CFA Entrepreneurial Finance and Factoring Conference - The Value of Collaboration

By Toby Dahm, Senior Vice President, Hennessey Capital

I have just returned from the Commercial Finance Association’s annual Entrepreneurial Finance and Factoring Conference.  This is an event where specialty lenders that serve the smaller part of the financing spectrum come together to share ideas, build new relationships and cultivate existing ones.  Each year I get more out of it.  This year I came back with a particularly strong sense that the relationships I forged and the ideas that we shared as a group will play a big role in the growth and strengthening of Hennessey Capital.

In a word, the key to the value of the conference is collaboration.  Although many of us may compete, there is a feeling that we are on a common mission.  We fill various financing niches.  Each one of us meets a need, many of which are underserved.  In order to be successful, we all must understand and manage risk wisely, while creating prosperity for our clients and our firms.

I met a number of people whose firms complement what we do.  By partnering with other specialists, such as purchase order lenders, or export finance firms, we will be able to meet a much broader financing need than any of our individual firms could do.  In addition, I met numerous niche lenders that may not complement what we do, but who can meet financing needs that we cannot and thus become a valuable business resource.  We call the concept of building our network and using it to the benefit of clients and associates “network capital”.  This conference provides a great opportunity to expand our network capital.

The key to having this collaboration work is the attitude of being on a common mission.  There is a strong need for what we collectively do and there is enough business for all of us to prosper if we continue to improve as a group.  The pie is not finite.  If we grow the pie, we all eat more.

I look forward to continuing some of the initiatives that we started at the conference and building on the relationships formed.  Most of all, I look forward to coming together as a group again in November.  This is definitely a group where one plus one is more than two.

Accessing Capital When Traditional Credit is Constrained

By Mike Semanco, President, Hennessey Capital

What is a borrower to do?  Although the traditional credit market is showing signs of life, businesses are still facing a challenging credit market.  Hard asset (equipment and real estate) collateral values have dropped dramatically so refinancing of loans requires more cash in each deal.  Younger companies still require a track record, typically 2 years, to qualify for traditional lending.  Because of constrained credit conditions, companies have to think outside the traditional box to finance their business. 

 

In our business, we have seen companies negotiate preferred payment terms with their customers.  Down payments, progress payments and shortened A/R terms are being pursued as viable alternatives.  Companies who have normally written off the notion of factoring receivables are now using it as a standalone financing product or using it in addition to current bank lines to fund incremental growth.  ABL lines of credit are now more mainstream since most ABL lenders are focused on collateral and not solely on cash flow. 

 

In addition to working capital alternatives, companies are looking at micro loan programs and seed funds to help with growth financing.  These loans are usually under $50,000 but can make a difference to a young, growing business.  State funded programs are constrained with lack of cash but could also be a source for creative financing.  PO Financing for distribution businesses remain a good source of capital but project financing for manufacturing companies is non-existent in the traditional market. 

 

Young companies are traditionally undercapitalized.  In a tightened credit market, this creates more stress when new opportunities become available.  Communication is always the key.  Ask your banker if options exist outside their world.  Do be afraid to ask customers what may be available.  If customers like your product or service, they may be open to concessions.  Ask your professional advisors to make introductions to funding sources.  They should be aware of various options and point you in new directions. 

 

Credit is available.  You may just need to look outside the traditional box to find it.

Commercial Finance Association Conference Recap

By Mike Semanco, President, Hennessey Capital

For those professionals involved with the commercial finance industry, the place to be in mid October this year was at our annual conference in downtown Chicago.  The weather was great and the time spent at Navy Pier for the opening reception was filled with talk about what a difference a year makes in the credit world.

The attendance was up and I am not sure if it was due to the keynote speech by President George W. Bush or that we had a wave of bankers who were in attendance this year who could not make it in 2009 for a whole host of reasons.

One common theme throughout the week was the discussion on how factoring and asset-based lending were the products used by small and midsized businesses to help them get through the credit crunch.  Even with the credit market showing a slight sign of easing, ABL and factoring is still the time tested way for businesses to finance their working capital needs, whether traditional means are available or not. 

Panel discussions included insight on the current state of the debt and equity markets, financing for entrepreneurial lenders, the impact of global economics and technology trends within the commercial finance industry.   It is apparent that credit remains very tight for small and medium sized companies, while there is a lot of money available to large corporations who have a broader choice of borrowing options.  To achieve long term success, lenders must stay disciplined in following their credit and process guidelines.  Technology is playing an increasingly important role in our industry, from marketing to sales management as well as in operational efficiency and customer service. 

An opening session with former President Bush and a lunch session on customer and employee loyalty by James Kane, were highlights to the event.

Everyone at the conference agreed the economy is still fragile.  The lending community is confident the worst is behind us and there will be opportunities to lend companies the money they need in this difficult environment.  There is no question factoring and asset-based lending will remain a critical solution for businesses needing working capital.  I have been in this industry for 17 years, which is a short period of time compared to other seasoned operators.  One thread we all share is the passion to help entrepreneurs obtain the financing they need to grow their business.  The convention provides a fabulous opportunity to renew acquaintances and make new ones.  Sharing stories of successes, challenges, and experiences that we meet along our journeys is what really helps us connect as an industry. What a great industry it is!

Asset-Based Lending Grows in Popularity

An article from this Tuesday’s Wall Street Journal highlights the flexibility  that asset-based lending provides.  Weezabi LLC, the company highlighted in this story, is a prime example of how small businesses can use an asset-based line of credit to say “yes” to new business opportunities. Read the article

Where To Turn When Your Bank Credit Line Shrinks, Part 1: Asset Based Lending

In today’s credit crunch, many business owners are having a tough time finding as many options for needed capital as they once did.  The latest topic of the show is “Where to turn when your bank’s credit line shrinks.” This is part one of two, and covers asset based lending.

During this discussion, our interviewer rejoins Mike Semanco, the president of Hennessey Capital.

In the first part of the show, Mike explains what the credit crunch is, and how it affects your business. Mr. Semanco goes on to explain what asset based lending is, and how it can help business owners. This episode is wrapped up with a discussion on other options for financing, in case asset based financing is not the best option for you. Overall, business owners should hopefully find this discussion very informative and helpful.

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CFA Asset-Based Lending Index Reinforces Important Role of Altenative Lenders

An article released yesterday, “Commercial Finance Association Releases 4th Quarter Asset-Based Lending Index” reinforces the important place asset-based lenders hold in the current economic climate. Alternative sources of lending like factoring and asset-based lending, discussed further in episode #1 of Capital Conversations, is becoming an increasingly viable options for entrepreneurs who are still growing their business in turbulent times. Read the article: http://biz.yahoo.com/prnews/090218/ne72275.html?.v=1