April 2010

Four Fabulous Factors… What Defines a Legacy?

As we assembled the lineup of profiles for this year’s look at four factoring companies, a unifying theme began to emerge — legacy. And each of the four companies illustrates the multi-dimensionality of legacy in its own unique way. Whether it’s a father and son team; providing financing to a unique niche for the greater good; the impetus to acquire, sell and re-acquire the same company or serving as a training ground for future factoring entrepreneurs, each has an interesting story to tell.

When speaking with Vince Narez, the chief executive officer of Bay View Funding, one gets the sense that he chooses his words carefully. With his mellifluous voice and measured cadence, the northern Californian explains his pathway to factoring. “I really had no idea what factoring was about, but I’d been a banker for about six years. In 1979, I left banking to join Riviera Finance in the Silicon Valley. And with that, I got a raise and lost the tie.”

His time at Riviera proved far more beneficial than the initial perks. He explains, “I learned the fundamentals of factoring from John Danis, Dave Clark, Tony Kinninger and Rick Gottlieb. And factoring in the Silicon Valley during the eighties was very exciting. We weren’t doing traditional deals … we were buying invoices from truckers, printed circuit board makers, machine shops and temporary staffing agencies. The electronics business was booming in those days.”

By 1995, Narez had joined Concord Growth Corporation, a Silicon Valley-based asset-based lending shop that was contemplating the development of a factoring product. Formed in 1985, Concord Growth had its roots in venture capital and in time was acquired by a bank holding company, Bay View Capital Corp. Narez and his team operated as a division of Bay View Corporation until 2002, when he led the management buyout of the factoring division, Bay View Funding.

The factoring company operated independently until 2007, when Narez sold it to Capital Corporation of the West (CCOW). Under the terms of the sale, he was to stay on with Bay View Funding to facilitate the transition. But fate and the economy would have it differently. Narez recalls, “We were a wholly owned subsidiary of CCOW and its other subsidiary, County Bank was seized by banking regulators in February 2009. At that point, CCOW had no interest in maintaining a factoring subsidiary.” And with that, the parent company put the factoring business up for sale. While many offers were considered, Narez and his partners stepped up with the winning bid and took Bay View Funding private in April 2009. What was it that compelled Narez and his partners to reacquire the business? Narez explains, “There were many reasons … we knew the assets and the people, we continued to have the passion for the business and we had access to funding.”

Today, the company that Narez launched under the Bay View Capital umbrella some eight years ago is staffed with 37 team members, most of which are based in Bay View’s San Mateo, CA headquarters. Its board of directors is comprised of seasoned entrepreneurs, factoring, banking and finance professionals. With clients from Maine to Hawaii, Narez describes the firm as generalists with specializations in staffing and transportation. He adds, “Our client base and targets range from startups to growing companies with annual sales to $25 million. We provide recourse and non-recourse factoring services to literally hundreds of clients across most industries. And we’ve developed a private-label factoring product that allows other factors to leverage off of our back office capabilities and provides access to capital as well.”

When it gets right down to it, Bay View Funding’s mission is simple: To provide reliable and consistent accounts receivable factoring services to business across the United States. “And,” Narez notes, “our values are simple as well. We do what we say. We are in business because of our clients. So, we honor our commitments and treat people the way they want to be treated … with dignity and respect. We value our relationships with our investors, vendors and competitors.”

In terms of managing the company, Narez is joined by Glen Shu, Bay View’s president and chief operating officer; Seth Herman, the company’s national sales manager; Aaron Zahedani, who serves as portfolio manager and Andrew Aquino, Bay View’s senior vice president in charge of underwriting.

Looking to the future, Narez and his team of senior managers intend to focus on growth — both organically and through acquisition. “We are very much interested in growing our assets and our people and we’re actively seeking other factoring companies and portfolios,” he says. And it’s a claim that is proven easily. In April 2009, Bay View Funding completed the acquisition of Rexford Funding’s factoring business.

What made the Rexford portfolio a good fit? He explains, “Bill Elliott and his partners at Rexford Funding were financing with a lender that became unstable, so they began looking at alternatives … including an exit strategy. Our board approached Bill to explore various options and with the support of our investors, our senior lender, the Rexford team and our back office, we were able to successfully acquire their factoring business and with that, add three team members focused on originating new factoring clients.

“The acquisition has been a very good fit. It has given us further penetration into industry sectors where we only had limited opportunities. Examples include apparel and auto glass repair. Bill and his sales team have many years of industry experience and access to referral partners that are complementary to ours. They fill some gaps, if you will. This acquisition has presented career growth opportunities for team members based in our headquarters as well. And lastly, we are very acquisitive, so the transaction worked to have us hone our M&A skills.”

But as gratifying a successful acquisition of a portfolio might be, it’s not what keeps Narez in the game year in and year out. It’s about expansion. He says, “Sure, I continue to have passion for buying invoices, but my greatest satisfaction comes from seeing and assisting my team members in becoming factors. Over the years, I’ve hired or worked with and trained several factoring professionals that today own or operate factoring companies. It might looking like we are aiding the competition and quite frankly, we are. Because in the end, what good is creating wealth in anything if you can’t share it?”