January 2018 by Powell Slaughter
SHERMAN OAKS, Calif. — Baron & Associates, a specialist in factoring, accounts receivable and purchase order financing, and trade credit insurance, has partnered with receivables funding, servicer and administrator Finacity to offer a new credit packaging program, accounts receivable securitization, to the furniture industry.
With traditional factoring, a business typically picks and chooses which receivables to sell to a factor, while accounts receivable securitization bundles all receivables, creating a larger base of funds. The package relies upon the diversification of the obligated parties — some are financially stronger than others.
The program is being offered first in the furniture sector to buying groups, whose collective membership have the receivables volume to create a securitable product. In Finacity, which has U.S. headquarters in Stamford, Conn., Baron & Associates has teamed with an organization currently managing more than $100 billion a year in worldwide transactions. Clients using its receivables securitization product include Alcoa, Xerox and Archer Daniels Midland.
Some members of a furniture buying group might not be great credit risks by traditional measurements, said Finacity CEO Adrian Katz, but combined with the aggregate, the risk is spread enough to create an often highly rated security.
With accounts receivable securitization, “you can deliver better pricing and more funds than the individual companies can do on their own,” Katz said.
And while a factor might decide a client is too big a risk and cancel the arrangement, securitization can be more reliable.
“If we do a securitization for a negotiated period of time, the financing is available throughout the term of the facility,” Katz said.
He added that the retail sector is under stress and will remain so. “Being able to include all the obligors (in a buying group) through diversification is a benefit to an industry under stress,” Katz said.
While more than 90% of its funding transactions are handled through securitization, Finacity does do some factoring itself.
“We’re agnostic as to what’s best for each client,” Katz said. For transactions less than $25 million, Finacity acts as principal in the securitization; for larger transactions, it acts as agent, working with major U.S. banks such as Wells Fargo and European and Asian banks as well as smaller banks and non-bank funding sources.
The company has obligors in more than 175 countries, deals in 58 currencies and has funding programs in 11 of those currencies.
“Eighty percent of our current volume is outside the U.S.,” Katz said. “Our footprint mirrors that of global trade.”
In 2015, Finacity received the president’s “E” Award, which is the highest recognition for any U.S. entity may receive for making a significant contribution to the expansion of U.S. exports.