Porter focuses on AR or Invoice factoring and are a good fit for brands whose retail accounts include mass retailers such as Target.
AR or Invoice Factoring is one of the oldest finance products in retail. I have covered it here, but here’s a quick refresher. You get an invoice from a retailer. You present this invoice to the factor who advances to you some percentage less than 100% of the invoice face value. The factor then collects on that invoice from the retailer and remits to you the remaining amount less their fee. For example,
- You have a $1 million invoice from Target.
- You turn to Porter who advances $900,000.
- Let’s say Target then takes 4 months to pay that invoice and Porter’s fee is 1.5% per month. Their fee will then be $1,000,000 * 1.5% * 4 = $60,000.
- Once Target pays Porter, they will remit an additional $40,000 ($1,000,000 - $900,000 - $60,000) to you.
Porter works with brands that do $600K to $200 million annually in sales through retailers. While they do offer an ABL product, this is typically done with a partner and for larger relationships. Their speciality and focus is on AR/invoice factoring.
The Elephant Herd Short Term Lending Comparison Calculator has a tab for factors where you can play with terms and compare offers and factor products to other products.
Background
Porter is based in Birmingham, Alabama and has been in business since 1991. While they cover a wide range of industries, they have started doing an increasing amount of CPG factoring.
Important Considerations
- Invoice factors have to be careful of fraud where the borrower submits fake or inflated invoices. For this reason, Porter requires Personal Guarantees from borrowers with a single active founder / owner or Validity Guarantees from companies with multiple owners, foreign ownership or corporate ownership. Validity Guarantees are similar to “Bad Boy” clauses where the lender has the right to come after personal assets in the cases of fraud.
- Porter has long experience with mass retailers like Target and has access to their systems. This may translate into faster decisions and potentially higher advance rates on these invoices.
- Your mix of retailers will largely determine your advance rates. Remember, the factor is assessing the likelihood the retailer will pay the invoice and how quickly they will pay. Having all high credit mass retailers (i.e. Target, Wal-Mart et al) will increase your advance rates. Having low credit / no credit mom and pops will lower your advance rate. Having a lot of concentration among low credit retailers will lower the advance rate even further.
- If you sell through distributors like Kehe, expect much lower advance rates. The problem for factors is the distributors are notorious for unexpected additional fees, holding back money and taking a long time to pay. It’s not unusual for a brand to receive 70 cents on the dollar from Kehe. So the factor will then be giving you an advance rate of 85% to 90% on that 70% which translates to 60% to 63% of the invoice value. This advance rate can increase once a payment history from Kehe or the distributors is established.
- Porter also offers ABL financing, but this is not their main line of business and often this is done through a partner.
This post is not sponsored and I am not receiving compensation in any form. I find financing products interesting and simply sharing what I learn.
If you have questions or want help, reach out.