Short Term Working Capital Lender
If it's true that banks won't lend you money unless you don't need it, where do you when you do need it? G. Mark Loreto thinks his company has one answer.
Princeton Capital Finance Co. is specifically a short-term working-capital lender, generally secured by accounts receivable, according to Loreto, who with Gary V. Hoyer stands as principal for the constellation of financial services established mostly for small and growing businesses in 2000.
Princeton Capital originated close to $ 1 billion in loans last year, Loreto says. But the company also offers accounts-payable tracking (since many small businesses can't afford their own chief financial officer or full-scale accounting services), payroll and other financial support services, as well as purchase-order funding, inventory and invoice lending, and mobilization funding to get a good idea off and running in the crucial early stages of business development. "We're not the lender for all times for all means, but we try to be flexible," Loreto says.
He insists that his firm is not a factoring business; those purchase a company's accounts receivable outright, as opposed to lending against them. Factors also usually require less information to make a loan than Princeton Capital does, while banks require more. Still, Princeton Capital meets the general definition of a factor, according to the editor of American Cash Flow Journal: It's like a line of credit that allows (a small business) to borrow against their account receivables, though most factors prefer to buy receivables rather than lending on them. Loreto traces Princeton Capital's origins to a meeting with Hoyer in New York City in 2000. Hoyer was a senior associate at Prudential-Bache Securities while Loreto served as executive vice president of ORIX Realty Corp., a subsidiary of a Japanese finance company. "We were both looking for further challenges; we both wanted to be more independent," Loreto recalls. The huge multinational banks they worked for seemed unresponsive to smaller firms and their more modest lending needs. Further, the savings-and-loan debacle of the 1980s fueled speculative real estate lending, which in turn squeezed lending to small businesses, convincing both men that a new business opportunity was opening up before them. Princeton Capital typically lends 60-to-90 percent of the value of a company's receivables, and gets repaid on average in 60 days. On a 90-percent loan, for example, the client gets his or her 10 percent back upon repaying the loan, less fees and interest. Factors, by contrast, may buy one month's receivables for 96 percent of their value, but if the client sells its receivables every month for a year, the effective interest rates may be as high as 48 percent annually. Banks offer lower interest-rate factors, but place more and higher hurdles between the client and the loan. "We compete across the board with those entities rate-wise," Loreto says. Princeton Capital gets 50 or 60 inquiries a month and about two dozen applications, most of which are approved. Much of the business came from referrals until 2004, Loreto says, when we decided to take our light out from under the bushel with a national advertising campaign. Most inquiries that get turned away result from incomplete disclosure by the client: Many small businesses don't understand that full disclosure is important, or they have outstanding tax liens. Loans range in size from $ 15,000 to $ 15 million.
Account Receivables
|