction, capital      Editor/Design & Graphics
            markets turmoil and high energy and commodity prices.” What this            Lisa Rafter
            means is that you made the correct decision out of school by entering       R&W Publishing Associates
     the Factoring industry rather than running an airline or trucking company.

                                                                                        Advertising Sales
     The economic downturn that we are experiencing does not spell disaster for
                                                                                        Elena Rodin
     factors, but rather presents new opportunities. Although we should see more
     bankruptcies being filed as some of the less financially stable companies end      R&W Publishing Associates
     up closing their doors, we should also see a greater need for factoring as some
     of the stronger companies start experiencing cash flow issues.
                                                                                        AdVISORy BOARd

     The unprecedented rise in fuel costs will affect not just how much we pay at       Jay Atkins
     the gas pumps, but will result in an increase in costs for all goods and ser-      First Growth Capital
     vices. Although this will financially affect all of us in the short term, I have   craig Berry
     great faith in the business and scientific community to develop new technolo-      Phoenix Capital Group
     gies and alternatives to the internal combustion engine. Governments should
     assist this development by providing the proper incentives to expedite this        Lori gustaf
     development.                                                                       Assist Financial Services
                                                                                        Richard Karch
     During an economic period such as this, please take the time to evaluate all       Liberty Capital Funding, LLC
     aspects of your organization. This issue of The Commercial Factor deals with
     many ways you should be positioning your company for long term survival.           Lisa Mazon
     Take the time to evaluate your back office for operational efficiencies. Make      Mazon Associates
     sure your cost of funds are at a competitive rate. Also, don’t get overzealous     Michael Miller
     in booking new deals. Keep in mind that with rates as competitive as they          Maple Trade Finance, Inc.
     are, one hit could easily wipe out your entire profit.
                                                                                        The International Factoring Association’s (IFA)
     Employees are your most valuable asset. This year’s training courses and           goal is to assist the factoring community by
                                                                                        providing information, training, purchasing
     meetings from the IFA represent the most diverse factor training ever.
                                                                                        power and a resource for factors. The IFA
     Maintaining a well trained staff will produce better results within your firm      provides a way for commercial factors to get
     through greater operating efficiencies and a happier staff.                        together and discuss a variety of issues and
                                                                                        concerns about the industry. Membership is
                                                                                        open to all banks and finance companies that
     Thank you for your support and I hope to see you all at an upcoming IFA
                                                                                        perform financing through the purchase of
     training course.                                                                   invoices or other types of accounts receivable.
                                                                                        The Commercial Factor is published quarterly
                                                                                        by the International Factoring Association. To
                                                                                        subscribe, please email
                                                                                        The Commercial Factor magazine invites the
                                                                                        submission of articles and news of interest to
                                                                                        the factoring industry. For more information
                                                                                        on submitting articles or advertisements, email
                                                                              , or call 800-563-1895.

flash                                                     IFA Member News

PERSONNEL                                      including: North and South Carolina,            ing states. Pereira has spent the last six
                                               Georgia, Florida and Alabama. Artman            years as a factoring and financial broker
Textron Financial Promotes Wagner              will be based in Atlanta and will report        providing working capital solutions to
to President of ABL Business                   to John La Lota, president of Sterling          businesses throughout Texas.
Textron Financial Corporation announced        Factors.                                        Valarie “Val” Watson joins UCF and
that Robert Wagner has been promoted to
                                               Crestmark CCL Hires Golden as VP/               opens its first business development office
president of its asset-based lending busi-
                                               Business Development                            in northern California. Watson transferred
ness, which provides asset-based lending                                                       to UCF from a related company, Riviera
and factoring products and services to a       Crestmark Bank announced the addi-
                                               tion of James Golden as vice president,         Finance, where she was instrumental in
variety of industries.                                                                         formation of relationships with Small
                                               Business Development with Crestmark
Wagner will lead the Business Credit and                                                       Business Development Centers (SBDC)
                                               Commercial Capital Lending (CCL).
Commercial Finance divisions, as well as                                                       as well as Minority Business Enterprise
Finance Company Services and Healthcare        Golden brings with him more than 10             Centers (MBEC).
Finance. He will provide executive leader-     years of banking, factoring and asset-
ship and strategic direction to support the    based lending experience.                       Wragge Expands Banking & Finance
continued growth of this business as well                                                      Practice
                                               Wells Fargo Hires BDO for Accounts              Wragge & Co LLP has expanded its
as lead expansion into new markets.            Receivable Financing                            banking & finance practice with the ap-
Bibby Financial Services Announces             Wells Fargo & Company announced that            pointment of Mark McKee as a director.
Appointment of New York Sales Team             Mark Collins has joined Wells Fargo             As a specialist in asset and receivables
Bibby Financial Services (BFS) is pleased to   Business Credit as business development         finance and asset-based lending, McKee
announce new VP’s of Sales and Marketing,      officer, responsible for marketing the unit’s   will strengthen the team’s asset finance
Mark Dubs and Matt DiGianni for the            accounts receivable financing solutions in      capability.
New York region. They will be assist-          Georgia and Florida.
                                                                                               McKee joins from global financial services
ing in the expansion of BFS’s East Coast       Collins has more than 20 years of expe-         company GMAC Commercial Finance
presence.                                      rience in the financial services industry       Limited, where he was head of legal. He
                                               and an extensive background in accounts         brings significant experience in cross-bor-
Presidential Financial Hires VP/               receivable purchasing and asset-based
Business Development Officer                                                                   der and domestic high-value asset and re-
                                               lending.                                        ceivables finance securitization.
Presidential Financial Corporation has
hired Reed Howard as vice president, se-       Riviera Finance Adds Three                      Wragge & Co has further expanded its fi-
nior business development officer in the       Development Managers                            nance capability with the appointment of a
company’s Atlanta headquarters.                Riviera Finance announced the hir-              new partner. Kieron Dwyer is a structured
                                               ing of three new Business Development           finance lawyer with a particular focus on
Howard has more than 25 years of finance
                                               managers.                                       project finance work.
experience, most recently as vice president
of business development for Wells Fargo        Scott Townsend has been appointed               The firm’s Banking & Finance team han-
Business Credit in Atlanta.                    Business Development manager for                dles UK and cross-border mid-market ac-
                                               Riviera’s Atlanta office.                       quisition, debt and leveraged finance deals
Sterling Factors Announces                     Richard Strezo has been appointed               for lenders and borrowers.
Appointments                                   Business Development manager for the
Sterling Factors Corporation announced                                                         Textron Financial Names Shelley
                                               company’s Chicago office. Strezo comes to       Wilson SVP of Marketing
the appointment of Lawrence Artman as          Riviera with an extensive background in
vice president and southeast regional sales                                                    Textron Financial Corporation named
                                               small business lending.                         Shelley Wilson to the position of senior
manager. In addition, Sterling National
                                               Carolyn McClure has been appointed              vice president of marketing. In this role,
Bank, a subsidiary of Sterling Bancorp,
                                               Business Development manager for                Wilson will plan and direct all aspects of
announced the appointment of Ray
                                               Riviera’s Chicago office.                       the company’s marketing policies, objec-
Keenan as vice president, western regional
sales manager in its Asset-Based Lending                                                       tives and initiatives, as well as oversee the
                                               UCF Hires Two Business Development
Division.                                                                                      management of positioning and promo-
                                                                                               tional activities for the company’s prod-
As part of Sterling’s ongoing commitment       UC Factors (UCF) a non-recourse factor
                                                                                               ucts and services.
to grow its factoring and credit finance       based in southern California, has hired
business, Artman will identify business        two new business development managers           Bibby Financial Services Announces
opportunities to continue the expansion        to keep pace with its record growth.            Appointment of VP/Sales
of Sterling Factors and Sterling Capital       Mike Pereira has been hired to represent        Bibby Financial Services is pleased to an-
Funding in the Southeastern U.S. region        UCF in Houston, TX, and the surround-           nounce the appointment of Adam Keck

as Vice President of Sales for the Phoenix,    and asset-based lending solutions to small   assessment has determined that their sin-
AZ region.                                     and mid-market businesses.                   gle invoice discounting business, where a
Adam joins Bibby Financial Services with                                                    niche position has been built over many
                                               Siemens Financial Sells Single Invoice
almost 8 years experience in the factoring                                                  years, no longer resides as a core offering.
                                               Factoring Operation to Bibby
industry, in the Phoenix, AZ market.
                                               Siemens Financial Services has sold its      Wells Fargo to Acquire Operations of
In his new role with Bibby Financial           single invoice factoring business to the     Transcap Associates
Services, Adam will be responsible for         UK based Bibby Financial Services Group.     Wells Fargo Business Credit’s factoring
building a team of business developers in      The deal has been completed for an undis-    division has signed a definitive agree-
the Southwest to enhance the strong pres-      closed sum.                                  ment to acquire operations of Transcap
ence that Bibby Financial Services pres-                                                    Associates, Inc. The operations to be ac-
                                               Over the course of 2007-8 Siemens
ently holds in the region.                                                                  quired are the wholly-owned subsidiaries
                                               Financial Services undertook a review of
                                               the single invoice factoring operations      Transcap Manufacturing Services, Inc.,
MERGERS/                                       of Siemens Financial Services. While this    and Transcap Trade Finance LLC. Terms
ACQUISITIONS                                   business has performed well, a strategic     of the acquisition were not disclosed.
The Madison Company Merges with
Gibraltar Financial Corporation
After 17 years of successfully funding
small businesses together, The Madison
Company has merged with Gibraltar
Financial Corporation. “In today’s chal-
lenging credit markets, I felt strongly that
the Madison Company needed to align
itself with a reputable organization with
a large capital base, successful infrastruc-
ture and most importantly a solid repu-
tation for working with small businesses
that do not qualify for traditional financ-
ing” said Fred Resnick, founder of The
Madison Company.
“Fred Resnick has been and continues to
be one of the most knowledgeable, honest,
loyal and valuable partners that Gibraltar
has had in its 57 years of existence. We are
extremely excited that we have formalized
our partnership and that Fred continues
to service Indiana businesses.” said Ron
Winicour, President of Gibraltar Financial.
NOVA Bank Acquires BCP; Launches
NOVA Business Credit
NOVA Bank and Business Credit Partners,
LP (BCP) closed a transaction in which
NOVA acquired certain assets and as-
sumed certain liabilities of BCP. Through
the acquisition of these assets, NOVA will
begin serving asset-based lending and fac-
toring clients through a newly created di-
vision known as NOVA Business Credit.
Business Credit Partners, LP began opera-
tions seven years ago and serves business
clients primarily located in the northeast-
ern United States. Rocco Perate, president
and CEO of BCP and his staff are man-
aging approximately $20 million of loan
commitments through 16 business clients.
GE Commercial Finance Acquires Five
Arrows Commercial Finance
GE Commercial Finance, the business-
to-business financial services unit of the
General Electric Company, has acquired
Five Arrows Commercial Finance, Ltd., a
provider of invoice discounting, factoring,

                                                                                                       cOMMERcIAL FAcTOR | SUMMER 2008   7
flash                                                     IFA Member News

Transcap is the largest purchase order and     organization, Gibraltar Business Credit.       HPD Opens U.S. Office
trade finance company in the U.S. It pro-      Run by commercial finance veteran Ron          HPD, the global provider of factoring and
vides short-term financing that helps small    Winicour and his son Scott, Gibraltar          ABL software, has opened an office in
and medium-sized businesses fund the in-       Business Credit will provide traditional       Chicago. This office will focus on market-
ventory required to fulfill large sales or-    asset-based loans to U.S. companies with       ing HPD s Aquarius software to factoring
ders domestically and overseas. Founded        credit needs of $250,000 - $5 million.         and ABL operations in North and South
in 1991, Transcap is headquartered in          Gibraltar Business Credit recently closed      America.
Illinois and has regional offices in New       a $1 million revolver with a $400,000 in-
York and Florida.                              ventory term loan with an Illinois manu-       INDUSTRY
“We look forward to joining Wells Fargo        facturer of high-end product identifica-       TRANSACTIONS
and helping more companies access the          tion materials.
capital they need to grow sales,” said Paul                                                   Proficio Bank Provides $17.5 Million
                                               Gibraltar Business Credit provides asset-
Schuldiner, Principal and National Business                                                   Rediscount Facility to Transfac
                                               based loans secured by A/R & inventory,
Development Director of Transcap. “Our                                                        Capital
                                               commercial real estate and production
purchase order financing programs cou-                                                        Proficio Bank has closed a $17.5 million
pled with the Wells Fargo asset-based fi-                                                     rediscount facility for Transfac Capital, a
nancing and accounts receivable factoring      New Company to Assist Factors In               national factoring company, specializing
programs provide a complete supply chain       Entering Credit Card Factoring                 in transportation. The facility will be used
funding solution.”                             Frank Capozza, formally Managing               to fund the continued growth of Transfac’s
                                               Director of London based Merchant Cash         factoring portfolio.
“Transcap will bring our customers sig-
nificant expertise in international transac-   Express has formed Credit Card Factoring       Proficio Bank Provides $30 Million
tions and deep knowledge of the rules and      Partners, Inc. (CCFP), a New York based        Non-Recourse Factoring Facility to
regulations in the distribution of interna-    consulting company dedicated to assisting      Primacy Relocation
tional goods,” said David Ciccolo, head        factoring, finance, leasing companies and      Proficio Bank has provided a $30 million
of Wells Fargo Business Credit’s Factoring     banks to enter the lucrative global indus-     non-recourse factoring facility for Primacy
division.                                      try of credit card factoring.                  Relocation, an international relocation
                                               SC Equipment Funding Implements                company based in Memphis, TN. The
Hitachi To Buy London Scottish
                                               Asset Based Leasing Program                    Proficio facility will be used to support the
Factoring Unit
                                               SC Equipment Funding has implemented           continued growth of Primacy’s corporate
Hitachi Capital has agreed to buy London
Scottish Invoice Finance Limited, the fac-     an Asset Based Leasing program (ABL) de-       business, while offering an off-balance
toring and invoice discounting subsidiary      signed to assist businesses in raising capi-   sheet alternative to traditional lending.
of London Scottish Bank. Hitachi will          tal needed for equipment purchases.            Bibby Announces Referral Affiliation
pay GBP28.5m for the unit. The sale of         “Businesses are under tremendous pres-         with Liquid Capital
the unit is crucial to the recovery plan of    sure for operating capital and it’s our        Bibby Financial Services (BFS) and Liquid
London Scottish.                               responsibility as funding experts to find      Capital Corp (LCC) have entered into a
The agreement requires the approval of         ways for them to acquire and protect their     mutual referral affiliation to increase ser-
London Scottish shareholders. The sale         cash assets,” said company spokesman           vice selections to their client base. BFS and
price is 11 times 2007 profit and compares     Bruce Braviroff. “Asset Based Leasing is       LCC will complement each other’s client
with total assets of GBP27.2m and net as-      often a viable, alternative form of funding    portfolio with ancillary products, out-of-
sets of GBP3.4m for the unit.                  when other sources are not available.”         the box business opportunities, and an
Commenting on the transaction, David                                                          enhanced business relationship ultimately
                                               WebBank Forms New Lending                      benefiting both companies in the long
Anthony, Chief Executive of Hitachi
                                               Subsidiary                                     term. This affiliation will strengthen the
Capital, said, “London Scottish Invoice
                                               WebBank, a Salt Lake City based                firm positioning in the industry that both
Finance is a proven business with a highly
                                               Industrial Bank, has formed a new lend-        companies currently hold.
regarded management team. The business
                                               ing subsidiary, Working Capital Solutions,
is an excellent fit with our existing op-
                                               Inc. (WCS). WCS provides Factoring and         Marquette Commercial Provides
erations and we look forward to working
                                               Asset-Based Loans (ABLs) to address the        Factoring Facility to International
with the team to progress plans for its fur-
                                               cash flow needs of small to medium sized       Automotive
ther development.”
                                               firms. Led by industry veteran Thomas G.       Marquette Commercial Finance pro-
                                               Siska and based in Chicago, WCS targets        vided a $1 million factoring facility to
NEW VENTURES                                   firms from start-ups to those with over $25    International Automotive Group, LLC
Gibraltar Financial Forms New Asset-           million in annual sales. Working Capital       (IAG) to support growth and ongoing
Based Lending Organization                     Solutions can also provide liquidity to        working capital.
Gibraltar Financial Corporation has            boutique lenders through Re-factoring          IAG, located in Bloomfield, MI, provides
formed a unique new asset-based lending        Lines and Participations.                      supply chain management for its clients,

which includes sourcing, importing,             including an $835,000 revolving account             ing capital needs of the firm, dedicated to
warehousing and distributing automotive         with progress billings and a term loan.             the professional design of economic, cost-
and non-automotive parts such as fas-           Darby Bank demonstrated exceptional co-             effective ships, ship systems and other ma-
teners, stampings, castings forgings and        operation and professionalism in working            rine structures for both commercial and
components.                                     with Platinum, the company said, to ar-             military purposes.
Platinum Provides $66 Million to                range a pay down and payment structure
                                                program on the remaining balance.                   Wells Fargo to Provide Scotiabank
Support Acquisition
                                                                                                    with Factoring Services
Platinum Funding Group has signed an
                                                Federal National Payables Provides                  Wells Fargo & Company and Scotiabank
agreement to provide a $66 million ac-
                                                $2 Million to Navy Contractor                       reported that Wells Fargo will provide
counts receivable factoring facility to
                                                Federal National Payables, Inc. announced           Scotiabank with factoring services through
Velocita Wireless, a provider of wireless
                                                it provided a $2 Million facility to a pro-         its Wells Fargo Century subsidiary and
data services. The accounts receivable
                                                vider of ship repair services to the Navy.          treasury services through its Global
factoring facility was a key element of
the funding package, which enabled the          The $2 Million facility will serve for work-        Correspondent Banking division.
New Jersey-based network operator to
complete the acquisition of SkyTel, a com-
plimentary wireless technology business,
providing nationwide wireless data and                                                                                                             TM

messaging services, from Bell Industries.
The accounts receivable factoring facil-
ity provided by Platinum Funding Group
will also assist the combined entity to                   The Industry Leader.
consolidate its position as one of the lead-
ing M2M providers in the USA providing              Growing to Meet Clients’ Needs.
comprehensive, reliable and secure com-
munication solutions.

Liquid Capital Completes Factoring
Liquid Capital closed a $150,000 factor-
ing credit facility for a company that refin-
ishes tubs, bathrooms, etc. for apartments
and office buildings. The company is rela-
tively new and sales are just now starting
to boost up.
Liquid Capital also completed a $75,000
factoring credit facility to a company that
provides document scanning, indexing,
copying, printing & and data discovery.

Platinum Funding Provides Factoring
Agreement to Maintenance
Platinum Funding Group has signed a
two-year, $8.4 million invoice factoring                Gulf Coast Business Credit represents the leading edge in the
agreement with a maintenance contractor             Factoring Industry and continually evolves to provide its clients with the
                                                    services and support they require.
servicing utility companies. The mainte-
nance and utility company entering into                 In 2007, Gulf Coast Business Credit introduced its Transportation
the accounts receivable financing agree-            Division, which specializes in meeting the speci c needs of companies in
                                                    the Transportation Industry.
ment is a 100% minority-owned business
located in Savannah, GA. It provides me-               With 5 acquisitions in the past 6 years, Gulf Coast Business Credit is
                                                    continuing to grow and adapt in order to o er its clients the newest,
dium and high voltage underground and               most innovative Factoring Services available.
overhead cable to the maintenance and
utilities industry.                                           Traditional Factoring - Toll Free    866.577.8867
                                                              Transportation Factoring - Toll Free 866.480.4430
Platinum Funding Group negotiated an
intercreditor agreement with the current                     200 St. Charles Ave., 3rd Floor New Orleans, LA 70130      Fax: 504.412.2040
                                                     Website:         Transportation Division Website:
lender, Georgia-based Darby Bank, which
will continue financing the term debt. This
customized invoice factoring agreement                              Atlanta • Austin • Baton Rouge
was the key to completing the transaction.                          Dallas • Houston • New Orleans
The client owed Darby Bank $1.5 million,

                                                                                                                 cOMMERcIAL FAcTOR | SUMMER 2008        9
flash                                                      IFA Member News

Scotiabank will begin to offer pre- and        ics of Eurokommerz company in terms of         Foremost Factors from Mohan Exports
post-export financing immediately through      all key performance indicators.                Group, thereby increasing its stake to
its Commercial Banking Centre in the           Eurokommerz increased its share of the         96.49% in FFL.
Dominican Republic and plans to expand         factoring market from 22.2% in 2006
                                                                                              IIC to Lend More to Eurocapital
factoring to other countries soon. In turn,    to 23.4% as of the end of 2007, and the
                                                                                              The Inter-American Investment Corporation
Wells Fargo gains new international busi-      number of clients served from 34.9% to
                                                                                              (IIC) has approved increasing its loan to
ness opportunities, particularly in Latin      41.5% correspondingly. At the beginning
                                                                                              Chilean factoring company Eurocapital to
America, where exports have increased          of 2008, the portfolio of Eurokommerz
                                                                                              $5USmn from $3USmn.
due to the Dominican Republic-Central          amounted to 29 249 million rubles, or
America Free Trade Agreement.                  30.3% of the total market volume, giving       The loan proceeds, IIC’s second operation
                                               it a commanding lead over the other mar-       with Eurocapital, will be used to provide
BB&T Commercial Finance Provides               ket players. Volume of factoring compen-       financing to Chilean SMEs in need of
Facility to A/R Factoring Company              sation, received by the company in 2007,       working capital by factoring dollar-de-
BB&T Commercial Finance provided a             amounted to 5 233 million rubles.              nominated or indexed instruments arising
$7 million credit facility to an accounts                                                     mainly from exports, IIC said.
                                               On the whole, the factoring market con-
receivable factoring company located in
                                               tinues its steady growth: Expert Rating        Eurocapital used the proceeds from the
Atlanta, GA.
                                               Agency evaluated market volume to be           first IIC loan to fund 30 operations with
BB&T Commercial Finance offers asset-          equal to 147,1 billion rubles in 2005, in      12 SMEs. The number of SMEs benefit-
based lending, factoring, and supply-chain     2006 – 297,2 billion rubles and 516,4 bil-     ing from this new operation is expected
finance, among other credit-based prod-        lion rubles in 2007.                           be similar to that which received financing
ucts and services.                                                                            from the first loan, the press release reads.
                                               RapidAdvance Buys Merchant
BLN Capital Enters Factoring                   Cash Express                                   In Chile, there are at present some 100,000
Agreement With Voyager                         Merchant      cash    advance    provider      SMEs, of which barely 6,000 have access
Voyager Petroleum Inc has entered into         RapidAdvance has purchased Merchant            to formal factoring arrangements, IIC
a factoring agreement with BLN Capital         Cash Express, a U.K.-based credit and          said.
Funding LLC through Fifth Third Bank           debit card factoring company. Terms were       IIC is a multilateral financial institution
for up to $1 million in purchase order, in-    not disclosed.                                 that is a member of the (IDB) Group. IIC
ventory and receivables financing.                                                            provides financing in the form of equity
                                               This is Bethesda-based RapidAdvance’s
The credit facility will provide the working   first entrance into the U.K. In February, it   investments, loans, guarantees and other
capital necessary to generate additional       entered the Canadian market.                   instruments and advisory services to pri-
revenue by accelerating production at the      RapidAdvance lends working capital to          vate companies in Latin America and the
Detroit facility. The company is market-       business that might otherwise not qualify      Caribbean.
ing its eco-friendly, reprocessing method      for traditional bank loans. RapidAdvance
for reclaimed used oil and working dili-                                                      Bayside Business Solutions Opens UK
                                               collects the debt by taking a percentage of    Sales Office
gently to inform regional automotive and       the borrower’s credit card receivables
industrial customers in the Midwest of its                                                    Bayside Business Solutions has expanded
                                               RapidAdvance bought Merchant Cash              into the United Kingdom and Europe
processing capabilities.
                                               Express “because of the strength of            with the opening of Bayside International
Transfac Funds Factoring Facilities            their management team and the strate-          Limited.
Totaling $620K                                 gic relationships they have established
                                                                                              Bayside has hired Edwige Lemercier as its
Transfac Capital funded factoring facili-      in the U.K.,” said Lee Jundanian, chief
                                                                                              UK/European sales manager. Lemercier
ties totaling $620,000 to 17 individual        executive officer of RapidAdvance in a
                                                                                              is a well regarded professional with ex-
trucking companies with an aggregate of        statement.
                                                                                              tensive experience working with a wide
38 trucks in the month of April.
                                               IFCI Proposes to Acquire Remaining             variety of banks and other companies
Many of the carriers took advantage of         3.5% Stake in Foremost Factors                 throughout her career in the global com-
Transfac’s ancillary products such as bill-    IFCI, Ltd., a provider of finance and cor-     mercial finance industry.
ing, fuel cards and insurance.                 porate advisory services, has plans to ac-     According to Lemercier, “Bayside, with
                                               quire the balance shareholding of a 3.5%       its complete suite of software products,
INTERNATIONAL                                  in Foremost Factors, Ltd. (FFL), a provider    including its new CADENCE commercial
Eurokommerz Keeps Outperforming                of domestic and export factoring facilities.   lending platform, is well-equipped to fill a
Rivals in All Key Indicators                   Upon the completion of this acquisition,       void that currently exists in Europe.” She
The annual factoring market survey con-        Foremost Factors wil become a 100%             continues, “I am excited to join Bayside
ducted by Expert Rating Agency confirms        subsidiary to IFCI.                            and work with an experienced, nimble
the leadership and positive growth dynam-      IFCI has acquired a 46.65% stake in            and accomplished team.”

Factoring and
A Recessionary
Addressing the Inherent Risks
By Roger Allen

An economic downturn most certainly
increases opportunity in the factoring
industry. However, in order to take
advantage of the opportunity factors must
make adjustments to address the inherent
risks that travel hand in hand with the
recessionary environment.

     t is commonly believed that the current recessionary envi-
     ronment will bring substantial sustained growth and profit-
     ability to alternative finance companies. In theory, this is a
     true conception. In practice, it will only prove accurate for
those companies that position themselves to manage the credit
challenges (both internal and external) that it will bring.
The argument I have been hearing the most in recent months
is that traditional financial institutions’ credit boxes are con-
tracting, allowing factors to move up market. Prospects that
were “bankable” yesterday aren’t today. So, in theory, factor-
ing companies will actually be able to pursue stronger clients,
notwithstanding the overall deterioration in the economy. As a
result, risk will actually be reduced.

                                                           cOMMERcIAL FAcTOR | SUMMER 2008   13
                                     In truth, stronger companies can prove
                                     just as rife with risk as their weaker coun-
                                     terparts. The primary driver of this coun-
                                     terintuitive truth is the “exception”. As
                                     factors move upstream, interacting with
                                     firms that only yesterday were bankable,
                                     they often face push back on common fac-
                                     toring practices. Notification, verification,
                                     customer analysis, invoice and backup
                                     documentation submission... all can prove
                                     to be areas of contention for the stronger
                                     prospect. To the extent that a factor devi-
                                     ates from their policies to accommodate
                                     “up market” clients, they introduce risks
                                     that may not exist within their portfolio at
                                     large. I am not suggesting that there aren’t
                                     justifiable exceptions. However, as a mat-
                                     ter of practice, exceptions often prove to
                                     have a viral like quality, morphing over
                                     time into expectations and practices.
                                     As a matter of course, whether factors are
                                     evaluating up market clients or not, they
                                     must manage two primary types of risk;
                                     debtor risk and client risk. Debtor analysis
                                     is simply critical to longevity in this industry.
                                     The deteriorating economy makes this even
                                     more the case. If a factor finds itself with a
                                     low incidence of collusive fraud, or debtor
                                     driven bad debt expense, and they have
                                     made limited investment in debtor analysis,
                                     they had better knock twice on a piece of
                                     wood and count their lucky stars. Then, go
                                     hire a strong willed credit manager.
                                     If a factor’s clients have unsupportable ex-
                                     posure to their customers, they should ask
                                     themselves why this makes sense. Is there
                                     any reason that justifies the exposure? If
                                     the factor is fully advanced on the expo-
                                     sure, they had better start coming up with
                                     a game plan to reduce the risk, crossing
                                     their fingers on the way down. In our ex-
                                     perience, unsupportable exposure to debt-
                                     ors increases the risk of collusive fraud to
                                     unacceptable levels.
                                     I am sure you can see the story at this point.
                                     Client A sells to Customer B at a greater
                                     than supportable level, but you fund it
                                     anyway. Client A contacts Customer B
                                     and asks them to “verify” an invoice be-
                                     ing submitted to the factor. Either because
                                     Customer B is a friend of Client A, or be-
                                     cause they are getting paid by Client A,
                                     Customer B verifies subsequent shipments
                                     of goods. All the while, the factor contin-
                                     ues to fund. When the invoices come due,
                                     Client A submits an even bigger invoice
                                     from Customer B, which the factor funds.
                                     Client A, now having enough money to
                                     pay for the invoices that have come due,
                                     sends the money to Customer B, who then
                                     sends the payment to the factor. The fac-
                                     tor feels great; they got paid in full – high
                                     fives around the office, the advance was
                                     justified. Unfortunately, even more in-
                                     voices are coming due, requiring Client A
                                     to submit even more invoices to the fac-

tor, increasing its exposure, each time, by       need to be reduced, and clients may need        What impact might this have on the own-
at least as much as the factor’s reserve...       to be asked out of the portfolio.               er? Is the owner experiencing increased
and then, the last invoice is submitted.          Clients directly servicing or selling into      personal financial stress? How might this
Client A disappears, Customer B says they         high risk industries are not the only clients   impact the business? What operational,
never received the goods, or the goods            that should be closely monitored. In gen-       documentation or verification exceptions
were returned, and the factor is left try-        eral, most clients are going to experience      have been made to accommodate existing
ing to collect from a client that has gone        downward revenue and margin pressure.           clients? Do they introduce risks that are
underground and a less than cooperative                                                           no longer acceptable?
                                                  Factors should be asking themselves what,
debtor, and feeling foolish indeed.                                                               An economic downturn most certainly
                                                  if any impact, these pressures might have
If the customer exposure in a factor’s port-      on their clients.                               increases opportunity in the factoring in-
folio can’t be supported, the factor needs to                                                     dustry. However, in order to take advan-
                                                  Factors should also take time to review
ask itself why support is being provided. If                                                      tage of the opportunity factors must make
                                                  owner credit strength (or deterioration),
it doesn’t know if its exposures are appro-       client operational procedures and cli-          adjustments to address the inherent risks
priate, it had better find out. In instances      ent management practices. Has a client’s        that travel hand in hand with the reces-
where factors are managing their portfolio        credit score dropped from a 650 to a 520?       sionary environment. n
debtor risk they should be spending time
reviewing every large exposure. Economic
conditions have changed in tangible ways
and so has the creditworthiness of many
historically strong debtors. Identify them
and develop a plan. Talk to your client
and share with them your findings. I as-
sure you they will appreciate your proac-
tive approach to protecting their interests
and their balance sheet.
On the client side, risk is generally broken
down into industry, client and owner risk.
The most sophisticated factors have al-
ready evaluated their portfolios by indus-
try, identifying industries and clients that
are likely to be impacted by recessionary
environments. Debtors that service and
support higher end retail, or that are espe-
cially sensitive to fluctuations in the price
of oil, are likely to experience greater dete-
rioration in financial quality than debtors
in less sensitive industries. Clients selling
to these debtors, or clients that are di-
rectly impacted by these conditions, will
experience increased levels of risk over
clients servicing other industries. They
will likely experience dilution, accounts
receivable slowness, revenue declines and
margin pressures that they haven’t seen in
decades, or perhaps ever. The factors sup-
porting these clients should be watching
them closely. Advance rates may need to
be adjusted, customer credit limits may

                           As Chief Operating
                           Officer of LSQ
                           Funding Group,
                           Roger Allen is
                           responsible for
                           managing LSQ’s
                           Underwriting, Credit
                           and Operations
                           Teams. With over 20
                           years of experience
                           in the factoring and
  financial services industry, Roger has an
  extensive background in Risk Management
  and Factoring Operations. Roger may be
  reached at or
  407-206-0022 ext 224.

                                                                                                           cOMMERcIAL FAcTOR | SUMMER 2008   15
       ARE You PREPARED?
       8 Tips for Surviving and Thriving
       in an Economic Downturn
                                                               By Vince Mancuso

       No one wants to endure economic
       anxiety and portfolio stress. In
       order to survive and thrive in
       2008 and beyond, recessionary
       pressures must be addressed
       immediately and preemptively.
       For those who prepare now, the
       pain of a recession may give way
       to opportunity during this almost
       certain economic slowdown.

                      e all know that in difficult economic
                      times, banks decrease their risk ex-
                      posure to all but their strongest cus-
                      tomers and prospects. Banks gener-
       ally seek companies with incredibly strong balance
       sheets and sustainable cash flows. As a result, they
       take extra precaution when considering up and
       coming businesses. Small businesses without sig-
       nificant assets or economies of scale end up being
       overlooked and denied access to traditional funding
       sources. This can create tempting opportunities for
       factoring companies.

Extending credit to small businesses is      development and portfolio management             pany, its effect on the client’s industry, and
inherently more risky; however, they rep-    strategies, and now may be the time to           its effect on the account debtor’s industry
resent a significant portion of the U.S.     reconsider.                                      (as the ultimate obligor).
economy. According to,           With an economic downturn come chal-             Historically, recessions have lasted be-
more than half of America’s jobs are with    lenges and tough conditions. The first           tween 6 and 16 months. Remaining in
companies that have fewer than 100 em-       challenge factoring companies face in a          tune with the influence of the economy
ployees. Add a national economic down-       downturn is uncertainty. As a manager            will preserve credit quality and minimize
turn into the mix, and the outlook be-       or operator, you will almost certainly ask       potential losses during a difficult cycle,
comes even more precarious. However, if      yourself, “How will my clients continue to       while establishing the appropriate appe-
you know where you want to go and how        perform in a constricting economy?” The          tite for new business. But it is not enough
to get there, an economic downturn is by     intuitive person will surely follow with,        to simply prepare for the downturn; one
far the best time to improve your relative   “How will my client’s customers (account         must also plan for the rebound, which
strategic position. Because of the general   debtors) perform?” Ultimately, the eco-          could happen in as soon as 6 months.
state of the economy, factoring companies    nomic impact must be evaluated on mul-           The good news is you don’t have to be im-
may be forced to reconsider their business   tiple levels: its effect on the factoring com-   prudent and wait for a portfolio problem
                                                                                              to react. You can continue on a moderate-
                                                                                              ly aggressive growth path, without jeopar-
                                                                                              dizing asset integrity. Taking the following
                                                                                              precautionary steps can help prevent the
                                                                                              consequences of a recession from correlat-
                                                                                              ing to losses in your portfolio:
                                                                                              1. Reconsider the overall condition and
                                                                                              state of the industries to which you
                                                                                              market. Establish the level of acceptable
                                                                                              risk by industry concentration when tak-
                                                                                              ing into consideration economic pressures.
                                                                                              For example, any business even remotely
                                                                                              tied to real estate, from carpet and tile
                                                                                              distributors to building materials haulers
                                                                                              may be finding it difficult to meet trade
                                                                                              demands. Manufacturers and distributors
                                                                                              closely tied to the automotive industry
                                                                                              are also being squeezed. Begin ratcheting
                                                                                              down exposure to weakening industries
                                                                                              unless convincing reasons exist to solicit
                                                                                              or stay in a transaction in those markets.
                                                                                              Consider diluting your risk by participat-
                                                                                              ing out the portion that may no longer be
                                                                                              2. Monitor and be continuously aware
                                                                                              of your client’s financial trend. This
                                                                                              doesn’t have to be sophisticated financial
                                                                                              statement analysis (although, the more
                                                                                              information you can obtain the better); it
                                                                                              may be as simple as determining that your
                                                                                              factoring proceeds continue to strengthen
                                                                                              your client’s business. You’ll also want to
                                                                                              maintain an understanding that your cli-
                                                                                              ent’s use of factored proceeds continues to
                                                                                              have a positive effect on cash flow.
                                                                                              3. Update and review principal and
                                                                                              guarantor personal credit. How has
                                                                                              the economy affected their personal credit
                                                                                              worthiness? Are revolving balances el-
                                                                                              evated? Are mortgages past due? Use this
                                                                                              information in determining your true po-
                                                                                              tential exposure and ability to be repaid in
                                                                                              the unlikely event of a fire drill. A princi-
                                                                                              pal’s failure to keep their personal finan-
                                                                                              cial house in order can directly correlate
                                                                                              to volatility in their business.
                                                                                              4. Re-examine all of your documen-
                                                                                              tation, including notice of assignments
                                                                                              and financing statements (UCC filings) to

insure you remain in perfected form and           a victim of volume targets. While the cliché   managing that relationship effectively.
position with respect to your collateral,         of “quality over quantity” has long been       Your relationship with your funding source
and, as importantly, reconfirming your            overused in factoring, the truth is market     is as important, if not more important,
ability to effectively collect the proceeds       pressures regularly affect pricing. It’s im-   than your relationship with your clients.
from your collateral. Take the time to in-        portant to focus on ways to enhance your       You need to be assured that your financing
sure payments from account debtors are            yields, whether considering an unbundled       partner continues to remain committed
coming directly to you from them (as op-          pricing model, whereby incorporating fee       despite an ailing economy. With key inter-
posed to being forwarded by your client).         based services, or through the offering of     est rates being lowered, insure the lower
This is easily confirmed by reviewing the         ancillary products, such as advisory ser-
                                                                                                 cost of funds is being passed onto you.
remittance address on the daily collection        vices, which can be hugely profitable (and
                                                                                                 When funding sources tighten up, they
receipts and immediately (re)notifying            beneficial to an operator who is struggling
                                                                                                 typically are selective, losing confidence in
any account debtor that is paying your            to take his business to the next level).
                                                                                                 relationships that are inconsistent. Don’t
client directly.                                  8. Know your funding source. Make sure
                                                                                                 be viewed as inconsistent. As an added
5. Re-assess operational procedures,              your funding source is healthy and com-
specifically the level and detail of support-     mitted to your relationship and continue                               Continued on page 45
ing documentation being accepted from
all clients, even your most seasoned cli-
ents, and the thoroughness of your veri-
fication process. Convenience is not an
excuse for letting even the most seasoned
client submit minimal (or no) support-
ing documentation. Arguably, the single
most important operational function is
the verification process. In these difficult
economic times, potential for fraud is sig-
nificantly elevated. Historically, at risk cli-
ents “borrow” first from the IRS (through
the non-payment of 941 obligations) and
next from their lovable funding source
(through the prefunding of sales and/or
conversion of funds). Avoid becoming a
target by maintaining an effective level of
random verifications.
6. Review collection activity. In a con-
tracting economy, receivable turn be-
comes an issue. Collection efforts must
be prudent, consistent and effective. If you
are providing your clients with collection
services, evaluate your collection team’s
efforts and incentivize them based on an
improved DSO (A/R turn). For those cli-
ents who handle their own collections,
insure your pricing incentivizes quicker
DSO. Improved DSO not only improves
liquidity but also hedges against any ac-
count debtor industry concerns relative to
a recession.
7. Take the time to insure your risk
based margins are reflective of the risk
you are actually taking. Do not become

                         Vince Mancuso is
                         the Senior Lending
                         Officer for Proficio
                         Bank, a national
                         provider of working
                         capital to specialty
                         finance companies.
                         Vince may be reached
                         at 801-322-7027
                         or vmancuso@

                                                                                                          cOMMERcIAL FAcTOR | SUMMER 2008   19
People: “Your Most Valuable Asset”
Part 3: How to Retain the Best People in Your Company

                                               n the first article of this series, we discussed the value of good people in the fac-
Editor’s Note: This is the last article        toring industry. Whether it is sales or operations, the key to success is the right
in a three-part series addressing              person in the right position in your company. In the second article, we discussed
human capital.                                 how important a great company culture is to ensure that you facilitate an atmo-
                                          sphere which will enhance the growth of your people and in turn boost the growth of
By David Rains                            your company. Finally, we end this series on the methods of retaining the best people
                                          in your organization.
                                          In order to discuss employee retention, we should determine why people leave one com-
In order to discuss                       pany and go to another. The reasons can be stated in different ways, however it comes
                                          down to three very basic reasons and they are listed below.
employee retention, it’s
                                          First, people leave for money. This should not be a surprise to anyone. Money is a mo-
important to determine why                tivating factor and paying good people market wages is your first defense against losing
people leave one company                  an individual for this reason. If you are paying what the position is worth and not taking
and go to another. The                    advantage of them, there is just not much more you can do. If you think you are get-
                                          ting a bargain with a great person, you should always review his or her salary to keep it
reasons can be stated in                  at market. Someone else will definitely see the value, if you do not recognize the asset.
different ways, however                   However, some employees are never happy and always want more; you have met the type
it comes down to the                      of individual in which the grass is always greener on the other side of the fence. Quite
                                          frankly, if money is the only thing that brought them to you or keeps them with you, then
three very basic reasons                  the next highest bidder will be around the corner and they will be gone again.
discussed in this article.                Secondly, running to something is another reason an individual will leave for a better
                                          opportunity where they are allowed to accomplish greater things or they have the percep-
                                          tion that they can advance their career. In most cases, there is little or no defense against
                                          this reason for leaving. If you have a great sales person who is leaving to be a sales man-
                                          ager and you already have a sales manager, then how can you offer anything that can
                                          compare? This scenario is difficult especially in small companies. Money will not retain
                                          employees and the best course of action is to wish them well as they depart. As when chil-

dren grow up and have to leave their par-        the organization; reaching the pinnacle of     your company. If they feel they are just a
ents, people will grow in your organization      what is available to them; or there is some-   cog in a wheel with no future, they will
and leave to go to a better opportunity. It      one in the company making life miserable       naturally seek other opportunities to bet-
would be detrimental in these types of situ-     for them in their day to day work life. The    ter their situation.
ations to counteroffer. To scramble to save      way to combat this is simple yet not so        In closing, it is clear that no magic bullet
someone will only prolong the agony and          simple. Do you have individuals in your        exists which will enhance employee reten-
they will leave anyway.                          company that have a lack of respect for        tion. As in all phases of your business, it is
Finally, running from something is an ad-        people around them? If you do, then you        up to you as the owner or senior manager
ditional reason an individual will leave a       should address the problem and either ter-     to make the work atmosphere of your
company. They are either in a situation          minate or counsel that individual on the       company attractive and conducive to peo-
which they are uncomfortable, perhaps            value of all of the employees in the orga-     ple wanting to be there everyday. If you
feel they are being stifled in their careers,    nization. If the problem is you, then good
or there is a personality conflict with an-      luck. Your turnover will continue unless                                 Continued on page 45
other employee or senior management of           you can recognize the problem and correct
the company. This is the #1 reason that          it. Self correction for an owner or senior       ABOUT THE AUTHOR
more than fifty percent of people leave one      manager is one of the hardest goals to at-
organization and join another. It is also        tain. Cross training is another very impor-
                                                                                                                         David Rains is
the reason that not-so-good people leave,        tant part of allowing people to progress                                the President of
however we will concentrate on the good          in their careers and to grow as individu-                               Commercial Finance
people you want to retain for the sake of        als while helping to achieve the company                                Consultants (www.
this article. As mentioned in the previous                                                                      and
                                                 goals. Another key component is to en-
                                                                                                                         the Founder of
article, company culture is a major key to       sure that you include the employees in                                  Factorhelp, Inc (www.
employee retention and statistically speak-      the goals of the company. One other area,                      CFC
ing, this is the one area where you can ex-      which is very inexpensive to implement, is                              continues to impact
ert the most control in keeping employees                                                         the factoring industry by assisting companies
                                                 simply letting people know that you value
                                                                                                  to find the right human capital to manage
happy within your organization. Although         their contribution and especially appreci-       and grow their businesses. Additionally,
money is listed as the first motive, it is re-   ate the extra mile that they are willing to      Factorhelp has been instrumental in finding
ally the third reason people leave compa-        go. People spend thirty percent of their         entry and exit strategies, funding, and other
nies and seek another opportunity.               lives on the job. If they feel like they are     solutions for factoring companies across the
                                                                                                  US and Canada. David Rains can be reached
The strong motivators in this category are:      a viable part of the organization, they are      at or 972-203-6064.
not feeling appreciated; having no input in      better employees and they will stay with

                                                                                                          cOMMERcIAL FAcTOR | SUMMER 2008    21
                                                  FACTOR                                            By John A. Beckstead, Esq.

The Perils of Post-Filing Events on Perfection

               aintaining a perfected secu-       ability company, or limited partnership.        filing office’s standard search logic using
               rity interest is the lifeblood     The laws of the jurisdiction in which the       the correct name would not disclose the
               of a factor. Without it, a         debtor is located generally govern the per-     financing statement, then the original filed
               factor cannot adequately           fection of a security interest.                 financing statement is not effective to per-
protect what may be its only source of            A debtor who is an individual or an or-         fect a security interest in collateral acquired
recovery—the accounts receivable of its           ganization that is not a registered organi-     by the debtor more than four months after
clients. A factor will generally file a UCC       zation can change its location by simply        the name change, unless the secured party
Financing Statement to perfect its security       moving his or her residence or by moving        files an amendment to the original financ-
interest. However, filing a financing state-      its office. A registered organization can       ing statement that renders the financing
ment may not be sufficient to maintain a          change its location by converting from          statement not “seriously misleading.”
perfected security interest. The Uniform          a New York corporation to a Delaware            The original financing statement will be
Commercial Code contemplates numer-               corporation, for example, or by convert-        effective to perfect a security interest in the
ous post-filing events that can negatively        ing from a California corporation to an         collateral acquired by the debtor before or
impact a perfected security interest un-          Arizona limited liability company. A reg-       within four months after the name change,
less the secured party takes timely action.       istered organization can also change its lo-    but not collateral acquired after that date.
Common post-filing events of which a fac-         cation by a merger. The effect of a change
tor must be aware include changes in the          in the debtor’s location can be dramatic.       Changes in the Debtor
debtor’s location, changes in the debtor’s                                                        Changes in the debtor typically occur by
                                                  Under the Uniform Commercial Code a
name, and changes in the debtor.                                                                  merger or a sale of all assets. The UCC
                                                  perfected security interest expires four
                                                  months after a debtor changes its location      provides that when a new entity becomes
Changes In Debtor’s                               to a new jurisdiction unless the secured        generally obligated for the obligations of
Location                                          party becomes perfected under the laws of       the factoring client, the new entity, referred
Under the UCC, the factor’s client is re-         the new jurisdiction, which is generally ac-    to as a “new debtor”, will be bound by the
ferred to as a debtor. Article 9 requires         complished by filing a financing statement      client’s original security agreement.
that a financing statement be filed where         in the new jurisdiction. If the secured party   When a new debtor becomes bound under
the debtor is located. If the debtor is an        fails to become perfected in the new juris-     an original security agreement, the original
individual, the debtor is located where the       diction within the four months, the security    financing statement naming the original
debtor resides. If the debtor is an organi-       interest becomes unperfected and is deemed      debtor is effective to perfect a security in-
zation that is not a “registered organiza-        to never have been perfected as against a       terest in the collateral the new debtor has
tion,” the debtor is located at its place of      purchaser of the collateral for value.          or acquires to the extent the financing state-
business, if it only has one location, or                                                         ment would have been effective had the
at its chief executive office, if it has more     Changes In Debtor’s Name                        original debtor acquired the rights in the
than one location. If the debtor is a “regis-                                                     collateral. However, if the name of the new
                                                  A financing statement must sufficiently
                                                                                                  debtor causes the original financing state-
tered organization,” the debtor is located        provide the name of the debtor. A financ-
                                                                                                  ment to become “seriously misleading,”
in the state where the debtor is organized.       ing statement sufficiently provides for
                                                                                                  then the financing statement will not be ef-
A registered organization is any entity that      the name of the debtor if, in the case of       fective to perfect a security interest in collat-
is formed by a filing with a government           a “registered organization,” the financing      eral acquired by the new debtor more than
agency, namely, a corporation, limited li-        statement provides the name of the debtor       four months after the new debtor becomes
                                                  indicated on the public record that shows       obligated as a new debtor unless the secured
  ABOUT THE AUTHOR                                the debtor to have been organized, or, in       party files a new financing statement pro-
                                                  the case of an individual or an “unregis-       viding the name of the new debtor.
                                                  tered organization,” the financing state-
                       John A. Beckstead,                                                         As in the case of a change in the debtor’s
                       Esq. is a partner in the   ment provides the name of the individual        name, the original financing statement
                       Salt Lake City office of   or organization.                                will remain effective to perfect the security
                       the regional law firm
                                                  If a debtor changes its name, an amend-         interest in the collateral the new debtor
                       Holland & Hart LLP.
                       He can be reached          ment to the financing statement may be re-      has or acquires within four months after
                       at jabeckstead@            quired. The UCC provides that if a debtor       becoming obligated as a new debtor but
              or         changes its name so that a filed financing      not collateral acquired after that date.
                       801-799-5823.              statement becomes “seriously misleading,”
                                                  meaning that a search conducted under the                                 Continued on page 45

                                                                                                            cOMMERcIAL FAcTOR | SUMMER 2008    23
Risk Management in a
Changing Economic Climate
                                                                                                           By Dugan Smith

           hey say a rising tide raises all      management. So, what can we do to im-
           boats in a harbor, yet we never       prove our risk management protocols in a
           really know who the real ship         softening economy?
           captains are until the tide goes      Softening economic conditions can impact
out. The same can be said for the factoring      long term client accounts as they begin ex-     They say a rising tide
industry as we head into a softer economic       periencing new challenges in running their
climate. Ironically, this tide appears to be
                                                                                                 raises all boats in a
                                                 businesses. Unanticipated client problems
both ‘ebbing and flowing’ for factors creat-     may arise with increased expenses and ma-       harbor, yet we never
ing potential risk management challenges.        terial costs, more competition and lower        really know who the real
While tightening credit markets upstream         margins, loss of business, or a need to take    ship captains are until
will surely generate increased deal oppor-       more money out of the company to man-
tunities for the factoring space, these same     age personal finances. When this occurs,        the tide goes out. The
tightening markets may likely strain some        even a long term client may feel compelled      same can be said for
of your existing clients. This softening econ-   to make a choice they would not normally        the factoring industry
omy effectively creates a two-edged sword,       have considered. It may start with pre-bill-
as factors work to capitalize on increased       ing, an accidentally cashed check, or even a
                                                                                                 as we head into a softer
deal flow while also applying vigilance in       billing error. In other cases, it may just be   economic climate.
managing their portfolios.                       an intentional act by the client to the det-
Fundamentally, factors buy receivables at a      riment of the factor. In any case, a factor
discount from companies (clients) who sell       cannot ignore these warning signs, whether
to creditworthy customers (debtors). The         accidental or intentional, lest a long stand-
real art of factoring is balancing client re-    ing client become a challenge or result in a
lationships and customer service while also      potential loss.
working to ensure repayment on the pur-          Again, what can a factor do in this new
chased invoices. Said another way, it’s not      economy to better manage their portfolio
just about the money going out the door…         risk profile? Focus and leverage on people,
it’s also about getting it back. This is risk    processes and systems.

                                                                                                   cOMMERcIAL FAcTOR | SUMMER 2008   25
                                     PeoPle: Do you have the right people
                                     trained in the right things?
                                     A factor’s greatest asset continues to be its
                                     people. Focus on them and satisfy yourself
                                     that your employees are trained in their
                                     jobs. Ensure they understand the relation-
                                     ship between their job and the other as-
                                     pects of the company. As an example: A
                                     factoring company with a diverse industry
                                     client base only had a few transportation
                                     accounts. In one situation, a data entry
                                     specialist reviewed a schedule and support
                                     documentation. The amounts matched.
                                     Then, the verifier confirmed with the debt-
                                     or (a broker) that the work had been per-
                                     formed. The client received their funding.
                                     Yet, the invoices were never paid… at least
                                     not to the client. Why? Those reviewing
                                     the backup did not know to look at the
                                     carrier who signed the bill of lading. Yes,
                                     it was the broker. In the end, the client re-
                                     purchased the invoices since it was a small
                                     amount but the fact remains… training can
                                     be critical in daily operations. In this situ-
                                     ation, processes were in place but training
                                     was lacking. Fortunately, it worked out for
                                     the factor with no loss incurred. Is your
                                     staff adequately trained in their functions
                                     to execute their roles effectively?
                                     PRocesses: Do you have the right
                                     processes and procedures in place to
                                     manage the risk/reward paradigm as
                                     a factor – particularly in this changing
                                     The risks associated with these changing
                                     economic times calls for factors to better
                                     evaluate their procedures and assure their
                                     effectiveness. Reagan’s signature quote,
                                     “Trust, but Verify” should be a watch
                                     phrase as the economy softens. A factor’s
                                     processes serve a two-pronged purpose and
                                     include (i) processing the funding needs
                                     and routine management of the clients’
                                     daily operations and (ii) identifying those
                                     exceptions or “red flag” situations that
                                     warrant investigation or action. Nothing
                                     can replace vigilant monitoring in a factor-
                                     ing portfolio. You may want to ask your-
                                     self: Are invoices and supporting docu-
                                     mentation being reviewed consistently and
                                     to your expectations? How do you know?
                                     Are reviews and ongoing management of
                                     debtor credit limits and concentrations
                                     occurring? Are you sure? Are notification
                                     letters being sent in a timely manner? Are
                                     they audited or tracked for return?
                                     Additionally, verification and lockbox pro-
                                     tocols remain key focus areas in softening
                                     economies. Increased client stress may cre-
                                     ate circumstances where clients have ten-
                                     dencies to circumvent debtor payments or
                                     to submit invalid invoices or supporting
                                     documentation. These types of situations
                                     occur more frequently during economic

slowdowns, and if caught quickly, losses          may work on funding a client every week         ing business successfully. Not just some-
can be minimized or prevented. Now is             for several months and never realize that       times… but consistently. Stick to the ba-
the time to review verification procedures        the client’s sales have actually decreased      sics. Buy good invoices from clients that
across the portfolio to satisfy yourself that     by 35 percent or that no collections have       make or deliver good quality products or
your expectations are being met and that          been received during the last month. Trend      services to debtors you believe are cred-
protocols match the potential new risk            tools provide client, portfolio and risk per-   itworthy and will pay. Inspect what you
within each client profile.                       spective through leveraging information.        expect, both from your clients and from
Successful factors do what they know and                                                          within your business. Finally, monitor
                                                  Vigilance and persistence are valuable traits
know what they do. They do it consistent-                                                         your collateral closely. Effectively manag-
                                                  that will help you know what is going on
ly through both economic expansions and                                                           ing portfolio risk requires factors to truly
                                                  with your clients and in your portfolio,
slowdowns – regardless of whether the tide                                                        look at the roots of their business: the peo-
                                                  particularly in this economy.                   ple, the processes and the systems to en-
is coming in or going out. Protecting your
                                                  With today’s changing economic climate,         sure that the risk/reward paradigm stays
collateral is not a periodic activity. For dis-
                                                  risk management protocols are essential         in balance – regardless of whether the tide
ciplined and successful factors, it is a daily
                                                  in managing and maintaining a factor-           is coming in or going out. n
occurrence. Sound business practices and
procedures implemented and executed con-
sistently will minimize loss risk and foster
success, even in softening economies.
sysTeMs: Do you have the systems
and technology in place to support
your risk management vision?
                                                                                                               SERVICES LLC
Technology and systems have advanced sig-
nificantly in the factoring space during the             A Leading Choice for Purchase Order Finance
past decade and can provide valuable tools
in risk management. Differentiate between
information and data. Data is exactly that:
                                                                                   Hartsko purchase
data. Information is the assimilation of
data segments that facilitates decisions. For
                                                                            order financing, well-managed
example, disciplined factors review client                               companies can grow sales and take
and portfolio trends at least monthly as                            advantage of profitable growth opportunities
part of their processes to help better under-                      that are larger than they can support internally.
stand their clients’ businesses and to look
for exceptions or “red flags”. Trend tools
typically measure key client characteristics             What Hartsko
over time including such elements as pur-
chases, collections, dilution, non-factored                         Does For You...
cash, funds employed, charge-backs, and                                           Evaluates transactions and looks beyond
agings. Use of this type of tool gives a fac-                                     our client’s balance sheet.
tor a higher level perspective on a client’s                                      Grants you access to working capital
performance than may typically be seen
                                                                                  without having to sacrifice equity.
during the daily activities performed by the
account manager. While a trend tool can                                           Provides approval in days, not weeks, or longer.
only provide a historical view of a client’s                                      Works across many industries, company types
performance, valuable perspective may be                                          and purchase order sizes.
gained. For example, an account manager                                           Supports both domestic and international
                                                                  Hartsko is a privately funded, closely held entity
                                                                  with a strong financial foundation and is able to
                         Dugan Smith is the
                         President and Founder
                                                                     react quickly to unique financing requests
                         of FactorSource, a                             in trade. We are not a bank! We offer
                         consulting firm to the                             the speed and flexibility to get
                         factoring industry.
                         Previously he served
                                                                                   deals done fast!
                         as the CEO for
                         Greystone Commercial
                         Services LP and has
  worked in organizational management,
  finance, financing and operations, credit
                                                      Hartsko Financial Services, LLC                 Richard Eitelberg, CPA
  and product sales since 1979. A twenty-year         214-18 41st Avenue                              President
  industry veteran, Dugan has broad and deep          Suite 301                                       Tel: 718-229-0440
  experience in specialty finance from
  GE Capital, KBK Capital and two public
                                                      Bayside, NY 11361                               Fax: 718-229-5428
  banking concerns. Dugan can be reached at           Cell: 516-906-6682                              E-mail: or 214-351-2882.

                                                                                                           cOMMERcIAL FAcTOR | SUMMER 2008   27
                                       Sales & Marketing
Sales Tips To Make ’08 great
                                                                                                             By Thomas G. Siska

Don’t Assume                                  salespeople get paid on closed sales, not       prospect was ready to commit if you could
                                              “feel good” points. If you think you know       meet this immediate need with a written
“If you assume, you just might make an
                                              what someone said, you don’t - until you        proposal. If you spend more time trying
a…”. I know, you’ve heard this one. But
                                              probe.                                          to close on a call than you do qualifying,
let’s put this rear view picture in a sales
perspective. Have you ever heard this from                                                    you’ve probably made your job too diffi-
a prospect: “Sounds good. Let’s circle back
                                              Is This a Sale You Want to                      cult. And you’re closing ratio might be be-
next week after I’ve gone over everything     Make?                                           low your true par. Be sure to qualify hard
with my people here”. Most salespeople        Many salespeople believe that every pros-       and let the prospect do the closing!
hear this and assume things are progress-     pect is a “real” opportunity. So they dive
ing nicely. Until next week comes and goes    into their full presentation before a) quali-   In Summary
with no “circling back” from the prospect.    fying the prospect, and then b) finding out     1. Qualify – Some prospects are golden,
What could have happened between then         what exactly this now qualified prospect        others are “fools gold”. Discover the dif-
and now?                                      really wants. Shouldn’t you first find out if   ference. YOUR TIME IS FINITE. INVEST
The problem is, nothing happened. The         your firm even wants to get involved with       IT WISELY.
salesperson didn’t close. What specifi-       this prospect? Remember, the term “fi-          2. Probe – Do you understand what
cally “sounded good”? Who specifically        nancing relationship” infers that both par-     the prospect “really” wants? If not, how
is the prospect going to “go over every-      ties have a vested interest in what’s going     can you convince the prospect that your
thing with”? And why? Is there someone        on. It’s not a given that just because the      product fulfills their needs? And does your
else involved in the decision making pro-     prospect has A/R and needs money that           product fulfill the prospect’s needs better
cess? There should have been a clear un-      you want to close this deal. YOUR TIME          than the alternatives that the prospect is
derstanding and agreement of when the         IS FINITE. INVEST IT WISELY.                    already considering? YOUR TIME IS
“circling back” would occur and what          Now let’s assume that you do want to do         FINITE. INVEST IT WISELY.
was going to take place (prospect was go-     business with this firm. What does this         3. Close – If you want to do business
ing to have a complete application pack-      prospect want? And more importantly,            with the prospect and you discover that
age ready for you to pick up so you could     what does the prospect need? Can you            your product is the best (or at least one of
quote all of those aspects of your program    competitively fulfill their most important      the best) options at the prospect’s disposal,
that “sounded good”).                         requirements? If not, get out of there.
                                                                                              CLOSE THE DEAL.
This happens often because salespeople        YOUR TIME IS FINITE. INVEST IT
                                              WISELY.                                         If you’ve gotten this far and can’t close the
are “thinking positive”. Salespeople…                                                         deal, you might want to consider becom-
don’t think. Sell. Selling means getting      If so, the portion of your presentation that
                                                                                              ing the President & CEO of a Factoring
a commitment from a prospect, not an          addresses their needs is all you want to fo-
                                                                                              Company. n
empty promise. If you’re going to assume,     cus on. Everything else is noise. Believe it
assume you don’t have agreement, and          or not, prospects don’t hang on your ev-
probe until you do or you hit that road-      ery word. They are only interested in what        ABOUT THE AUTHOR
block that you must “sell around”. Most       you have that they specifically need. And if
salespeople can sell, the bigger problem is   you babble on about things that were un-                                 Thomas G. Siska is
that they don’t put themselves in the prop-   important to the prospect, you might ac-                                 President & CEO of
er position. They assume they’ve already      cidentally create a need that wasn’t there                               Working Capital Solutions,
                                                                                                                       Inc., a subsidiary of
made the sale when they haven’t. Selling      a minute ago. And that need might not be
                                                                                                                       WebBank. Tom is a 24
means probing until you have agreement.       something that you can fulfill effectively.                              year industry veteran
“Sounds good” is meaningless unless you       Now if this is a deal a) you want, and b)                                who has built several
probe: “Thank you. And by ‘sounds good’       you can effectively compete on, Close It!                                factoring operations
                                                                                                                       from the ground up
you mean...?” The prospect would then be      And here’s something you may have never                                  and orchestrated one
forced to more precisely define their po-     heard before: You should have been closing                               of the most successful
sition. If you don’t ask, they’ll be plenty   this deal from the very minute you walked        turnarounds in the small Asset Based Lending
comfortable making you feel good while        into the meeting. You should have estab-         industry niche. He also managed one of the largest
                                                                                               and most successful national sales organizations
committing to nothing. The end result is      lished that there was an immediate need
                                                                                               numbering 30 branches. He can be reached at
both parties feel good, but you have no       (this is Factoring after all). You should or 847-297-3673.
sale. I don’t know about you, but most        have found out at the outset whether the

                                                                                                        cOMMERcIAL FAcTOR | SUMMER 2008      29
what’s new at IFA
 IFA 2008 Spring Conference:
 Pleasing All of the People All of the Time!

      f it’s a given that you can’t please all   years ago are on the schedule now. The            plans a great event.” Besides the direct ben-
      of the people all of the time, IFA ex-     meeting just gets better and better. There        efits of the actual programming, Silverman
      ecutive director Bert Goldberg seems       is real value there.” On a lighter note,          met two colleagues at the golf tournament
      to be tempting fate.                       Steve Ontiveros appreciated the planners’         for the first time – two guys he wound up
 Goldberg’s latest efforts to satisfy more       choice of entertainment – especially the          spending most of the conference with. “We
 than 500 attendees at the association’s         band on Thursday night.                           had a lot to talk about, and we’ve kept in
 spring conference at the historic Hotel Del     A highlight for many conference goers was         touch by email. I’m sure we’ll get together
 Coronado in San Diego met with resound-         the banquet event aboard the USS Midway           again. Those kinds of connections are what
 ingly upbeat reviews, a coup no matter          on the Navy Pier, the permanent home to           makes the meetings so valuable.”
 how you look at it. Member feedback was         the aircraft carrier in service longer than any   It doesn’t get any better than a cocktail
 overwhelmingly positive, with glowing           other in history. Factors had the chance to       reception on a grand lawn setting, over-
 comments for everything from the historic       tour the interactive naval aviation museum        looking the ocean, said the Dallas-based
 location at the Hotel del Coronado to the       during the evening, led by docents (hired         Edward King of King Trade Capital. “I
 cutting edge speaker roster and profound        specially by IFA) who had actually served         think San Diego was the best venue yet,”
 networking opportunities.                       aboard the ship during her heyday. “I think       he said. “I wanted to take advantage of the
 “We had our largest attendance ever,”           all of us had the sense we were on a big          special activities, the golf, the kite surfing –
 said Goldberg, who counted 535 attend-          floating piece of history,” said Goldberg.        but I was too busy meeting contacts from
 ees from every continent but Antarctica at      But for most attendees, the chance to             all over the country. I tend to set up a lot
 the meeting. “I usually stick with the same     swap war stories, discuss challenges and          of meetings in advance,” he said. “Then
 basic structure and flow for the meeting,       meet new business contacts was the con-           again, I guess that’s what really makes
 changing up the sessions to appeal to           ference’s biggest draw. “I was really happy       these meetings so important to me.”
 both beginning and advanced members.            to see the (program’s) emphasis shifting to       Allen Frederic, whose company, Gulf
 My goal is to really deliver content --         emerging trends like P/O and International        Coast Business Credit, is headquartered
 not fluff.” The mix of 1 1/2 hour edu-          Factoring,” said Ken Walsleben, of the            in New Orleans, agrees that the Del, and
 cational seminars, cutting edge speakers,       Hamilton Group in Syracuse, NY. “Gets             San Diego in general, made for a fantas-
 events and venues designed to encourage         you out of your comfort zone.”                    tic and historic setting. But he wouldn’t
 networking, both in the glamorous Del
                                                 The golf tournament was a highlight for           miss the IFA conference no matter where
 and around San Diego, combined to earn
                                                 Gary Silverman, of Silverman & Associates         it was. “I’ve been to all of them. It’s the
 raves from many attendees, both seasoned
                                                 in Bethesda, MD. San Diego was his second         greatest networking opportunity of the
 members as well as first timers. Nonstop
                                                 IFA conference – New Orleans was his first        year,” he said. “And it’s a must attend for
 sunshine and San Diego’s trademark per-
                                                 – and his experience was positive across the      all factors that want to stay competitive,
 fect weather was just icing on the cake.
                                                 board. “Everything was so well planned            increase their knowledge base and grow
 “My expectations were exceeded,” said           and well executed,” he said. “Bert really         their companies.”
 Dave Larson, of Firmco Business Funding
 in Murray, Utah. Larson had three pri-
 mary objectives in attending: updating
 his education, meeting firms to whom he
 could refer larger transactions and learn
 ways to partner with PO, trade and inven-
 tory companies to spike business and in-
 come. For him, the spring conference hit a
 home run on all counts.
 For Randy Ontiveros, whose company
 Resource Business partners , Inc. is based
 in San Jose, CA, San Diego was his sev-
 enth IFA conference experience. “I got
 what I wanted out of this meeting,” said
 Ontiveros, who attended with his son and
 business partner Steve Ontiveros. “I’d say
 features that were missing six or seven
                                                 Marc Porter and Sal Trupiano, Porter Capital,     Greg Porter, Capital Funding Solutions enjoys a
 30 cOMMERcIAL FAcTOR | SUMMER 2008              in front of The Midway                            surprise visit with Marilyn Monroe!
                                                                                         August 21-22
                                                                                         Executives Meeting
                                                                                         Sonnenalp Resort
                                                                                         Vail, CO
                                                                                         $995 member
                                                                                         ($1095 non-member)

IFA Acknowledges
                                                                                         September 18-19
                                                                                         Small Ticket Factoring
                                                                                         Workshop Meeting

2007-2008 Board Members                                                                  Monte Carlo Resort
                                                                                         and Casino, Las Vegas, NV
                                                                                         $645 member
                                                                                         ($695 non-member)

         he IFA would like to thank our 2007-2008 Board Members for their                September 25-26
         time and contributions in making the last year one of the finest for the        Transportation Meeting
         IFA. We have seen our membership grow as well as the attendance at              Skirvin Hilton, Oklahoma City, OK
         our annual convention and training courses. This board has also been            $795 member / ($845 non-member)
instrumental in implementing some new benefits for IFA members including the             October 16-17
Preferred Vendor program, new training courses and enforcement of the IFA’s              Credit & Underwriting
Code of Ethics.                                                                          Training Class
Our previous board members are: Stewart Chesters, Bibby Financial Services               Monte Carlo Resort and Casino
(Holdings), Inc.; Pat Haney, Crestmark Commercial Capital Lending; JW Reed,              Las Vegas, NV
Jr., Jhanira Capital Funding; Jay Atkins, First Growth Capital; Lori Gustaf, Assist      $945 member / ($995 non-member)
Financial Services, Inc. and Lisa Mazon, Mazon Associates, Inc.                          October 23-24
Our new Board of Directors for 2008-2009 includes three returning Board                  Sales & Marketing Training Class
Members: Jay Atkins, Lori Gustaf and Lisa Mazon. Joining the board will be:              Monte Carlo Resort and Casino
Craig Berry, Phoenix Capital Group in Phoenix, AZ, Richard Karch, Liberty                Las Vegas, NV
Capital Funding, LLC in Huntington Beach, CA and Mike Miller, Maple Trade                $945 member / ($995 non-member)
Finance, Inc. in Halifax, NS, Canada.
                                                                                         More details and registration
We are all looking forward to another successful year with the IFA. Please remem-        for these courses are available at
ber, this association is here to serve you. Any suggestions and/or feedback would
be greatly appreciated. E-mail us at, or call 800-563-1895.
                                                                                         You can also call the IFA at
                                                                                         800-563-1895 for more information.
Jay Atkins
First Growth Capital                                                                     OTHER EVENTS
West Palm Beach, FL                                                                      September 7-13, 2008
Jay’s financial career began over 16 years ago where he worked as a credit analyst       Factors Chain International
with a large New Jersey-based bank. More recently, Jay was President of Assured          40th Annual Meeting
Consulting, Inc., a unique South-Florida based firm he launched in 2006 to sig-          Kyoto, Japan
nificantly contribute to the success of businesses in general and to factors in par-     November 6 & 7, 2008
ticular by advising them on improving processes, maintaining best practices and          Lender’s Podium with Bob Zadek
ultimately generating and keeping more revenue. In December 2006, First Capital          Commercial Loan Documents - What
Corporation acquired Assured Consulting and announced that Jay Atkins had                They Mean and How They are Used
joined the company as President of First Growth Capital, its National Discount           Chicago, IL
Factoring Division and will also serve as Executive Vice President of FCC.     

Craig Berry                                                                              November 12-14, 2008
                                                                                         Commercial Finance Association
Phoenix Capital Group                                                                    64th Annual Convention
Phoenix, AZ                                                                              San Francisco Marriott
Craig Berry currently serves as President of Phoenix Capital Group (“PCG”),              San Francisco, CA
which he co-founded in 2001 at the age of 23. PCG’s primary operational focus is         November 17 & 18, 2008
the transportation industry, but also services clients in several other areas, includ-   Lender’s Podium with Bob Zadek
ing manufacturing, staffing, and general service providers. Prior to founding PCG,       Commercial Loan Documents - What
Craig worked as an underwriter for a real estate investment trust. He received his       They Mean and How They are Used
bachelor’s degree from Washington University in St. Louis with degrees in both           Las Vegas NV
finance and accounting.
                                                                 Continued on page 44

                                                                                              cOMMERcIAL FAcTOR | SUMMER 2008   31
what’s new at IFA
                 AudiT SERVicES                                                   Contractor Financing and Risk Management Services for
                                                                                  contractors working on Public Works Projects.
                 Asset Based Lending Audit Services
                                                                                  Phone:   631-738-0047
                 Specialists in collateral and financial audits for commercial
                 lenders. Their audit reports focus on the reliability of the
                 company’s books and records as well as the collateral that is

                 supporting the bank’s line of credit.                            Resource Management Partners will pay your IFA membership
                 Phone:   818-730-3926                                            yearly dues.

                 Email:                                      PO fiNANciNg, WiP, lc’S & mOdifiEd iNVENTORy
                 IFA Members receive a 10% discount off of standard audit         Hartsko Financial Services, LLC
                                                                                  Hartsko is a leading source of Purchase Order Financing doing
                                                                                  deals from $25,000 to $10,000,000 per month. Their staff has
                 cERTifiEd EmAil                                                  over 100 years of experience and they are able to close deals
                                                                                  very quickly.
                                                                                  Phone:   718-229-0440
                 RPost Registered E-mail® provides legal and verifiable proof
                 and protection for the sender of any Registered E-mail® sent
                 to any recipient anywhere in the world - regardless of what
                 system or software the recipient uses, regardless of their       IFA members will receive a 12% commission.
                 settings, and without requiring them to respond in any way.
                 Phone:   619-584-4088                                            REcRuiTmENT AgENcy
                 Website:                                           Commercial Finance Consultants
                                                                                  Commercial Finance Consultants seeks to form long term
                 IFA Members receive a $10 discount per 100 pack. Also, the       relationships with Factoring companies with the goal of
                 first order from each company will be doubled.                   providing their clients with the best available human capital
                                                                                  and most current industry information to accomplishing their
                 cONSulTiNg                                                       growth potential.
                                                                                  Phone:   972-203-6064
                 FactorHelp has come to be regarded as the factoring industry’s   Email:
                 premier resource provider. FactorHelp’s manuals, in daily
                                                                                  IFA members will receive an additional 60 days added to the
                 use on every continent of the world, are setting the industry
                                                                                  guarantee on all placements.
                 standard and FactorHelp’s reputation as the one-call solutions
                 for factoring problems is growing.
                 Phone:   972-759-0711
                 Website:                                      FactorFox
                 Email:                                  FactorFox is designed for Smaller Factors. FactorFox is a web-
                 IFA Members receive a discount of 10% on their consulting        based factoring software program developed by a factor, for factors.
                 fees and 5% discount on their manuals.                           Phone:   800-509-6088
                                                                                  IFA members will receive two months free usage of the
                                                                                  software. This will be given above and beyond any other trial
                 Unlimited reports, UCC filings, Legal Filings, Small and Large   or usage time limits.
                 businesses available, Flat fee.
                 Phone:   800-638-7171                                            ucc SEARcH
                 Email:                                 First Corporate Solutions
                                                                                  First Corporate Solutions is a national firm specializing in
                 IFA Members receive 50% off the annual subscription rate of      the research and filing of public records nationwide and
                 $1800 making your cost $900.                                     internationally. They offer industry standard services, such as
                 Experian                                                         UCC searching and filings to unique services such as Account
                                                                                  Monitoring, National Registered Agent Services and Real
                 Experian is the industry leader when it comes to credit          Estate Title Services.
                 information on small to medium sized companies.
                                                                                  Phone:   800-406-1577
                 Phone:   224-698-8933                                            Website:
                 Website:                                        Email:
                                                                                  IFA members will receive a 10% discount off of the retail
                 IFA Members receive Experian business credit                     rates of their signature State and County Account Monitoring
                 information at a special reduced rate.                           product. Larger discounts will be offered based on volume.

                                                                                   Our Preferred Vendors have undergone a screening and
                 Resource Management Partners, Inc.
                                                                                   evaluation process. When you contact the Preferred
                 Resource Management Partners, Inc. is a national provider         Vendors, you will need to indicate that you are an IFA
                 of Portfolio Management Services and Rediscounting                member to receive your benefit.
                 Programs to Independent Factoring Companies offering
                 Accounts Receivable based financing for small to medium           If you offer a good or service to the Factoring Industry
                 sized businesses. They also provide Transportation Financing,     and are interested in applying for Preferred Vendor
                                                                                   Status, please contact the IFA at 805-773-0011.

Presidents/Senior                                          Transportation

                                                                                                                         TRAINING COURSES
Executives Meeting                                         Factoring Meeting
August 21 & 22, 2008                                       September 25 & 26 2008
Sonnenalp Resort, Vail, Colorado                           The Skirvin Hilton, Oklahoma City, Oklahoma
Cost: $995 Members/$1095 Non-Members                       Cost: $795 Members/$845 Non-Members
Presidents and Senior Executives of factoring              This meeting will feature two different speakers
organizations have unique needs. One of the best           and plenty of time for networking. We will begin
ways to help with your strategic planning is to spend      with a welcome reception on Wednesday evening.
time discussing those issues with other Presidents         Thursday will begin with a lecture followed by a
and Senior Executives in the factoring industry. This      group discussion. There will be another speaker from
meeting is designed to discuss specific topics that are    the transportation industry with additional time for
of concern to Senior Executives.                           discussion. Friday we will focus on credit with a group
                                                           credit discussion. We will finish up with lunch on
The second component of our meeting will
                                                           Friday. This meeting will also feature an exhibit hall
concentrate on networking. We will begin on
                                                           with products and services for transportation factors.
Wednesday evening with a Welcome Reception.
Breakfast and lunches will be held together to give you    Guest Speakers TBD: Moderators are Bryan Alsobrooks,
a chance to network with the other attendees. Dinner       Executive Vice President, Crestmark TPG, LLC and
on Thursday evening will also be included.                 Steve Hausman, President, Advance Business Capital.
The moderators for this meeting will be Allen
Frederic, Jr., President, Gulf Coast Business Credit
and Pat Haney, President, Crestmark Commercial
Capital Lending.
                                                           Credit & Underwriting
                                                           Training Class
Small Ticket Factoring                                     October 16 & 17, 2008
Workshop Meeting                                           Monte Carlo Resort and Casino, Las Vegas, NV
                                                           Cost: $945 Members/$995 Non-Members
September 18 & 19, 2008                                    Some of the topics covered will be: Financial
                                                           Statement Analysis, Ratio Analysis, Trending Analysis,
Monte Carlo Resort and Casino, Las Vegas, NV               Tax Return Analysis, Six C’s of Credit, Credit Reporting
Cost: $645 Members/$695 Non-Members                        Options, Reading Credit Reports, Personal Credit
Small Ticket Factors have unique needs. This               Reports, Public Record Searches, Collateral Valuation
workshop is designed to give small ticket factors          Instructors are: Debra Wilson, Senior Vice President,
a forum to discuss and learn. Emphasis will be on          Vertex Financial Corporation; Dugan Smith, President,
roundtable discussions, networking and education.          FactorSource
Some of the specific topics are: Client Industries,
Marketing, Employees & Outsourcing, Taking Time
Away, Due Diligence, Contracts, Legal Issues, Lawsuits,
Collections, Disaster Recovery, Technology,                Sales & Marketing
Case Studies.
The second component of our meeting will
                                                           Training Class
concentrate on networking. We will begin on
Wednesday evening with a Welcome Reception.
                                                           October 23 & 24, 2008
Breakfast and lunches will be held together to give you    Monte Carlo Resort and Casino, Las Vegas, NV
a chance to network with the other attendees. Dinner       Cost: $945 Members/$995 Non-Members
on Thursday evening will also be included.
                                                           Some of the topics covered will be: Increase Your Hit
The moderators for this meeting will be                    Ratio, Developing More Business in a Bad Market, The
Jeff Callender, President, Dash Point Financial            Basics of Marketing, Developing a Marketing Plan,
Services, Inc. and JW Reed, Jr., President,                Establishing your ‘Piece’ of the Market, Protecting
Jhanira Capital Funding                                    Your Turf, Selling Tactics, Territory Management, Time
                                                           Management, Selling Tools
                                                           Instructors are: Thomas Siska, President & CEO,
  The IFA’s Training Courses for Factors are the best      Working Capital Solutions, Inc and Kevin O’Hare,
  way to train new employees, learn new information or     President, Graystone Capital
  simply brush up your knowledge and update some of
  your corporate procedures.
  Registration Information: To register for IFA training
  events, call 1-800-563-1895, email
  or register online at

                                                                                                cOMMERcIAL FAcTOR | SUMMER 2008       33
Motor Carrier
Why Should The
Factor Care?
Transportation Factors are faced with
additional and unique challenges during
initial due diligence. There are differing
opinions within our niche as to what Carrier
compliance issues should be of concern.
This article discusses the importance of the
continual monitoring of the Carrier.

                                            By Kim Kringen

          ransportation Factors are faced with additional and unique
          challenges during initial due diligence. There are differing
          opinions within our niche as to what Carrier compliance
          issues should be of concern. Predominantly, we do agree
that the initial due diligence must include the confirming of active
Operating Authority and the existence of required insurance. But,
what can be of even more importance is the continual monitoring
of the Carrier.

Operating Authority Revocation
scenario: Factor signed a Carrier that has a fleet of fifteen owned
and leased on units. Carrier hauls for several Freight Brokers
with seasonally related concentrations among produce Brokers.
Unbeknownst to the produce Brokers and Factor, several weeks and
thousands of dollars of loads into Carrier’s “busy season”, a truck
is routinely stopped at a Port of Entry. During the safety inspection,
several violations were cited, which resulted in the truck being or-
dered to discontinue operations until the violations were remedied.
The Department of Transportation (DOT) gave Carrier two days to
make the mandated corrections to the truck, but Carrier was unable

                                   cOMMERcIAL FAcTOR | SUMMER 2008   35
to secure the funds needed to comply. The     reason for any of the Freight Brokers to      claims and offset. The Factor should also
truck remained parked for several days.       hold payments. Unfortunately, things did      make the Client aware that it requires a
Because Carrier had a history of safety       not work out the way Carrier ensured. A       “Satisfactory” Safety Rating and expects
violations and had failed to comply within    matter of weeks went by and the number        any deficiencies to be taken care of in a
the two day deadline, the DOT declared        of invoices being offered to Factor had de-   timely manner. Armed with the knowledge
Carrier “Out of Service”. The “Out of         creased significantly due to the fact that    of a deficient or conditional Safety Rating
Service” status was placed upon the entire    Carrier’s leased on trucks had deserted,      also enables the Factor to anticipate the
fleet as each truck runs under the same       the safety violations were not remedied,      possible next move of the Carrier and
DOT and Motor Carrier (MC) numbers.           and the operating authority was revoked.      subsequently “follow” them if need be.
Meanwhile, the parked truck failed to         Factor was left with a debt that could not    A significant number of Carriers will not
deliver the load on time, and three other     be recovered by any method.                   follow DOT regulations. The Carrier may
trucks that were in route were forced to                                                    choose to simply form a new company,
                                              loss Prevention Techniques: If the
park when the Ports of Entry that they                                                      apply for a new DOT number and a new
                                              Freight Broker monitors the DOT Safety
were passing through ran the DOT num-                                                       MC number as it is the least expensive
                                              Rating of each Carrier and checks the rat-
ber and found it to be “Out of Service”.                                                    way out of the dilemma. Unfortunately
                                              ing when contracting each load, they may
When Factor received the invoices and                                                       this may leave the Factor with no viable
                                              choose not to do business with a deficient
back up paperwork for these loads, the                                                      or cost effective collection method on the
bills of lading had notations regarding                                                     accounts receivable.
late deliveries and/or the refusal of loads   If the Factor monitors its Client’s Safety
due to spoilage. Factor called each Freight   Rating and finds anything other than a        Cancellation of Insurance
Broker to confirm that the notations were     “Satisfactory” rating, the Factor should      scenario: Factor has a Client that owns a
accurate and to inquire as to the status      immediately call all Freight Brokers for      fleet with three units. Carrier hauls freight
of the account. Factor learned that each      account information. Reason being: Most       of all kinds for several Freight Brokers.
Freight Broker was going to assert their      Broker/Carrier Agreements contain pro-        Carrier is unable to pay the insurance
right to offset and payments on all open      visions allowing the Broker to make no        premiums for an entire year of coverage
invoices were being held due to the late      payment or delayed payment under any          so the underwriter issues a Certificate
deliveries and the pending cargo insur-       loads hauled at the time that there is a      of Insurance with an effective date, but
ance claims. Factor immediately alerted       less than “Satisfactory” Safety Rating.       does not list an expiration date. Carrier
Carrier to the problems at hand. Carrier      Making these calls to the Freight Brokers     is able to pay for only a few months of
assured Factor that as soon as the insur-     is the most effective way to avoid purchas-   coverage at a time, leaving the policy open
ance paid the claims, there would be no       ing future invoices that may be subject to    for cancellation at any time. During the
                                                                                            normal course of business, Carrier con-
                                                                                            tracts with Freight Brokers and provides
                                                                                            each a Certificate of Insurance listing
                                                                                            the Broker as a Certificate Holder. The
                                                                                            Brokers rely on the underwriter to inform
                                                                                            all Certificate Holders in the event that the
                                                                                            insurance policy is cancelled. Months of
                                                                                            hauling and factoring go by without inci-
                                                                                            dent until a routine collection call changes
                                                                                            everything. Factor is informed by a par-
                                                                                            ticular Freight Broker that there will be no
                                                                                            payments made on the open invoices due

                                                                                            Continued on page 46

                                                                                              ABOUT THE AUTHOR
                                                                                                                       Kim Kringen is the
                                                                                                                       director of sales and
                                                                                                                       marketing for Assist
                                                                                                                       Financial Services
                                                                                                                       (AFS), a transportation
                                                                                                                       factoring company
                                                                                                                       servicing the small
                                                                                                                       fleet and owner-
                                                                                                                       operator market,
                                                                                                                       based in Madison,
                                                                                                                       SD. She has been
                                                                                             with AFS since its inception in 1998. Kim has
                                                                                             acquired considerable knowledge in this
                                                                                             unique factoring niche and enjoys sharing her
                                                                                             experiences and insight with her industry peers.
                                                                                             Kim can be reached at or

                                          Small Ticket
Smaller Factors and the current Economic climate
                                                                                                                   By Jeff Callender

           he current economic climate           careful underwriting now become crucial.        unpleasant circumstances down the road.
           provides both increased op-           Obtaining thorough background histories         Some clients will see the wisdom of your
           portunities as well as increased      on prospective clients, carefully checking      caution, and appreciate your prudence.
           risk, and this is true for smaller    the creditworthiness of their debtors, and      You also want to be sure that the economy
factors as well as larger factors. Personally    obtaining current and complete aging re-        isn’t putting other pressures on your cli-
I’ve noticed, since the beginning of this        ports before a single invoice is purchased      ents you may not otherwise know about.
year and the general acknowledgement             are more important than ever.                   This can be a good time to re-file your
of the economic downturn, that inqui-            Even more, smaller factors need to keep         8821s to make sure you haven’t been
ries from potential clients about using          an eagle eye on the status of their current     bumped from receiving tax delinquency
my smaller factoring service have jumped         client accounts. If you haven’t reviewed        notices. And re-checking your UCCs on
from what it was even last year. My guess        the credit rating of debtors with larger fac-   clients will tell you if someone has filed
is the same is true for others as well.          toring volumes in a while, this is a good       behind you, whom you might not other-
The reasons for this increased interest are      time to do that.                                wise know about.
not hard to ascertain. Primarily, banks          Further, look carefully at the current ag-      The most important practice to maintain is
just aren’t making business or personal          ing reports of all your clients’ accounts.      to make regular follow up calls on invoic-
loans as frequently as they did previously.      But don’t just consider recent payment          es that are slightly past due before they’re
Money has become tight but businesses            patterns; spend some time and look at the       seriously past due. Making timely follow
continue to need it; in fact, with the spiral-   current payment patterns of each client’s
                                                                                                 up calls on a consistent basis is always the
ing cost of fuel and operating costs, small      customers and compare these to what
                                                                                                 first line of defense for getting your money
businesses need working capital more than        they’ve been in the past.
                                                                                                 back. These calls are even more important
ever. When the normal banking channels           Are payment waits taking the same               now. Make them a part of your routine,
no longer provide capital as they once did,      amount of time they did a few months or         make them consistently, and the payments
factoring becomes an option – sometimes          a year ago, or have they become slower?
the only option – for businesses who had                                                         they generate (plus problems the calls may
                                                 If they’re slower, by how much? Is this
previously not chosen it, not considered it,                                                     avert) can make the current economic cli-
                                                 difference significant? If some clients are
or didn’t even know about it.                                                                    mate a real boost to your bottom line…
                                                 now paying you more in discounts due
                                                                                                 not a threat to your business. n
This means new opportunities for those of        to slower payments, is this negatively im-
us in the factoring world, but it also has a     pacting their profitability, at least in an
flip side. As cash is restricted to not only     alarming way? What is the overall health
our prospects and clients, it is also harder     of your clients’ businesses now, and how is
                                                                                                   ABOUT THE AUTHOR
to come by for their debtors, in particular      the economy affecting their industries and
                                                                                                                         In addition to running
smaller debtors. That means the wait for         general operations?                                                     his factoring business
payments for factored invoices often in-         When you find changes in debtor payment                                 (DashPointFinancial.
creases (or can even become problematic)                                                                                 com), Jeff Callender
                                                 patterns, and especially when you’ve spo-                               has written several
for debtors who previously paid within           ken with AP departments who’ve indicat-                                 books, ebooks, and
terms or somewhat slowly. Quick paying           ed they need longer to pay than they did                                articles on factoring.
debtors may take longer to pay, and mar-                                                                                 His latest ebook,
                                                 previously, common sense dictates this is a                             “How I Run My
ginal debtors may pay more slowly or not         good time to be more cautious. You may                                  One-Person Factoring
at all.                                          need to lower the credit limit for these                                Business,” can be
                                                                                                     obtained from DashPointPublishing.
Risk management for smaller factors thus         debtors and in some cases you may decide            com. He also is hosts the site FactorFind.
needs to be taken seriously; we need to          you can no longer buy invoices to some              com and is the developer of FactorFox
be on heightened alert for accounts that                                                             software ( You can reach
                                                 of them at all. Many clients won’t like
                                                                                                     him at 877-620-3699 or via email at
have or may become problems. Taking              this, but tightening your risk controls this
our due diligence practices seriously and        way will protect you and your client from

                                                                                                          cOMMERcIAL FAcTOR | SUMMER 2008     37
Jumping Into
  The Factoring
The current economic climate means a lot of
musical chairs and transient opportunities being
played among bank executives. Many of these
folks are frisky in finding a place to park their cash
to make a good return. Some of these people
have heard about the returns in commercial
finance and want to get into it. Factoring is the
simplest way for a start-up to make their debut.

                                              By James DiCamillo

           he current economic climate means a lot of musical chairs and
           transient opportunities being played among bank executives. For
           example, investment bankers have been making exits. Then, there
           are high net-worth people who have soured on the stock market
or real estate investments. Many of these folks are frisky in finding a place
to park their cash to make a good return. Some of these people have heard
about the returns in commercial finance and want to get into it. Factoring is
the simplest way for a start-up to make their debut. There are service pro-
viders who work in commercial finance, namely accountants, lawyers, and
appraisers who have sometimes functioned as broker dealers. Especially
during this turbulent market some of these professionals see this period
as their moment to expand their role from just brokers of transactions,
into full-fledged factors. They want to earn more than a mere commission.
Amidst all of this, banks which are generally the sources of funding to
factors are starting to pare down their commitments. So the small, inde-
pendent factor must look beyond banks to larger factors which can back
them up if there is a scheduled cash need. One of the critical components a
start-up factor must address is how their “backroom” is going to be set-up.
There is a check-list of eleven items as part of the due diligence process on
entertaining a deal, that the start-up factor needs to get squared away.

                                                  cOMMERcIAL FAcTOR | SUMMER 2008   39
Here are the 11 items:                        quick. The emerging factor can build the       screen a deal once they agree to enter-
                                              book of business until it hits the amount      tain it. The backroom features previously
   n Credit review including accessing
                                              of volume necessary to carry those op-         listed, combined with the total of hours
     credit bureau reports
                                              erations start-up and operating costs via      spent, could easily wind up costing the
   n Analyzing financial statements
                                              cash flow. Not only does this eliminate        small factor $1000-$2000. So acquiring
     including A/R and A/P agings
                                              the need to finance the break-in time, but     the instinct about whether or not a deal
   n Verifying banking and supplier           it also means that capital for start-up is     is worth the evaluation process, is a learn-
                                              never put at risk. (If the factoring venture   ing curve unto itself. I am not trying to as-
   n Documentation                            never gets off the ground, all that has        sign blame to any banks or mega factors,
   n UCC filings                              been lost is time.)                            when I say that the start-up or small factor
   n Special computer software                This approach can minimize the typi-           must realize the true motives of this class
     programs                                 cal, potential mistakes that can easily be     of lender. Generally, they simply want to
                                              made by a beginner or small factor. For        lend as much as they can to the small fac-
   n Verifying invoice terms and
     confirming with account-debtors          example, on the selling side an inexperi-      tor, to drive up their own revenues. These
                                              enced factor can get enamored with the         institutions have no interest in any career
   n Conducting searches on high
     concentration account debtors            first glance appeal and attractiveness         mentoring or in providing backroom sup-
     (in excess of 10-15%)                    of a deal. It can be compared to a guy         port. It is a syndrome of sorts for the small
                                              romancing a beautiful girl—only to dis-        factor to feel a false sense of security on
   n Conducting lien, judgment,
     personal background searches             cover she has a string of ex-husbands, is      how far a lender (who is proportionately
                                              a high maintenance spender, and has been       much larger) is actually prepared to go.
   n Booking the transaction
                                              involved in several lawsuits! In the case      The small factor needs to search for a
   n Reviewing the client’s aging                                                            larger, more experienced factor that is a
                                              of this transaction, the notion of three or
     report on invoice
                                              four points on a $2m invoice may sound         compatible fit.
Reputation means everything in com-           wonderful. But instead of being euphoric,      Even though the lending and credit indus-
mercial finance. A start-up factor needs      it is more important to examine why thus       try is severely distressed at the present time
to engage “best practices sharing” on         far, there have been no takers. If it is not   and through the foreseeable future, we can
operations, credit, underwriting, and         carefully vetted by a qualified backroom,      expect to see a new crop of factors open-
marketing.                                    putting on one bad deal can quickly wipe       ing their doors. I myself fit this description
Of course, we all acknowledge that there      out a small factor. It is not even a mat-      about ten years ago, when I made a transi-
is a certain degree of technical educa-       ter of acting neurotic or paranoid. Good       tion from the insulation industry and my
tion, training, and understanding of how      business sense here means that the back-       work in leasing! As I have shamelessly
to properly present factoring services in     room needs to be the prudent alter ego,        learned many times since I became a fac-
the field. (This underscores the important    to stabilize zeal on selling and booking       tor, there is vast opportunity amidst plenty
role of industry organizations like: IFA,     new business. Another stumbling block          of room to fail. If commercial finance was
CFA, TMA, and more.) In all likelihood,       for the little factor is when they get them-   a jungle—factors would be lions! n
the people I have described are motivated     selves jammed up on the size and scope of
to become factors by the contacts and re-     the deal. It is similar to someone choking
lationships they believe they have previ-     on a hunk of U.S.D.A. “prime” filet mi-
                                                                                               ABOUT THE AUTHOR
ously cultivated. If they are armed with      gnon! “Holy smokes, factoring this one
                                                                                                                        James DiCamillo
the comprehension about the different         invoice is going to wind up being 75%
                                                                                                                        is Executive Vice
factoring angles, and how they can ful-       of my financial capacity.” The small fac-                                 President of Resource
fill a need for a prospect, they can suc-     tor can become desperate when they ap-                                    Management Partners,
ceed.The newborn factor has to expect         proach other factors and lenders in their                                 Inc., (RMPI). Prior to
that their baptism would probably cost        attempt to raise additional capital. Again,                               co-founding RMPI,
                                                                                                                        Mr. DiCamillo was
$300,000+ to develop the “backroom”           despite what appears to be healthy prof-                                  the Chief Operating
capability. (This includes a minimum of       itability in a deal, the inexperienced                                    Officer of CTA
$25,000 and up for a software specific        smaller factor can easily wind up with                                    Industries, formerly
program, $50,000 for a knowledgeable          little revenue to show for it, or perhaps,      American Rockwool Acquisition Corporation, a
                                                                                              holding company of several manufacturers of
office worker, and $125,000 in back-          a loss. They need to acquire a knowledge
                                                                                              insulation products for residential, commercial
room systems.) Then, it may require a         and craftsmanship in how to spread risk         and industrial uses. Mr. DiCamillo managed
few years to attract experienced people       by use of re-discounting, participations,       operations and sales for each company. He was
and build up an operating team. Unless        and brokering with a source that allows         responsible for the integration of operations
there is a certain threshold of business      new factors to manage risk. A sin in com-       and human resources for each acquisition.
                                                                                              Mr. DiCamillo also has 25 years of leasing
attained, it would be impractical for the     mercial finance is having to disappoint
                                                                                              experience. He spent five years as President
start-up factor to make this investment.      referral sources by letting an account go       of Quality Lessors LTD, a medical equipment
Another route is for the new factor to        because the exposure or concentration is        leasing company, and was the Chief Operating
partner with an existing factor which al-     too high.                                       Officer of Suburbia Federal Savings and Loan’s
                                                                                              leasing subsidiary, Resource Leasing. James can
ready has this capacity for satisfying each   It is important for the small factor to be      be reached at or
part of the process. It enables the wan-      circumspect, to consider how much time          631-738-0047.
nabe factor to get underway relatively        and money it costs them to properly

                                                                                                       cOMMERcIAL FAcTOR | SUMMER 2008    41
                                                FACTOR                                                                    By Clint Carter

                                              What Is a document?
                                              Why Should You Care?

         et’s start with defining a document. The Merriam-Webster         record of a transaction have changed as technology has been em-
         dictionary defines it as “an original or official paper relied   braced and encouraged.
         on as the basis, proof, or support of something.” This is        The federal Electronic Signatures in Global and National
         a common understanding of the word and a document’s              Commerce (ESIGN) Act was passed in 2000 to facilitate the use
legal nature. We will discuss these legal aspects, but for a moment       of electronic documents and signatures in foreign and interstate
I want to focus on how technology has changed that definition in          commerce and to address the electronic retention of contracts
some very interesting and extremely powerful ways.                        and records. For intrastate transactions, the Uniform Electronics
A document is “a writing conveying information” (Merriam-                 Transaction Act (UTEA) has been passed by 48 states (excludes
Webster; emphasis mine). It is a “record or capturing of some             Georgia and Washington), the District of Columbia, Puerto
event or thing so that the information will not be lost. Usually,         Rico, and the U.S. Virgin Islands, providing consistency to state
a document is written, but a document can also be made with               laws regarding electronic documents and signatures and elec-
pictures and sound” ( So, a document is more than             tronic records retention. The key aspect of the state and federal
the printed word -- more than a piece of paper. It is any type of         acts is the affirmation that an electronic document is as enforce-
recording that communicates information or data. Let’s compare            able as the original if the electronic version accurately reflects the
that to the definition of the word medium as “any tool used to            information contained in the document and can be accurately
store and deliver information or data” ( A docu-           reproduced later.
ment serves as the medium or transport for communicating the              For most business documents, including contracts, invoices, and
information or data contained within the document.                        checks, electronic storage of the document retains the document’s
So let’s test that theory with an example. Your client submits an         status as a legal document as valid as the original. You should
invoice to the debtor for the provided products/services. If the          consult your legal counsel on how these and other federal and
debtor shreds the invoice, the debt transaction (the debt owed to         state laws may apply for your situation.
you!) – the information – still exists. The means of conveying that
information (the document) does not matter.                               What Is So Great about Electronic
Why Should You Care? Freedom of                                           Now we can take advantage of the benefits of using electronic
Expression!                                                               documents.
Since a document is NOT the information or data it contains, we           Access sPeeD. Paper documents are typically stored in filing
are free to change HOW the information is stored without chang-           cabinets. Filing the documents is fairly straightforward. However,
ing the information! While paper is still an important means of           it is not always easy to find the document quickly or easily out-
communication, we can take advantage of other types of docu-              side of its stored sort order.
ments and storage methods. We can choose how we store and                 Storing the documents electronically provides faster access to the
retrieve that information. Electronic documents such as scanned           information directly from your desktop. Faster access means bet-
paper (TIF, JPG, or PDF), Word or Excel files, e-mail, audio, vid-        ter customer service to your client on the phone. You can link
eo, or other electronic file formats are just as valid as a piece of      the data in your applications with the electronic documents, al-
paper as long as they communicate the same information. Even
                                                                                                                             Continued on page 44
a record in an application (e.g. an invoice transaction stored in
your factoring software) can be considered a document.
So, why do we care? Now we can CHOOSE the best way to
                                                                            ABOUT THE AUTHOR
store and access information and data to take advantage of the
medium (the means of communication), optimize access and stor-                                  Clint Carter is President of Advanced Data
                                                                                                Spectrum, a leading provider of data and
age, and even provide us with additional benefits that are cost                                 document management solutions for over
prohibitive with traditional paper documents.                                                   15 years. Clint has been providing technology
                                                                                                solutions for the insurance and financial
But I Need the Document for Legal Reasons                                                       industries for over 18 years. He can be reached
                                                                                                at or
While a paper original is a long-accepted means of proving a                                    214-495-7387.
transaction, the laws and standards for what constitutes a legal

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Continued from page 31                                                    Continued from page 42

Lori Gustaf                                                               lowing you to quickly search and retrieve documents by
                                                                          invoice number, date range, or debtor to find specific in-
Assist Financial Services, Inc.                                           voices and even e-mail them to your client. secURITy
Madison, SD                                                               AnD InfoRMATIon shARIng. With paper documents,
Lori has served as Co-Founder, Vice President and Director of             anyone who has access to a filing cabinet has access to all
Operations for Assist Financial Services, Inc. (AFS) and its affiliate,   of the documents in that cabinet. Your employee may need
                                                                          access to the invoices to enter the information into your
Continental Transportation Services, Inc. (CTS) since its inception
                                                                          factoring software or to answer a customer service ques-
in 1998. AFS specializes in factoring the small to mid-sized carrier
                                                                          tion from your client, but should they also have access to
market while CTS provides a wide variety of additional motor carrier
                                                                          your client’s contract or their personal credit information?
services. Lori has over 20 years of experience within the transpor-
                                                                          Storing documents electronically allows you to restrict
tation industry. During her career, she has also worked in Carrier
                                                                          access to only those documents your employee has a
Compliance, Safety and Administration. She led administrative op-         need to view and use by document type (e.g. invoices
erations for a successful trucking company, and helped develop and        versus credit documents), by client, or by other docu-
manage a freight brokerage company.                                       ment data. You can also restrict access by business pro-
                                                                          cess (e.g. allowing data entry staff access to schedules
Richard Karch                                                             and invoices only during the entry of the data into your
Liberty Capital Funding, LLC                                              factoring system). Additionally, you can share electronic
Huntington Beach, CA                                                      documents with external users. Clients can access their
                                                                          relevant documents to find the answers to their ques-
Richard L. Karch has been in the factoring and asset based lending
                                                                          tions, providing additional customer service.
industries for 14 years. He received a bachelor’s degree in finance
                                                                          DIsAsTeR RecoveRy. In order to protect paper docu-
from Cal-State Fullerton while employed in law enforcement and was
                                                                          ments from fire or other loss, copies must be made, stored
subsequently employed as VP of Administration and Legal Affairs at        offsite, and kept in an ordered fashion in case the docu-
Pleion Corporation working with CIT and Concord Growth. He later          ments need to be recovered — a cost prohibitive endeavor.
headed up factoring at The RJL Group and currently is the manager         Electronic documents are much easier and cheaper to
of Operations and Underwriting at Liberty Capital Funding, LLC,           backup and store offsite. Additionally, they are much eas-
formerly GM Funding, LLC.                                                 ier and faster to restore and return to normal operations.
                                                                          sTReAMlIneD PRocesses. Paper processes, by their
Lisa Mazon                                                                nature must be performed one after another. Documents
Mazon Associates, Inc.                                                    are distributed to the appropriate staff to be worked.
Irving, TX                                                                Losing a document is more likely as the document must
                                                                          pass from person to person and desk to desk. Electronic
Lisa was six years old when her parents started their factoring com-
                                                                          documents are stored safely in a centralized repository
pany. Growing up in a family business, Lisa and her sister, Shelley,
                                                                          and can be automatically routed to the appropriate staff
often were called upon to help with many aspects of the family            to be worked. Additionally, the document can be tracked
business. After attending Baylor University and earning a B.B.A. in       and managed through the processes, allowing you to bet-
Entrepreneurship and Management in 1993, Lisa officially began            ter manage the process and the people.
her factoring career by learning the operations side of their business    socIAl AnD fIscAl ResPonsIbIlITy. Being socially
and now leads her company’s sales department. She is passionate           responsible (“green”) also is financially beneficial. You
about the factoring industry and loves to help grow businesses. Lisa      can save on printing costs (paper, ink) and save trees and
is a consummate volunteer that lends a hand to the Irving Schools         reduce ozone (printers). You can save on mailing/shipping
Foundation, Irving Symphony Board, Baylor Healthcare in Irving,           costs (envelopes, postage, shipping fees, mailroom costs)
Social Advisor to Alpha Delta Pi Sorority-Baylor University and           and improve air quality (shipping trucks and airplanes).
teaches sixth-grade Sunday School.
                                                                          The Bottom Line
Michael Miller                                                            So, we know that a document is simply the medium
Maple Trade Finance, Inc.                                                 through which information and data is conveyed. We
                                                                          have addressed the question of electronic documents as
Halifax, NS, Canada
                                                                          valid legal documents. And, we have reviewed many of
Michael Miller is a results oriented professional with 30 years of        the benefits of using electronic documents. Some of you
marketing, sales, and senior management experience in a variety of        are still saying “so what?”
business sectors. Mike entered the financial services industry in 2001    Well, all of the aspects we have discussed above increase
as co-founder of Maple Trade Finance Inc., one of Canada’s fastest        your staff productivity and decrease your costs. Often,
growing financial services companies. MTF provides innovative cash        you can see a return on your investment in using electron-
flow solutions to Canadian businesses from coast to coast with offices    ic document technologies with resulting productivity im-
in 5 major cities. Mike also served Canada for 12 years as an officer     provements decreasing required staffing. Doing more with
in the Canadian Armed Forces Reserve. n                                   less, increasing customer service, decreasing costs, increas-
                                                                          ing profitability — isn’t that what all businesses want?
                                                                          THAT is why you should care. n

  3i Infotech .............................................................................................18   Hartsko Financial Services.............................................................27
  Bayside Business Solutions, Inc. ...................................................15                        Health Capital Investors...............................................Inside Front
  Bibby Financial Services...................................................................11                 International Factoring Association................................... 24, 26
  Boston Financial & Equity..............................................................26                     LSQ Funding ........................................................................................14 40
                                                                                                                Purchase Order Solutions ...............................................................14
  Crossroads Financial .........................................................................19
                                                                                                                Resource Management Partners .................................................45
  FactorFox .............................................................................................36
                                                                                                                Seed Money ........................................................................................ 43
  Factor Source ......................................................................................21
  First Capital .......................................................................................... 7    Textron Financial .............................................................Back Cover
  First Corporate Solutions .............................................Inside Back                            UCC Direct ...........................................................................................22
  Gateway Trade Finance ................................................................. 46                    Wells Fargo Foothill .........................................................................28
  Gulf Coast Bank ................................................................................... 9         William Stucky & Associates........................................................... 5

Are You Prepared?
Continued from page 19

benefit, your funding source could become
a referral source - you can help them work
out of problem relationships.
No one wants to endure economic anxiety
and portfolio stress. In order to survive and
thrive in 2008 and beyond, recessionary
pressures must be addressed immediately
and preemptively. For those who prepare
now, the pain of a recession may give way
to opportunity during this almost certain
economic slowdown. Virtually all busi-
nesses can survive in a thriving economy,
but only the great ones can make it in dif-
ficult times. n

People: Your Most Valuable Asset
Continued from page 21

can accomplish this lofty goal, you will
retain the best people. If you cannot, you
will continue to lose them to work envi-
ronments and opportunities that do foster
that atmosphere. The choice is yours. n

Continued from page 23

Be Diligent in Monitoring
Post-Filing Events
The effect of post-filing events can be se-
vere and can render a properly perfected
secured party unperfected. Documents
should contain provisions prohibiting a
client from changing its location, changing
its name, or merging or otherwise dispos-
ing of all of its assets, without prior writ-
ten notice. Unfortunately, debtors don’t
always follow these covenants and there-
fore the factor should proactively monitor
the status of the client. n

Information provided in this article is gen-
eral information only and not legal advice.
Readers are encouraged to consult an at-
torney for specific legal advice.

                                                                                                                                                                        cOMMERcIAL FAcTOR | SUMMER 2008                    45
Motor Carrier Compliance                       the Freight Brokers are also stating that     practical method for Factor to recover its
                                               receiving the notice of cancellation from     debt. Carrier is able to continue to haul
Continued from page 36
                                               the insurance agent was of no use to them     freight and offer invoices to Factor for a
to the fact that Carrier had no insurance      when the loads were already on trucks or      few months, but the debt is not clearing as
coverage while under the loads. Broker         delivered. Factor then checks the Federal     quickly as Factor anticipated. The weekly
went on to notify Factor that the Broker/      Motor Carrier Safety Administration           volume of freight bill purchases started to
Carrier Agreement specifically states that     (FMCSA) website and finds that the op-        decline without reason. Factor inquires
no payments will be made under those           erating authority had been revoked due to     with Carrier and is told that they have
conditions and that Factor is subject to the   the cancellation of insurance. Factor con-    started to haul freight for Brokers that
terms of Agreement. Factor immediately         tacts Carrier and it is decided that Factor   offer a “quick pay program” and will no
calls each Freight Broker on the account       will assist Carrier in obtaining the funds    longer need the services of Factor. Carrier
to discuss payment status. The majority of     needed to reinstate the insurance and op-     offers to make monthly payments towards
the Freight Brokers are refusing to pay due    erating authority. The attempt to keep        the remaining debt but soon fails to honor
to the cancellation of insurance. Many of      Carrier in business appears to be the only    the promise. Carrier also fails to secure
                                                                                             the necessary funds for the next insurance
                                                                                             premium payment and once again the au-
                                                                                             thority is revoked. Factor makes several
                                                                                             collection attempts but is unable to recov-
                                                                                             er without costly litigation.
                                                                                             Loss Prevention Techniques: If the Freight
                                                                                             Broker monitors the Motor Carrier num-
                                                                                             ber of each Carrier, they can choose to be
                                                                                             automatically alerted as to the pending
                                                                                             revocation of operating authority that
                                                                                             quickly follows the insurance cancelling.
                                                                                             The FMCSA website tracks the expira-
                                                                                             tion date (if applicable) of each Carrier’s
                                                                                             insurance policy. The FMCSA will post a
                                                                                             “pending revocation” notice 30 days prior
                                                                                             to the policy’s expiration date. This prac-
                                                                                             tice often ends up being a false alarm as
                                                                                             the Carrier intends on renewing the insur-
                                                                                             ance, but will wait to pay the premium un-
                                                                                             til the policy is closer to expiration. If the
                                                                                             Carrier is within the thirty day window,
                                                                                             the Broker may continue to contract with
                                                                                             the Carrier while watching for the insur-
                                                                                             ance to renew or cancel.
                                                                                             If the Factor monitors the Motor Carrier
                                                                                             number of each Client thus receiving no-
                                                                                             tice to cancelling insurance policies and/or
                                                                                             pending operating authority revocation,
                                                                                             the Factor can alert the Carrier and hope-
                                                                                             fully help them to avoid an “unexpected”
                                                                                             lapse or cancellation of coverage. By
                                                                                             knowing the exact term of the insurance
                                                                                             coverage, the Factor can avoid purchasing
                                                                                             invoices from the Carrier that may not be
                                                                                             paid and also avoid the offset that may
                                                                                             happen on invoices that were purchased
                                                                                             prior to the cancellation.
                                                                                             Each Factor must decide the amount of
                                                                                             resources they are willing to either invest
                                                                                             in house or in outsourcing the monitoring
                                                                                             of their Clients. The best business practice
                                                                                             varies from shop to shop but most Factors
                                                                                             will agree that some type of Carrier com-
                                                                                             pliance monitoring is critical in making
                                                                                             not only purchasing decisions but in help-
                                                                                             ing to avoid losses as well. n


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