Too much stress in your business?
Gift & Decorative Accessories Magazine
July 2014 issue
Deco Breeze tells GDA how Rosenthal & Rosenthal has become an invaluable financial partner. Learn how their factoring services have helped their friends at Deco Breeze concentrate on what matters in their business.
GDA: Historically your industry has had minimal dealings with traditional factors. How did you get acquainted with factoring?
Punit: My background was in the apparel industry where everybody uses a factor. When we started we knew we needed a factor behind us to drive our growth.
GDA: How does a factor augment your growth?
Jeff: Speaking from the sales side, we use Rosenthal to make sure our customers are credit worthy and our collection efforts are professionally managed. Generating sales in today’s economy is tough enough and you don’t want a bad debt to ruin an otherwise strong year. They have more manpower and resources to investigate the customers. Typically our customers may be reluctant to share information with us that they will share freely with them.
Punit: When they approve a customer’s credit they guaranty the fi nancial ability of the customer. If the customer doesn’t pay the factor takes the bad debt. You can sleep at night if you have credit approval.
GDA: But not all customers are approved.
Jeff: Some customers are only partially approved and some are declined completely .But we can make our own decisions as whether to ship them or not, and the receivables remain eligible for borrowing purposes.
Phil: As important, we call them for advice on a new customer-you don’t want to go through the time and expense of servicing a new customer to fi nd out they’re not creditworthy. The advice is invaluable.
Jeff: The customer can build its credit with the factor and have more purchasing power with us and other suppliers. We’d like to see more companies in our industry use a factor. The more dealings the factor has with our customers the more we would all benefi t.
Punit: Furthermore, the factor can play the role of the bad guy. They turn down the customer, not us. The factor becomes a buffer between us and our customer when payments come due and I can rest more easily knowing I’m not pitching a sale simultaneously while calling for money.
GDA: In addition the factor handles your cash application processes. Don’t you feel like you lose control over your customers if the factor has all the contact?
Punit: We have control where we want it, on the sales side. They relieve us of the functions that we as entrepreneurs don’t want to handle. We use their personnel who are more experienced and knowledgeable than anybody we could ever hire. All of the fi xed costs become variable costs that reduce as you grow.
GDA: Some companies only use the services described but you use factoring for financing as well.
Punit: We borrow against our receivables and inventory with specifi c formulas for each and have the ability to exceed those formulas for seasonal needs.
GDA: They helped you make an acquisition. How?
Punit: We were buying a company of similar size that would enable us to double our sales and diversify. They financed the purchased assets and provided additional funding to get us through the initial period when we had to restore a damaged supplier base. They understood the benefi ts of the deal and gave us a quick approval.
GDA: Couldn’t you do this with a traditional lender?
Punit: No way! They are privately owned and the decision process is fl exible and fast. In our business whether we are making an acquisition or seeing a surge in business, we have to react quickly. A bank moves too slowly.
Phil: They touch our business daily through receivable management. They know how strong our customers are and how our accounts perform. They’re living our business and are more comfortable taking a risk. They understand seasonality, which many businesses in our industry battle with. Many lenders are uncomfortable stretching formulas during your busy season. Rosenthal works with you not against you.
GDA: Aren’t the costs prohibitive?
Punit: That’s a gross misconception in our industry. Many of the factors are expensive. But Rosenthal plays in a different market, competing in New York against major players in the middle market arena.
Jeff: The rate for the outsourced services are more than offset by savings on our side and we get credit coverage as well. At worst it’s a wash and we’re probably well ahead when added up.
Punit: Interest rates for borrowing are competitive with banks without all the fringe costs like audit fees, facility fees, and unused line fees. Getting delayed in a bank approval process can cost you signifi cantly in lost sales or supply side costs due to cash fl ow strains while you wait for approvals.
GDA: One last question –why Rosenthal and Rosenthal?
Punit: Rosenthal is 75 years in business and family owned throughout. They know the market inside out and deal with numerous clients who share our same concerns. They anticipate the rough patches often before we do and their insights are invaluable. They are a great partner to have.