You’ve seen the headlines. “Wells Fargo, UBS Provide $4.1B Financing to Staples.” “JPMorgan Agents $750MM Revolver for Carter’s.”
Large, brand-name companies seem to have no difficulty closing multi-million or billion-dollar loans with equally brand-name banks. But if you’re not Staples, everybody doesn’t know your name.
What do you do if your company needs working capital or short-term financing and doesn’t have a name instantly recognized by one and all? Maybe you are a hard-working manufacturer and only need $50,000 to purchase materials for a large order. Where do you turn?
In July, Bryan Ballowe and Clinton Stanton launched TradeCap Partners to meet the needs of borrowers who could not turn to banks for assistance and sometimes could not even obtain the financing they need from ABL lenders. It has been an exciting experience for the duo, who worked together at King Trade Capital the previous eight and a half years.
“There’s nothing like having your own little labor of love to wake up to each morning and watch it take shape,” Ballowe says.
The pair have 35 years of lending experience between them, and both started their careers at large banks. Ballowe began his career at Bank of America in the media and telecom corporate lending group. Stanton started out at Citibank.
Leaving Large Banks Behind
“At the time, we were the lead bank on pretty much any major transaction being underwritten in the media and telecom industries,” Ballowe recalls. His clients included media giants like Viacom and WorldCom Nextel. After two years in the industry, Ballowe says, he started getting calls from headhunters with offers to lure him away. But it was a call from a basketball buddy from college that changed his life and connected him with Edward King, who had recently opened King Trade Capital.
“He brought me on to provide some of the credit background and some standardization. We started developing a database and letting people know what purchase order and supply chain finance was all about. Twenty years later, we were still together. Edward’s just a great guy,” Ballowe says.
Stanton followed a similar trajectory. He began his career at Citibank as an analyst and worked his way up to a vice president role within the middle market banking group where he focused on financing companies with international trade needs. One of those companies happened to be King Trade, where he was introduced to Ballowe.
“We developed a relationship having worked together on opposite sides of the table and one day he came and asked if I would be interested in working with them,” Stanton recalls.
After working for a bank he describes as a “3,000-pound gorilla,” Stanton was ready to make a change.
“I wanted to do something more entrepreneurial,” he says. “I feel like you get a better sense for all the inner workings of a business with a smaller company, and that was appealing to me.”
Of course, if you are entrepreneurial, the end game is owning your own business. So, last summer, the pair decided to plant a stake of their own. Stanton and Ballowe had the requisite finance experience and connections with industry partners. They were able to raise capital privately, develop a banking relationship and get into the market. TradeCap Partners specializes in providing alternative inventory finance solutions through purchase order, supply chain and trade finance.
Filling the Void
“It’s not just a straightforward ‘Hey we’re financing finished goods transactions going from one supplier from point A to point B’. We will step in and provide several types of transactional financings including those involving multiple suppliers and production financing. Often there’s a value-add or manufacturing process required on the front end by a manufacturer or distributor to be able to fulfill an order or a contract. Bryan and I felt there was a void in the market we can fill,” Stanton explains.
Ballowe points out there are companies focused on one aspect of the purchase order and supply chain financing business, such as providing letters of credit for finished goods. At TradeCap, they are looking to provide a menu of options for borrowers, and they are also prepared to work with banks, factors, ABLs and other lenders who need a way to fill in financing gaps for clients.
“Clinton and I have a really good handle on understanding what it takes to provide funding for production transactions a lot of folks tend to stay away from,” Ballowe says.
“We feel there’s an untapped market on a smaller scale as well. There are a lot of companies that present good growth opportunities. Management has shown sales history, whether it’s with their existing company or in the past. If we like the product and we like the story, we can be very flexible and provide financing as low as $50,000. There’s a large untapped market for smaller companies seeking the offerings we provide. Being able to provide not only finished goods letter of credit financing, but also the very detail oriented production financing in the size, scope and the range of what we provide differentiates us.”
Both Stanton and Ballowe are familiar with the technology that has transformed the 21st century. Stanton notes that while many lenders are comfortable with finished goods finance, TradeCap can help distributors selling hardware and software to companies as well.
“We provide what we call reseller financing, which really is more geared specifically to the technology hardware/software space,” Stanton explains. “Many times, software costs can’t be financed, but we’re able to understand those specific types of contracts and provide money for not only the hardware but also the software being purchased from the original equipment manufacturers (OEM) or authorized distributors selling to customers through a value-added distributor. There’s very few companies out there with the level of expertise or the willingness to finance those types of transactions.”
While brick-and-mortar retail is clearly in crisis-mode, Ballowe sees an opportunity for TradeCap with online retailers.
“Amazon is an amazing conduit for suppliers,” he points out. Many of the items sold using the Amazon platform come from smaller retailers utilizing Amazon’s fulfillment services. “Finance companies continue to provide the best service possible to keep inventory levels at the peaks where you know demand is being met. So that offers a lot of potential for companies like ours to be able to provide a solution for those businesses selling online. We are able to not only help them grow the business, but we are able to provide a lot of unique solutions out there that may have not otherwise been readily received.
“Being able to think outside the box and provide as many solutions as we can to help our clients continue to grow. I think that’s going to be a goal for us.”
Because this type of financing is transactional, offering speed and flexibility in customer service as well as developing excellent relationships with senior lenders and other industry partners are critical.
“We try to develop a rapport on the front end with our potential clients and industry partners and really make sure we ask all the right questions,” Ballowe says. “Okay, there’s a risk here. There’s a potential issue there. But you know how to address that for the client. Purchase order finance is transactional. We know we’re not long-term capital providers like a bank or an asset-based lender may be. So, it’s our job to make sure we can move quickly and structure a solution that helps best serve our clients as quickly as we possibly can.”
Developing Customer Relationships
“When you develop that relationship, people do come back. We’ve seen over the years where an ongoing relationship has been established. A lot of times clients like the ability to know ‘Hey I have a good partner behind me.’”
Ballowe says clients appreciate that he and Stanton understand their business and enjoy working with them.
“Even though they could maybe go out and find more traditional financing, they kind of like where they are and the flexibility. They understand what the financing is going to cost them, but they know we can execute, and they don’t have to worry about that.”
Stanton emphasizes TradeCap is looking to be a valued partner for other lenders as well.
“We want to be a trusted partner whether it’s a bank, ABL shop or a factor,” he says. “The sell for us is ‘Let us be your partner in providing this auxiliary product or service offering to your clients.’ They can approach clients and offer to deliver and execute on a full working capital solution, including purchase order financing. They can tell their clients TradeCap is their partner and will help them provide a total financing solution.”