The Difference Between A Commodity Lender And A Value Add Lender

Blog articles discussing factoring companies, factoring loans, invoice factoring and all things related.

There was a time when our clients viewed factoring companies and purchase order finance companies as “too expensive.” In recent times, we are noticing the value of these lenders’ services finally being recognized and the old stigmas of the past slowly fading. Our clients are viewing their factoring company partner as just that, a partner, that is facilitating their business growth without requiring equity in their company.

When you are in search of a mortgage to refinance or purchase a home, you are looking for the lowest rate. This is because the mortgage business is a commodity business and the large players in this space are competing primarily on rate. Note: I am referring here to the traditional, straight forward refinance or purchase for a buyer with good credit searching the market. I realize there are specialty lenders out there that structure bridge loans and provide funding for difficult property types and credit stories – they are a different story and bring value similar to factoring and purchase order companies.

Conversely, when it comes to business funding requests that fall outside of the traditional lender’s strike zone (i.e. funding progress payments, healthcare accounts receivable financing, inventory financing, companies experiencing losses, etc) the market is more aligned with the entrepreneurial lenders out there that will take a bigger risk in return for a higher return.

In a recent example, we assisted a client of ours in a turn around mode. The company was struggling with which direction to take the company. Instead of working together on a solution to take the business forward, each side dug in and refused to alter their plan for what they thought was right. Each side had strong wills and big egos which eventually led to the failure of the business.

Seeing that the company had a strong following and brand recognition, an investment firm came in and provided the capital to get the business back on track. Once all the piling financial obligations had been settled, the company needed a working capital line of credit to grow the business effectively. Because the company was owned over 90% by an investment group, a personal guarantee was not available. This ruled out the traditional funding sources which require a guaranty from the owners in the business.

Here is where Huntington Coast Capital was able to bring value. Our affiliate lenders do not focus on the current financial condition of the business, but rather the potential the company has. If there is market demand, purchase orders and existing sales, you have enough to qualify. We were able to connect them with the right purchase order financing company and factoring company to help them realize their potential. They are now able to put the past behind them and focus on the company’s growth without worrying about the restrictive requirements that would be placed on them with traditional lenders.

If your business could benefit from partnering with an entrepreneurial lender, we would like to speak with you.

To your success!

Patrick Zazueta | Founder
Huntington Coast Capital, Inc.