Imre J. Rosenthal, the late founder of the Rosenthal & Rosenthal family-run factoring firm, knew how to work a room.
At a restaurant, if Rosenthal overheard somebody at a nearby table discussing business, he would get up and sit with them — uninvited — and ask questions.
“Sometimes that would lead to getting some business. Sometimes it would lead to just hearing some entertaining stories,” recalled Peter Rosenthal, Imre’s grandson and president of Rosenthal & Rosenthal.
“He really lived this business 24/7, but it wasn’t his sole interest. He had lots of interests,” Rosenthal said, mentioning cycling, playing piano, judo, traveling, and investing in restaurants, wine, art and movies, including “Cousin Cousine,” the 1975 French romantic comedy that received an Academy Award nomination for best foreign language film and entitled Imre to attend the Oscars.
Most of all, the founder was interested in people. It’s said that the first client he lent money to was a chicken farmer with an uncertain future. He established the company in 1938 off a $25,000 check from his father Andor, a children’s wear manufacturer.
“He loved people who were trying to do something in this world but needed just a little bit of help,” said Cassie Rosenthal, Imre’s granddaughter and senior vice president of Rosenthal & Rosenthal.
Rosenthal & Rosenthal, named after Imre and his father, is a firm steeped in tradition and family lore. So on the eve of its 80th anniversary, family members — Peter, Cassie, Ken Kleiner, executive vice president and chief marketing officer and a first cousin of Cassie and Peter, and Eric Bader, a senior vice president and director of finance who married into the family — gathered to discuss Imre Rosenthal’s legacy, how his principles still guide the company, and how the firm is evolving.
They’re seated in a conference room at the New York office at 1370 Broadway, which has an aura of a venerable institution rather than a sterile financial firm, with busts of Imre and his father Andor, a grandfather clock and much of the family art collection. Adorning the walls are an Alexander Calder mobile and paintings by Frank Stella, Joan Miró and Amedeo Modigliani, among other works.
The company closed a deal on Jan. 31 of this year to buy the $2 billion factoring portfolio of Branch Banking & Trust Co. It’s Rosenthal’s first acquisition, adding 90 clients and growing the factoring volume to $11 billion. Rosenthal is taking on 25 BB&T employees including account executives, credit analysts, collectors, bookkeepers and back office personnel, upping the overall employee count to 215.
“This is definitely a big deal,” Peter said. “It gives us greater diversification in terms of the industries that we work with. The portfolio we are acquiring is largely centered in furniture, carpeting and other types of floor coverings — businesses that we traditionally haven’t been in.
“It also gives us geographic diversity. We will have an office in Atlanta and a back office in High Point, N.C.,” along with the existing Los Angeles and New York offices. “Now we have another region, and now that we have done one deal, it could possibly lead to other acquisitions. There are always other industries we can try to pursue,” Peter added, whose responsibilities as president run the gamut, though he focuses on the operations and credit sides of the business. “We would be open to additional acquisition opportunities now that we have one under our belt. But there’s nothing on our radar right now.”
For Rosenthal & Rosenthal, which Imre started as an asset-based lending business and evolved into a factoring company in the early Forties, the deal reflects a newfound appetite for growth and change spurred by the third generation joining the firm, after having careers elsewhere. Cassie owned two art galleries before joining six years ago; Bader was an oil painter before coming on board seven years ago; Kleiner, who joined 19 years ago, was a lawyer before, and Peter wasn’t long out of law school.
It was the legacy of the company and its founder that lured them in.
“I was a lawyer working 20 hours a day for years,” Kleiner recalled. “As soon as I would mention if joining the business was a possibility for me one day, grandpa would turn his back to me, and I was like, OK. But then he would turn around. He always had this soft spot. He would say to me, ‘One day; you need to get outside experience first.’ He was 100 percent right. I was a lawyer for eight, nine years on my own, and it’s held me in good stead, coming into the business.
“My older daughter, who is 21 and a senior in the University of Southern California in the undergraduate business school there, has expressed an interest in entering the business one day. She is really thinking about that, and it’s nice for me to hear. I’m not pushing it. I would like my daughter to get some experience on the outside with other firms first. In my opinion, it’s important because you need perspective. I want my daughter to be told, ‘You’ve got to get this memo on the boss’ desk by nine tomorrow morning or there will be consequences.’ You need to go through the hard knocks. I went through them. It makes you better.”
“I’m glad I ran a business prior to coming here,” Cassie added. “I can empathize a little more with our clients because I understand the ebbs and flows of cash.”
Bader was painting and drawing and eventually discovered art wasn’t going to pay the bills, so he got an MBA and interned at Rosenthal before getting a full-time job there.
“Working with family makes the job a lot more rewarding, just because you know you get to sort of help preserve your legacy and that’s very exciting,” Peter said. “Getting to know our clients is something I really enjoy. We do have many clients that have been with us for longer than I have been here. You really do build relationships and that’s an enjoyable part of the business.”
Two years ago, at the Accessory Council Excellence Awards, Rosenthal & Rosenthal was honored for “business leadership” in the apparel and accessories sectors, which still represent the lion’s share of the business. Yet the company has in recent years been diversifying its base, with clients that are in gifts and home, food and beverage, electronics and other categories. It’s helped to offset the impact of recessionary trends in retail and fashion.
As a private company, Rosenthal doesn’t face the demands for growth that a public one would. Yet complacency is not part of the vernacular. A purchasing order financing group, Rosenthal Trade Capital, was formed in July 2016 to provide alternative short-term inventory financing solutions for cash-constrained companies. It’s geared for manufacturers, wholesalers, assemblers, importers and exporters confronting issues related to seasonality, rapid growth, being under-capitalized or undergoing turnarounds.
More recently, a system, like a mentoring program, was launched where junior employees work alongside senior executives to gain experience. The family, which regards itself as creative lenders rather than stereotypical bankers, concedes that factoring isn’t the sexiest business and that young people out of college or graduate school often opt for Wall Street jobs, traditional banking, or digital or tech firms first. With the mentoring program, “We have identified younger, dedicated and ambitious employees and we have paired them with veteran employees, and it seems to be working really well across all departments,” Cassie said. “It’s a group of younger people shadowing senior account executives in the factoring division. The same happens in asset-based lending. There are younger credit analysts working in tandem with veteran players.”
“Factoring is not taught in school,” Bader noted. “It’s not taught in undergraduate schools or business schools or on chartered financial analysts exams. It’s barely on CPA exams. It’s just not there.”
The Rosenthal & Rosenthal web site was recently revamped, and the marketing was overhauled to explain in livelier, simpler terms what the company provides and to project a fresh image and higher profile in a sector that can been seen as musty. A few years ago, the firm’s first national print and digital ad campaign was launched, bearing a degree of levity. Also, videos about the company were shown on some airlines.
“Honestly, since I joined six years ago, to me it’s like a whole different company,” Cassie said. “The profile of the company, the type of clients we are working with, the overall look and feel of the company, how the employees act — there is an air of modernism about the company. We’re more open to change. Maybe those that were skeptical about a new business corridor, or a new logo, or a new web site are now really on board.”
Factoring provides manufacturers with the capital to produce merchandise for upcoming seasons without waiting weeks or months for retailers to pay up. It accounts for about 75 percent of the Rosenthal business, while asset-based lending comprises the rest of the business and purchase order financing can be used in tandem with either, or in tandem with an outside lender.
Factoring represents an important service to companies by giving them money upfront and taking the pressure off entrepreneurs and business owners so they can focus on what they’re best at, namely developing products and services. It puts the onus of collecting and managing receivables, and a lot of risk, on the factor. Rosenthal & Rosenthal will chase down unpaid invoices, assess retailers for clients, and strategize with clients and steer them to appropriate professionals, such as accountants or lawyers, depending on the situation.
Rosenthal primarily factors small and midsize companies, many family-run, though there’s work with numerous public companies. The firm is considered the nation’s largest privately held factoring and financing company. It’s primary competitors are CIT and Wells Fargo.
“We think it’s a tremendous advantage not being a bank and not being subject to regulations,” Peter said. “It just gives us tremendous freedom on how we do business. Our clients benefit from that because they get much quicker decisions from us and they get more flexibility than they could from a regulated institution. We’ve had a few transactions in recent years where we closed deals in 48 hours, when a client was really pressed.”
“We can be so much more creative with our lending capabilities,” Cassie added. “We are not just looking at a balance sheet. We are listening to their story. We are figuring out where we can pull collateral from, how we can support what they need. It’s a different approach than a regulated bank.”
At Rosenthal, “It’s streamlined decision-making — not big bureaucratic committees,” Kleiner said. “Instead of saying, ‘We’ll have a committee meeting in five days and get back to you in another seven days,’ we say, ‘Let me speak to my cousin in five minutes and we’ll get back to you in two hours.'”
Rosenthal doesn’t divulge revenues or profits, though Peter said the business is profitable. (Rosenthal’s fortunes are tied to the state of retail.)
“It’s challenging in today’s environment for sure,” Peter admitted. “Traditional factoring is certainly a mature industry. If you look at national statistics, about $100 billion of volume is factored on an annual basis, and it’s been pretty stable for a number of years now. But having said that, for us there is a lot of growth potential. If you look at our history, up until recently we really didn’t embrace change. We got really good at doing something and kept doing it. We are still very much focused on sticking to our knitting. We know what’s gotten us here to our success, we are not looking to deviate from that dramatically. But having said that, we are much more open to new ideas.”
“One of the challenges was removing the blinders, so to speak, and continuing to focus on our core competencies while reaching out a little bit, starting the [purchase order] financing, doing an acquisition, things of that nature,” said Bader, who works closely with the company’s chief financial officer and is married to Cassie’s first cousin. “So you are actively seeking growth but still focusing on the things that have led the company to be successful for so many years.”
“I’m the disruptor,” Cassie said. “Any company today needs to modernize and stay relevant to their clients and their customers.
“When I came in, everybody sort of really had their stake, their claims to what they were doing. They all had their referral sources. They all knew everybody in apparel. They had things covered. So I looked outside of New York, outside of apparel, and into other areas of the country, and started to reach out to a whole other world where many did not even know what factoring was. I started going into gift and home, and more food and beverage. Really any sort of product outside of apparel. The two industries most well-versed in factoring are apparel and furniture. The gift and home companies were not familiar with factoring at all. Most are small mom-and-pop businesses. They may have 4,000 customers and they just use credit cards,” to fund the business.
“The problem with that is they wind up paying these huge fees and their customers are basically traveling around the country on their dime,” she continued. “So there are better ways to leverage their inventories and receivables and run their business. And actually, if they have someone in the back office helping them on the collections and managing the receivables, they can focus on production and sales. A lot of these companies are quite small and they are doing everything themselves. When their sales start to grow, they are very much overwhelmed. I am talking about gifts specifically. That’s an industry we have educated well on what we do. That’s actually why we developed the web site more with instructional videos in animation, keep it simple to understand, it’s for the layperson. We have hosted webinars. A lot of people don’t understand what purchase-order finance is. And any chance we get, we will speak at a conference to a group of business owners, to really help them understand what we do.”
Her prospecting for clients involves understanding various marketplaces, and where the firm fits in. She educates businesses on what her company does.
“We love a good story. That’s the thing that makes us who we are,” said Cassie. “Yes, the numbers are important. But if the client’s story is compelling enough, we will help them. We understand that their legacy is so important to them and what’s riding on their business because we operate the same way. Most of the clients that come here are rarely in tip-top shape. A point of entry a lot of the time involves someone getting kicked out of a bank for one reason or another. We help a ton of clients through some difficult, hairy stuff.”
Kleiner, a grandson of Imre, handles marketing and gets involved in business development. He said that how Rosenthal functions today reflects his grandfather’s ways. “This is how we are different from our competitors. My grandfather was a big fan of the underdog — someone down on their luck.” In fact, he doted over Kleiner’s brother David, who passed away four years ago from kidney disease contracted at birth. “My brother was a wild one, but he was my grandfather’s favorite,” Kleiner said. “David could do no wrong, but he would drive my grandpa crazy. I would get calls at three in the morning at home from grandpa, ‘Have you seen David? Can you go find him?'”
He also picked up some clients that have stuck with the company for decades, the longest being Richloom Fabrics, a client for 55 years. When Richloom sought out Rosenthal & Rosenthal, factors were not in high regard and considered the place to go for financial help if there were no other options.
“Peter and I started at the company 19 some odd years ago within three months of each other,” Kleiner said. “Factoring is a lot more prevalent and accepted way of financing businesses now, compared to then. It used to be the lender of last resort.”
“Factoring at one time had a negative connotation. It was a form of financing that companies would utilize if they didn’t have alternatives,” Peter added. “It was more expensive than bank financing. It’s become much more competitive.”
“People are now seeing the benefits,” Bader explained, adding that with factor support, a business can more readily ride the ebbs and flows of retail cycles, and have the wherewithal for expansion.
For any family business, the key to success is having the family members keep to their areas of responsibilities and not stick their noses into affairs outside their purview. “Even though we focus on different areas of the business, we definitely work closely. We communicate a lot,” Peter said. “The most challenging part for me, which is also something I really enjoy, is figuring out ways to get everyone to work together toward a common goal. If you figure out how to do that, you are going to have a successful business.”
“My biggest challenge is getting on the same page,” Cassie admitted.
“We’re all basically pulling on the same rope,” Kleiner said. “It’s both wonderful and difficult at the same time to be working with family. I come from a slightly different place. I married into the family. I’ve heard so much about Imre for years.”
Imre Rosenthal died in 1996. “There must have been 1,000 people at my grandfather’s funeral at the Park Avenue Synagogue,” Peter recalled. “Growing up I was never involved in this business. But on that day I was amazed by the outpouring. People came to pay their respects. It sort of solidified this image I had of my grandfather, as a business persona and even more, as a member of the community at large. I remember my father speaking that day and talking about his relationship with his father, how he wanted to reassure people that our business would go on. Honestly, there were people who wondered whether the business should continue. How often do family companies survive beyond the first generation, and as you get further along, the odds are even slimmer. My grandfather was the business. He obviously had talented people around him but he was the business.”
When his grandfather died, Peter was in his second year of law school and wasn’t considering entering the family business. But the funeral and the impression it made were a turning point. “It may have been subconscious at that moment, but it became conscious shortly [thereafter],” that deep down, he was destined for the family business. He did clerk for a judge and was a summer law associate, but around then, his father asked him if he would think about joining the business.
“As the generations go on, more family members have been coming into the business,” Cassie observed. “My grandfather built this business. My father had the ability to look to others and that notion has stayed with us.”