Pictured: Rosenthal & Rosenthal's Leigh Lones and Paul Schuldiner

Rosenthal & Rosenthal’s recourse factoring division, launched earlier this year, allows the company to look beyond the traditional industries served by non-recourse factoring. Here, Rosenthal’s chief lending officer, Paul Schuldiner, and director of Recourse Factoring, Leigh Lones, discuss the recourse factoring division and what they’re seeing in the industry.

TSL: Why did Rosenthal make the decision to expand their offerings to offer both recourse and non-recourse factoring? 

Leigh Lones: As you know, Rosenthal launched our recourse factoring program earlier this year, but we are certainly not new to recourse factoring. By establishing a separate division dedicated to recourse factoring, we are well positioned to look beyond many of the traditional industries that non-recourse factoring typically covers, namely apparel, home goods and furniture.

Paul Schuldiner: Recourse factoring fits very well with service industries like staffing, light manufacturing or assembly businesses. It’s especially useful in situations where employee wages and vendor payments are required well in advance of when the invoice for services is due for payment. It’s also an excellent solution for start-ups, turnarounds and companies that are not yet profitable because they have grown quickly.

TSL: Can you explain how Rosenthal’s recourse factoring complements Rosenthal’s Pipeline division?

Lones: The focus of Rosenthal’s recourse division is to deliver funding against accounts receivable quickly and in a manner that’s easy for clients to understand, with simple agreements and straightforward cost structures. Our Pipeline division was established to serve high-growth direct-to-consumer and e-commerce businesses and works in much the same way as our recourse division, except the funding is against inventory.

Schuldiner: Both of these divisions—recourse factoring and Pipeline—were created to meet specific needs that we saw in the marketplace. In both cases, our clients are able to take advantage of new sales and growth opportunities and keep their businesses running smoothly.

TSL: Recourse factoring may come across as slightly riskier to a borrower in comparison to non-recourse factoring. How does Rosenthal explain the differences to a potential borrower? In what case is a recourse loan a better situation than a non-recourse? 

Lones:  The typical non-recourse client is often concerned about the credit worthiness of some or all of their customers. They often turn to non-recourse factoring because they want to mitigate—and in some cases remove entirely—the risk of those customers failing. Because these clients often also need working capital, the combination of alleviating customer risk and receiving access to cash flow earlier to improve the cash flow cycle is very appealing. With recourse factoring, clients are usually looking for funding and they may have been turned down by a bank and forced to find an alternative lender. Many times, these growing clients already have accumulated some debt and may even have exhausted other funding sources. In these cases, leveraging accounts receivable can be the easiest and fastest way for businesses to regain liquidity and generate working capital quickly.

Schuldiner: It’s not so much about recourse being a better option than non-recourse. For many clients, one or the other could be the only option suitable for their business. The real differentiating factor comes down to two things--the credit risk of their customer base  and their desire or need to outsource accounts receivable management to an experienced third-party like Rosenthal.

TSL: What are some of the younger, growing companies Rosenthal is seeing or funding right now?

Lones: It’s both a challenging and an exciting time for our industry, especially when we have the ability at Rosenthal to evolve our offerings and create products that address the gaps we’re seeing in the market. We’re seeing a lot of deals right now in food & beverage, pharmaceuticals, technology, landscaping, staffing and industrial services. And we’re also seeing a lot of activity in our Pipeline division with emerging brands that require inventory financing support.

TSL: Do you have any additional plans or diversifying your offerings in the next few years? 

Sculdiner: Rosenthal is excellent at identifying opportunities in the market and areas where we can help our clients catapult their businesses to the next level. We did that successfully with Pipeline and, most recently, with our newer international factoring and recourse factoring divisions. We’re looking into doing more around transportation factoring and expanding our offerings in supply chain financing down the road. But our focus is always on finding opportunities to serve our clients well and helping them meet their business goals.