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A Publication of The International Factoring AssociationJuly/August 2013 VOL 15/ No. 4NICHEFACTORINGALSO INSIDE:Factoring Construction Receivables: Is It Right For You?When it Comes to Factoring, Carefully Choose Your IndustriesExport Factoring: Constrained Cash Flow & Credit RiskUnderstanding RA9
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July/August 2013 VOL 15 / No. 4Factoring Construction Receivables:Is It Right For You?By Bruce Loren, Esq.Finding Your Niche: When it Comes to Factoring,Carefully Choose Your IndustriesBy Larry HolsteinExport Factoring or Letters of CreditBy John StillwaggonWhat’s New at IFAUnderstanding ra9Q&A with Dan LiasAdvance Funds Network Provides FlexibleFactoring Options for Small BusinessesBy Douglas Haddadcolumnssales and marketing It All Comes Down To OneSimple Thing By Thomas G. SiskaIFA members making a difference diana cloverlegal factor Did You Forget to Do Somethingon July 1?By John A. Beckstead, Esq.small ticket factor Predictable SchmaltzBy Jeff CallenderADVERTISER INDEXAccord Financial. 28Bayside Business Solutions, Inc. 6BCR Publishing. 25Capital Plus. 13Capital Software. 14Chameleon Catcher. 19D&S Factors. 13FactorFox. 31First Corporate Solutions. 32Gateway. 11Gibraltar Business Capital. 15Health Capital Investors. 2International Factoring Association.14 & 16Platinum Partners. 5RMP Capital Corp. 18RMP Trade Credit. 8TAB Bank. 9Utica LeaseCo. 15The Commercial Factor July/August 2013 3
from the executive directorThe InternationalFactoring Association6627 Bay Laurel Place, Ste CAvila Beach, CA 93424MAILING: PO Box 39Avila Beach, CA 93424-0039800-563-1895We’ve moved!Executive DirectorBert GoldbergPublished ByThe International Factoring AssociationThe IFA recently moved to a new office that is wheelchair accessible. Weare really excited about our new location as it is larger and affords us moreopportunities for growth. More importantly to me is that this location allowsme to get back into the office. Working from home is OK, but working froman office is much better.Editor/Design & GraphicsR&W Publishing Associates, Chelsea Kirtleychelsea@rw-assoc.com 727-450-9870The IFA just completed the first ever meeting for Women in CommercialFinance. Moderated by Robyn Barrett, Gail Reints and Laurie Montplaisir,Esq. this meeting was such a resounding success, it is now something that wewill start conducting on a regular basis.Advisory BoardWe have some excellent meetings coming up this Fall, including the firstever mini-conference for transportation factors. To be held at the Hyatt inMilwaukee on September 11 -12, this event will feature two sessions specifically for transportation factors. The Transportation roundtable is designed forthose that have been involved in the transportation sector and wish to discussmore advanced topics with their peers. The AE/LO Transportation Trainingis designed for those that are newer to the transportation niche. Attendees ofboth sessions will meet together during the social events (receptions, exhibithall, lunch breaks and group dinner). If you are involved in the transportationsector or wish to be, this event is for you.Also coming up this Fall is our Advanced Factoring Symposium. This meeting/ training course has been designed for experienced factors who wish to discussmore advanced factoring issues. Also in the Fall will be the ever popular Salesand Marketing training course for factors. This course delves into specificinformation on how to sell and market factoring. Whether you are new tofactoring or an experienced sales professional, this is an excellent way toenhance your sales and marketing skills. Information on all of our upcomingtraining courses can be found on page 23.Finally, I’d like to give you a quick update on my progress. My wound hasfinally closed, which has allowed me to begin physical therapy. I’ve been ableto attend a couple of sessions where they are working with me to determine ifthere is enough movement and strength in my legs for me to get vertical andtake some steps. We’ll see how that progresses. It’s a great feeling being ableto get around on my own.Thanks again for your support and I look forward to seeing you at anupcoming IFA event.Advertising SalesR&W Publishing Associateslisarafter@rw-assoc.comTina CapobiancoVice President of JD FactorsDiana CloverPresident of D&S FactorsRichard HallGeneral Manager of Factor LOGROSde Ecuador S.A.Steve HausmanPresident of Advance Business CapitalMarc MarinManaging Director of Gateway CommercialFinance, LLCAndy OsbornSenior Vice President of Summit Financial ResourcesJulie RegenoldPresident of TradeGate Finance, Inc.Stuart RosenthalExecutive Vice President of Prestige Capital CorporationThe International Factoring Association’s (IFA) goalis to assist the factoring community by providinginformation, training, purchasing power and a resource for factors. The IFA provides a way for commercial factors to get together and discuss a varietyof issues and concerns about the industry. Membership is open to all banks and finance companies thatperform financing through the purchase of invoicesor other types of accounts receivable.The Commercial Factor is published bi-monthlyby the International Factoring Association. To subscribe, please email info@factoring.org.The Commercial Factor magazine invites the submission of articles and news of interest to the factoringindustry. For more information on submittingarticles or advertisements, email info@factoring.org, or call 800-563-1895.4 The Commercial Factor July/August 2013The views expressed in the Commercial Factor arethose of the authors and do not necessarily represent the views of, and should not be attributed to,the International Factoring Association.
PERSONNELTJ Gill Joins TAB Bank’s BusinessDevelopment TeamTJ will be based in Orlando, FL and willbe responsible for sourcing new businessopportunities by providing asset-basedand factoring working capital facilitiesto commercial entities with annualrevenues of 2 million to 150 million.Entrepreneur Growth Capital HiresCraig CastleCraig Castle began his financial careeras a senior business banker with FleetBank, which was acquired by Bank ofAmerica. He was also a vice presidentwith well-known banking institutionssuch as the Royal Bank of Canada andmore recently Sterling National bank.INDUSTRY TRANSACTIONSPhoenix Capital Group’s June DealsPhoenix Capital Group funded eightnew clients in the transportationindustry with total credit facilities of 1.675 million.Vertex Financial Provides FactoringLines to Eight New CompaniesThese companies vary from subcontractors with progressive billing totemporary staffing agencies. The largestof these transactions is a steel erector inNew York. Vertex provided a 2 millionfacility to facilitate their growth.Loeb Term Solutions ProvidesEquipment Term LoansWith equipment valued at: over 550,000 to a high end cateringcompany specializing in healthy foodalternatives over 1.4 Million to a manufacturerof wind turbine towersAlleon Capital Partners Closes aMedical A/R Financing FacilityThe medical provider sought fundingto expand services for the existingfacility and to pay off a maturing loan.Liquid Capital Recent TransactionsHighlights include: 400,000 - North Dakota ready mixconcrete and materials distribution 500,000 - Ontario medical equipment distributor 850,000 - Texas packaging systemsdesigner and distributor 1,000,000 - Ontario call centerservices 2,500,000 - Arizona air craftrebuilderUtica Leaseco Relies on Equipmentas Collateral in Recently CompletedSale/Leasebacks 1.45 million for a Texas headquartered rock crushing and aggregateprocessing company 4.125 million for an Alabama headquartered steel stud manufacturing andsteel processing company 2.2 million for a Utah headquartered pipeline installation andfabricating company 725,000 for a Michigan headquartered CNC Machining companySix Deals Closed by Gateway TradeFunding 1,000,000 facility for importer ofpet related products selling to largeretailers 1,000,000 facility for importer ofartwork and frames selling to retailersin Canada 1,000,000 facility for wine manufacturer selling to distributors 1,000,000 facility for importer ofpropane tanks for marine usage tolarge OEMSThe Commercial Factor July/August 2013 5
news 1,000,000 facility for paperconverter selling to distributors 2,000,000 facility for manufacturerof diabetes test strips to large corporations and government entities in CanadaTAB Bank Provides Electro Brandwith a 3 Million Revolving CreditFacilityThe new agreement is based onaccounts receivable and has beenextended through a multiyear agreement. Electro Brand is an importerand distributor of consumer electronicproducts.OTHER INDUSTRY NEWSInvoice Factoring Company ReLaunches Staffing FactoringProgramStaffing company owners can nowbenefit from Charter Capital’s staffinginvoice factoring program. Thisfactoring program was created toaddress the growth in staffing andtemporary employment companies.D&S Factors Celebrated OneMillionth Invoice in JunePresident and owner, Diana Clover,chose to honor the D&S teammembers for their great achievementwith a celebration that included ascavenger hunt to several locallyowned businesses in the area, games,and dinner for the employees.Advance Business Capital ExpandsServices With Fuel AdvanceProgramThe fuel advance program joins ABC’srange of services, including creditchecks, collections, freight insurance,load board access, back office services,and factoring.Factoring Business Tipping 1Billion in PanamaThe factoring business in Panama isgrowing at a rate of 10% -20% andreaching up to 1 billion a year. Thefinancing mechanism is controlled by24 companies, mostly banks says areport in PanamaAmerica.com.Weather Forensics Leader DWSIntroduces First-Ever InsuranceClaims Factoring ServiceDynamic Weather Solutions (DWS),a provider in weather forensics for theinsurance and construction industries, hascreated a new service. DWS has secured 100 million in funds to spearhead theirentry into the first-ever factoring serviceinvolving insurance claims.Bayside Business Solutions,Inc. Announces Two StrategicPartnershipsBayside Business Solutions, Inc. partnered with Finsoft, LLC to develop anintegrated data-reading tool, and withGrizella, LLC to develop a SaferWatchinterface for Bayside’s flagship product,CADENCE.TBS Factoring Services LaunchesSaturday Fuel Advances andPartners with GetloadedTBS is expanding its fuel advanceprogram to six days a week, includingSaturdays. Truckers and truckingcompanies no longer have to be in abind over a weekend due to a lack offunds for fuel. TBS will advance up to50 percent toward the purchase of fuelon any load it factors. 6 The Commercial Factor July/August 2013
Niche FactoringFactoring ConstructionReceivables: Is It Right For You?The construction industry is coming back. It is a great time to think aboutfactoring construction receivables. But first, you must master the unique and strictrequirements of construction law. BY Bruce Loren, ESQ.The construction industry is coming back. Publicand private projects are being bid in greaternumbers, architects and engineers are busier,and contractors in every trade are beginning tohire new employees. But bank credit lines aremore difficult to obtain and contractors do nothave the resources to advance material and laborcosts and wait for their profit at the end of theproject. It is a great time to think about factoringconstruction receivables. But first, you as theFactor must master the unique and strict requirements of construction law. In other words, youneed to know as much (if not more) than yourcontractor client.What are the advantages to factoringconstruction receivables?If done correctly, factoring constructionreceivables gives the Factor another layer of security to collect the monies that it has advanced. Ina typical factoring relationship, the Factor canpursue the Account Debtor for payment, or undercertain circumstances, can pursue the Client. Thisis usually based upon the Uniform CommercialCode and breach of contract theories. However,the Factor may not be able to obtain reimbursement of its attorneys’ fees from an AccountDebtor.In addition to these rights, the Factor of construction receivables has much greater rights againstthe Account Debtor – secured rights. If theapplicable state or federal rules and time requirements are followed, the Factor (on behalf of itsClient) will have a construction lien against theproperty (or lease) where the construction workis located or will have a claim against a bondingThe Commercial Factor July/August 2013 7
company for collection. Under the lienor the bond, the Factor also has a rightto reimbursement of attorneys’ fees ifit prevails.Does factoring constructionreceivables require more duediligence by the Factor?This is the greatest burden facing theFactor. The Factor must commit to agreater level of due diligence beforeaccepting the Client, before eachfunding and even general monitoringof the construction projects. TheFactor must understand and ensurecompliance with all of the strictdeadlines to protect the Client’s (i.e.,the Factor’s) lien and bond rights.Because the Account Debtor (i.e.,the General Contractor) has manydifferent contract rights to withholdand set-off payment, the Factor mustconduct a detailed evaluation ofthe Client’s expertise. For example,you must know the Client’s subsubcontractors and suppliers andmake sure these parties are paid andprovide construction releases. If not,these sub-subcontractors and suppliershave the right to seek payment directlyagainst the Account Debtor, resultingin a set-off against the money owed tothe Factor.In essence, the Factor must have theconfidence that the Client has the skillsto perform the construction work. Butalso, the Client must have the sophistication and administrative support toprotect its lien and bond rights, obtainreleases from all sub-subcontractorsand suppliers, comply with federaland state labor laws and give timelynotices under its contract with theAccount Debtor. The Client’s inabilityto comply with all of these items mayresult in a claim against the AccountDebtor by a third party and a set-offagainst the money owed to the Factor.“The Factormust commit toa greater levelof due diligencebefore acceptingthe Client, beforeeach fundingand even generalmonitoring ofthe constructionprojects.”What are some other examples ofadditional due diligence that the Factorshould be conducting on the Client?Has the Client been the defendant inprior litigations? Specifically, has theClient been sued for not paying itssub-subcontractors and suppliers eventhough the Client has been paid? Hasthe Client been sued for defective workor delayed work? This information is agood indicator of your Client’s futureability to perform the constructioncontract.On prior projects, has the Client beenterminated for cause or had delayliquidated damages imposed uponit? Again, this information is a good8 The Commercial Factor July/August 2013
indication of whether the generalcontractor will withhold or set-offpayments due to the Client/Factor.the federal government, the Client mustbe familiar with federal law regardingbonds and construction regulationsDoes the Client have all requiredlicenses? In many states, theContractor-Client is not entitled to anypayment if the license was not active,even if all the work was performed.What are some examples of thestrict requirements to preservethe Factor’s construction lienor bond rights?I am familiar with theUniform Commercial Code.Are there other state orfederal laws that the Factorof construction receivablesmust become familiar with?In most states, there are typicalrequirements that the ContractorClient must timely perform to preserveits lien or bond rights. The Factor, totake advantage of the extra “security”for payment, must make sure that theClient has complied.For each private construction project(i.e., not involving a governmentalentity), the Factor must become familiarwith the construction/mechanic’s lienlaw and bond law of the state wherethe project is located. While most stateshave similar concepts, each state hasdifferent notice and recording deadlinesand other rights. For state or localpublic construction projects, the Factormust become familiar with the state andlocal laws and regulations governingconstruction of public or publiclyfunded projects. Last, if the project is forFor example, in Florida, the Clientmust serve (certified, return receiptmail) a “Notice to Owner/Notice ofIntent to Rely Upon Bond” on thegeneral contractor, owner, bondingcompany and any other entity namedin the Notice of Commencement.This Notice must be received any timebefore the Client’s work begins, but nolater than 45 days after the first day ofwork. If this Notice is not received byall parties within the 45 day deadline,the Client forever loses it lien rights (orbond rights, if applicable), and so doesthe Factor.Most states also require that theClient perfect its lien or bond rights byrecording a construction lien againstthe property or giving notice to thebond company and other requiredparties. The lien must be recorded orthe notice received within 90 days fromthe last day of the Client’s substantivework on the Project. Again, one daylate and you have waived the extrasecurity that makes factoring construction receivables so advantageous. Bruce Loren, Esq.and the Loren LawFirm are based inWest Palm Beach,Florida. For overtwenty years, Mr.Loren has focusedhis practice onconstruction law and factoring law.Mr. Loren has achieved the title of“Certified in Construction Law” bythe Florida Bar. He can be reachedat bloren@lorenlawfirm.com or561-615-5701.The Commercial Factor July/August 2013 9
sales and marketingBY Thomas G. SiskaIt All Comes Down ToOne Simple Thing Somewhere in the Northern half ofMinnesota, a single drop of water failsto evaporate and pools with otherdrops, ultimately forming a stream.This stream is joined by others thatalso started with one drop of water,until it becomes big enough to becalled a river—the mighty MississippiRiver. One of the largest and strongestrivers in the world starts with nothingmore than a tiny drop of water. Thehuman body, a far more complicatedsystem than a river, also starts fromthe combination of two single cells.Everything has to start from something. Even our universe is fabled tooriginate from a single Big Bang.Successfully funding a deal, whileclearly not as complicated as any of theaforementioned subjects, is still a lotmore involved than any of us wouldprefer. And not only is it difficult,but there’s usually a little bit of luckneeded along the way, as well. Woundthrough the tapestry of informationgathering, due diligence investigationand document negotiation, there isa single thread that keeps this wholepiece of artwork from completelyunraveling. It is this simple, singlething called “need”.The Difference BetweenWants and NeedsBefore we delve deep into what truly“Wound through thetapestry of informationgathering, due diligenceinvestigation anddocument negotiation,there is a sing
and factoring. Factoring Business Tipping 1 Billion in Panama The factoring business in Panama is growing at a rate of 10% -20% and reaching up to 1 billion a year. The financing mechanism is controlled by 24 companies, mostly banks says a report in PanamaAmerica.com. Weather Forensics Leader DWS Introduces First-Ever Insurance
