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The Big Apple: CBC’s presence in New York

June 20, 2011

Factorscan

Andrew Tananbaum, Executive Chairman of global factoring company Capital Business Credit, talks to Factorscan about the firm’s presence within the New York factoring market.

CBC recently appointed former Rosenthal and Rosenthal Executive Charles Sharf as portfolio manager for the New York area. What inspired this move?

What’s interesting is that Charles effectively approached us, as opposed to us approaching him. He saw CBC as a very leveragable platform and felt that he could contribute a great deal to its growth in the New York market through his experience in the area and his ability to utilise all the long term relationships in the referral network and with clients that he has acquired over the years to position us for material growth.

What will Sharf bring to CBC’s New York operation?

Charles is going to share our story with potential clients and referral sources. He’s also going to be a good contributor in the area of credit and credit litigation from a portfolio point of view, but also in the ‘new business’ area. The interesting thing in the factoring industry, as opposed to some other businesses in the New York financial market, is that it is the senior executives that have special, long term relationships with clients and referral sources and they also tend to be very good originators of business. Charles fits all those characteristics splendidly.

Will Sharf be bringing a new industry focus to the company?

CBC will be going by the ‘80/20’ rule for the foreseeable future; 80 per cent of the business will principally consist of companies who import consumer products into the supply chain while twenty per cent of the portfolio will be made up of other business. We are starting to see other types of industries that could possibly generate more diversification within the industry in the future, particularly the electronics industry.

Does CBC have a significant share of the factoring market New York?

There are very few ‘first tier’ factors in New York, as opposed to re-factors [smaller independent factors], and we are one of the four who are currently considered ‘first tier’. First tier factors are, generally speaking, those who provide their entire client service in-house – credit, collection and lending – and we have a significant volume of this market from which we are going to grow further.

What are the main products offered by CBC as a first tier factor?

There are a few products that we focus on; firstly, factoring with or without recourse – though the majority of our business is without recourse. Our second major product is factoring and lending against receivables and inventory, through which we support importers. We then have our asset based lending facilities that we are currently growing and which should take CBC services to a wider range of companies. Finally, there’s the trade finance area, which is a very attractive piece of business for us to pursue as it is incremental credit that we can provide to companies who may be financed, banked or factored by our competitors, because we are providing what we call traditional, wholesale factoring to their suppliers.

New York was particularly affected by the crisis, especially the retail sector. How have CBC grasped opportunities in the post-crisis market in the region?

I would argue that we are very well capitalised and underleveraged, We have substantial unused capacity that we are looking to employ. This has allowed us to take advantage of opportunities in the New York market since the crisis, that others have not.

Earlier this week, CBC announced that it has acquired the factoring portfolio of Omni Commercial, an independent factor based in New York. How will this further strengthen CBC’s presence in the area?

Since we have acquired 100 per cent of Omni Commercial’s factoring volume, the acquisition will be a big contributor to our end of year results in 2011. It will also provide us with a ‘shot in the arm’ for increased utilisation of funding and consolidate our relationship with Omni customers. We previously provided re-factoring services to Omni Commercial along with CIT – providing services such as customer credit underwriting that a smaller factor does not have the capacity or staffing to offer to clients in-house. Through the acquisition of Omni’s book, we have preserved our relationship with their client base and added materially to that.

Does the portfolio bring a new type of customer to CBC – in terms of size or industry?

As a re-factor, Omni’s clients are on average smaller than ours, but what we now have at CBC, thanks to the acquisition, is a ‘cradle to grave’ option with these clients. Re-factors often face problems with capacity or limitations on concentration, which are issues that we don’t have at CBC. With the portfolio under CBC, instead of losing customers once they reach a certain size and cannot be funded by the re-factor, the clients can graduate with us and have the ability to get substantially more credit.

How is the factoring market in New York changing following the crisis?

There has been some consolidation in the market of late, with the acquisition of another re-factor in New York, Westgate Financial, and I think this trend could continue in the future. At CBC, we are looking to grow ‘organically’, so to speak, but are also looking for further strategic investments and acquisitions.