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Borrower or Lender BE 2019 - Alternative Structures

Alternative Structures – PO Financing, Factoring & MCA

Purchase-order financing (P/O financing) is a type of asset-based loan designed to extend credit to a company that needs cash quickly, to fill a customer order. A company may operate with such a small amount of working capital that it cannot afford to pay the for the cost of producing a customer’s order. P/O financing enables such company to not turn away business, by borrowing from a lender using the purchase order itself as collateral to support a loan.

Factoring is one of the oldest forms of business financing. Note that the term is “financing” rather than “loan” because factoring is not actually a loan.  In a typical factoring arrangement, the company needing financing makes a sale, delivers the product or service and generates an invoice. The factor (the funding source) then purchases the right to collect on that invoice by agreeing to pay the company in need of financing the amount of the invoice minus a discount.

MCA lending is, in summary, an advance on a company’s sales.  Financing through a merchant cash advance (MCA) is used mostly by companies that accepted credit and debit cards for most of their sales, typically retailers and restaurants. The concept is this: funder purchases a portion of the company’s future credit card receivables for a discounted lump sum. The MCA funder receives the purchased credit card receivables as they are generated either by taking a percentage of the company’s daily credit card proceeds or by debiting a certain amount of funds from the company’s bank account. Depending on the risk profile of the company, it can be a more expensive form of financing for a business compared to other types of financing.

What these three things have in common is that they are each a type of “alternative lending.”  Alternative to what?  To the type of loan a company can get from a “regulated” commercial bank. This webinar explains these types of financing arrangements, what to consider before entering into them, and provides some tips on how to negotiate them.

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Webinar Faculty


Rebecca Fruchtman
Rebecca Fruchtman

Rebecca Fruchtman recently joined Mayer Brown LLP’s banking and finance practice group where her practice concentrates on global trade finance and asset based lending matters.  Previously Ms. Fruchtman served as… Read More


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Avi Levine

Avi Levine currently serves as a Vice President at Star Funding, Inc., a New York based firm providing Purchase Order Financing, Factoring, and other working capital solutions to lower middle market… Read More

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Jason Goldberg

Jason M. Goldberg is Senior Vice President, Head of IDB Factors. Goldberg was previously Senior Vice President -Managing Director of Trade Services at Crestmark Bank, included managing Crestmark’s non-recourse based… Read More

Paul Schuldiner
Paul Schuldiner

Paul D. Schuldiner is Senior Vice President at Rosenthal & Rosenthal, a commercial finance company specializing in factoring and asset based lending. Paul leads the firm's newest division, Rosenthal Trade… Read More

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