May/June 2017

Establishing a Capital Partnership: Benefits to Your Company and Your Clients

There comes a time when a successful ABL lender must decide on the next step to promote the company’s growth. Gerald Joseph and Jennifer Palmer explain how Gerber Finance chose to partner with a financing firm and provide suggestions for other companies facing similar situations.



Following a 67% spike in Gerber Finance’s ABL portfolio in 2016, we decided we needed a new capital partner to allow our firm to continue to grow another 67%. In March 2017, we announced our partnership with Global Fund Holdings, parent company of Trade Finance Solutions, a Miami-based international financing firm. Global has both the appetite and the resources to support our strategy for expanding both Gerber’s geographic footprint and product offering.

Growth — A Chicken-and-Egg Situation

For several years we have been working diligently to build a brand within the industry. Year over year we have experienced steady growth, but in 2016 it was as if the stars magically aligned, and we underwent a major boost in our portfolio size. Like any conservative business, we couldn’t assume the growth was going to continue. So, with that in mind, we consciously chose to manage our growth using the resources on hand and hold off from expanding our infrastructure. Our shareholders and banks remained supportive, always ensuring we had sufficient capital to support the growth.

Jennifer Palmer, President, Gerber Finance

Jennifer Palmer, President,
Gerber Finance

Time to Grow Up

However, working with the same resources we had prior to the growth spike, while manageable on a short-term basis, was not a sustainable approach. We began to notice we were spreading ourselves too thin and not giving our clients or our staff the attention they deserved.

We began by focusing on correcting the inefficiencies that came with growth, but because the business was transforming so quickly, it was difficult to look ahead and predict what our company would look like in three to five years. We spent countless hours contemplating the challenges we were facing and deliberating what changes were needed. We changed our minds constantly about which path forward was best, until one day it became clear which avenue was the correct one to sustain growth.

Preparing for the Future

The first step was to align ourselves with capital partners that also wanted to grow and had the financial capacity to support this growth. As we all know, the market is flush with liquidity, so finding interested parties was not difficult. Our shareholders allowed management carte blanche in deciding the important qualities we were seeking in a capital partner and who those partners would be. It was critical to align ourselves with individuals who understood and respected our philosophies, which are often different from industry standard. Keeping our entire staff was equally important to us.

Global not only recognized the talent within our office but the synergies we have as a team, and it understood the value of keeping that team intact. In Global, we have found a partner that adds value, wants to be with us for at least the next 20 years and relies on us to implement our growth plan.

Gerald Joseph, CEO & Founder, Gerber Finance

Gerald Joseph, CEO & Founder, Gerber Finance

Thus far, with the support of Global, our new shareholder, we have begun our geographic expansion into the Southeast and West Coast. This will allow us to have boots on the ground in markets where we want to expand and also be closer to our existing clients. Currently, we are servicing those clients from our New York office, but with the right team on the ground in the same markets as our existing clients, we can better service our borrowers’ needs and continue to nurture our relationships with them.

We are also staffing up in operations, sales and marketing, and we have used the opportunity to focus on the next generation to ensure our workplace reflects the current world and industry in which we live. Having a well-rounded team is essential as we look forward, and with an increased number of deals in our portfolio, we need to bring on more underwriters and relationship managers to ensure that we are managing our risk appropriately.

Moving forward, we will expand our product offerings, which will allow us to better service our existing clients and attract new ones. We will start looking more carefully at equipment lending and PO funding. As our shareholders have an investment in Trade Finance Solutions, which specializes in factoring and supply chain credit, we can now cross-sell these products as well, which ensures that we have an array of financing solutions to offer a borrower.

Our deal size is also changing. While we enjoy engaging with smaller, younger companies and want to continue working with them, we will now be looking at more mature companies as well. Previously, we only looked at deals up to $10 million. Now we are actively looking at and working on deals up to $20 million, and we are open to even larger deals.
Given the competition in the marketplace, we have had to pay close attention to the low rates and minimal margins being offered by our competition. Fortunately, because of our own success and stronger balance sheet, we received better rates from our banks, and our new partners have opened the door for more economical financing, which allows us to offer more affordable pricing that is key in today’s price-intensive marketplace.

While we believe that all the changes we are implementing will help us continue to grow organically, another strategic goal is to grow by acquisition. Our shareholders’ appetite for growth is robust, so we are actively looking for other companies similar to Gerber that would fit well within our portfolio.

Words of Advice

Raising capital is a time-consuming and laborious process, and no matter how hard you try to avoid having it affect your daily business, it will. Make sure the team you have in place can help you with the day-to-day tasks while you are going through the due diligence and legal process. We found that during this process we had to be careful not to lose the very momentum that put us on this path.

We always advise our clients that slow and steady growth is best, but sometimes you just can’t control it. Like we tell our clients, if Costco knocks on your door, you have to answer it — but you had better be ready. That doesn’t mean spending to build a big infrastructure; it means ensuring you have an efficient infrastructure in place, sufficient capital behind you and the right partners by your side. When that knock on the door comes, you must execute flawlessly and you cannot do that unless you are prepared in all aspects of your business.
The Future Looks Bright

As Gerber continues to grow and evolve as a company, our philosophy continues to put personal interaction and attention front and center. It will always be one of the most important elements influencing how we evolve. We aim to never forget who we were, where we came from or how we’ve transformed over the years. Gerber will continue to march to the beat of its own drum.