Historians vs. Fortunetellers
While giving a presentation on alternative financing options at the NYNJ Minority Council this summer, my colleague, Lewis Ross, of Chase Bank was asked why banks don’t finance early stage companies with contracts and why firms like Prestige Capital do.
Lewis’ spot on answer; “because banks are historians and factors are fortunetellers!’
What Lewis meant by that, is that banks are required to review financials, and past company performance to determine if a company is qualified to repay a loan.
A factor on the other hand is purchasing receivables which are a reflection of what the business is doing right now, as well as working in conjunction with purchase order companies to actually fill orders for future delivery.
By working with purchase order companies and factors, a company can look to their future, rather than their past to grow their businesses.
Those conversations that we often have with early stage and fast growth companies are exciting as we catch the energy of the entrepreneur who is bringing a product to market; finally receiving the orders that they were seeking and who is now finally speaking to a partner who will help move their business forward.
At Prestige, we have assisted many companies whose products are now household names, in food, beverage, liquor, consumer products, etc.
We are proud of their growth and are pleased to have assisted in providing the first rounds of financing for them.
They are also pleased when they come to understand that it is easier to obtain financing from factors and purchase order finance companies rather than equity and our financing services do not dilute the company’s equity.
That company is then a much better candidate for equity or traditional debt financing when their company has a stronger sales history.
As Lewis Ross and many of his colleagues at Chase know; “Where do you go when the bank says no?” To Prestige of course! Fortunetellers, rather than historians.
Thanks, Lewis, for all your support and for your great tag line!