Chocolate babka from Lilly's Baking Co. at Brooklyn Brands.

Apparel and fashion have always been Rosenthal & Rosenthal’s bailiwick, but the company has been diversifying its client base in an effort to reach a broader demographic and support other marketplaces.

“In the last decade, we have been successful in servicing the gift and home, furniture, food and beverage and consumer electronics industries. The goal is always to reach businesses in industries where we believe we can have a meaningful impact,” said Cassie Rosenthal, senior vice president of Rosenthal & Rosenthal.

Recently the company has been funding e-commerce businesses. “It’s very important for us to stay relevant and make sure we can evolve to meet the current needs of today’s entrepreneurs,” she said.

Companies such as Global Product Resources, a gift and home decor firm based in San Diego; Brooklyn Brands, a Bronx-based bakery; Mad Style, an accessories, gift and print business based in Chicago; 8 Oak Lane, a housewares firm based in Sewall’s Point, Fla., and Guideboat Co., a women’s and men’s sportswear retailer and boat manufacturer based in Mill Valley, Calif., are just some of the firms that use Rosenthal & Rosenthal’s services – representing a snapshot of their geographic and product diversity.

In interviews with some of their clients’ top executives, they all said they appreciated that Rosenthal & Rosenthal really took the time to understand their businesses, and the relationship felt more like family than banking. They said they preferred using them for their financial needs rather than a bank.

“They’re a great partner to work with,” said Jeff Amon, vice president of Global Product Resources. “We don’t get the feeling we’re at odds with them. They understand what we’re doing, why we’re doing it. They take the time to really learn the business. They’re at our trade shows. A banker couldn’t do that.”

Ken Kleiner, executive vice president and chief marketing officer of Rosenthal & Rosenthal, cited several advantages for using a factor rather than a bank.

“A factoring firm offers a more hands-on solution for companies to work through their cash flow needs,” he said. “In addition, for a company like ours that has an 80-year history, we have seen business patterns and scenarios over and over, and through these experiences are able to offer solutions that have resulted from those experiences. The advantages are lack of heavy bureaucracy, quicker decisions, more hand-holding and immediate access to decisions.”

Asked about the downside of working with a factor, he said, “At Rosenthal, we train our employees in a culture that is respectful of client relationships with their customers during the invoice collection process. For large companies, there may be the concern that a factoring company will not have enough capital to fulfill their borrowing needs. However, this is not an issue for Rosenthal, as the company has been profitable since its inception 80 years ago. Based on our longstanding relationships with numerous banks, we are able to handle almost any size loan because of our large capital base.”

According to Amon, his giftware company couldn’t do the things it does without Rosenthal. “We’ve had so many banks take us to lunch, when they hear the deal we have [with Rosenthal] they say they can’t touch it.”

Because there are banking laws in place, banks aren’t allowed to do the things that Rosenthal & Rosenthal can do, he explained. Since they are not a bank, they are not bound by banking laws, he said. “They can lend us on inventory and receivables. When we get an invoice, we assign that invoice to Rosenthal electronically, and we can borrow against it. Once they approve us, they protect us in case it isn’t paid. I’ve eliminated responsibility from that. They have much financial savvy and they can intuitively approve a client for their creditworthiness. Then the collection of that receivable is their responsibility and not mine,” said Amon.

What he appreciates about the working relationship is the flexible financing. “They know my business and understand the seasonality. They understand how things work in our business. We can say, ‘We really need $200,000 today.’ There’s no way a bank can compete with that. I don’t think legally they can,” he said.

Amon explained that his company wants to develop new products and have bigger customers, but it becomes daunting for a small manufacturer. “You want so badly to have a bigger business, but when you get it, it’s dangerous for you and challenging for you to fulfill. The larger accounts are not easy to work with in many regards, and one of which is they don’t always pay. By having someone say to you, ‘this chain is good for credit and this one is not,’ it weighs more. Once they approve it, they approve the responsibility for that collection.”

Amon said his company has a relationship with Rosenthal’s New York office. “I get really good rates for my financing, and they’re not gouging anything. It’s a very sustainable partnership,” he said.

Fred Schmidt, cofounder of 8 Oak Lane, also works with Rosenthal & Rosenthal’s New York office. The company, which was launched in 2016, produces 8 Oak Lane home decor and gifts, and Shade Critters, a line of sun protected-swimwear for kids.

A look from Shade Critters.

A look from Shade Critters.  Courtesy Photo

“We work with them in the gift area, which is a new category for them. Factoring is much more common in the apparel space,” said Schmidt.

“We sell it, we ship it, we give them the paper and they collect on it,”  he said. “They’re like a family. It’s a family-run company. I work with Cassie.”

What Schmidt especially values in the relationship is the way Rosenthal & Rosenthal has an understanding of his business. “They feel like they’re a partner in the business, compared to a bank. They come to the trade shows and get a pulse on how your business is moving and trending. They will take more risks than maybe a bank would.” He said that his business began with zero customers and grew to 3,000 in over 18 months.

“We started from scratch and created a beautiful collection of accessories at moderate price points for independent retailers. It’s Instagram-worthy and helps these people bring brands to life,” he said. He noted that 8 Oak Lane is a modern, home decor gifting and holiday merchandise brand for the Millennial-minded girl. “For the 25- to 30-year-old, they’ve been pinning for years,” he said.

A style from 8 Oak Lane.

Some gifts from 8 Oak Lane.  Courtesy Photo

 

Shade Critters is sold at stores such as Nordstrom, Bloomingdale’s and Saks Fifth Avenue.

Schmidt also observed the forward-thinking nature of Rosenthal & Rosenthal. “They say, ‘We’ll give you as much money as you need. If we believe your business is growing, we’ll take the risk.’ They let us borrow against what we ship. So if we ship $100,000, we can borrow against that. We can borrow 95 percent of it.” With a bank, they might base it on last year’s sales, said Schmidt. “If we had sales of $3 million, a bank would say, ‘Here’s a $500,000 line of credit. Rosenthal would say, ‘Where are you at today?’ If I had a $5 million order, I can borrow $5 million. They’re a lot more flexible as you grow.”

Schmidt also said that Rosenthal & Rosenthal allows him to take on more risk because they can ensure the receivables when necessary. “If a retailer is having some cash flow problems, Rosenthal will ensure the receivables. They will make sure we get paid regardless,” he said.

Schmidt interfaces with Rosenthal & Rosenthal on a daily basis. “Every day we ship, we upload our invoices to them. They’re super supportive. They’re super nice people. They’re trying to reach out and assist young entrepreneurs who may not be in the traditional factoring channels,” he said.

What he stressed was that Rosenthal & Rosenthal equips a company based on its future growth, not necessarily past sales. “They’ll assess you on a monthly basis based on sales trends, opposed to a traditional bank that looks in the rearview mirror,” said Schmidt.

Doug Stein, ceo of Mad Style, a Chicago-based gift and apparel manufacturer, has been working with Rosenthal & Rosenthal for more than three years. “What I love about them is they are ridiculously good people. They are an enormous company in a big, tough industry,” said Stein. “They have this approach like it’s more than just a business — it’s about relationships.”

He said they care about them as people. “They make you feel it’s less about the money and more about the people,” said Stein.

Mad Style manufactures women’s accessories, men’s gifts and accessories and has a print-on-demand division. They’re a business-to-business supplier to 5,000 to 6,000 retailers around the country, and import products from overseas. “When it comes to buying the fabric, they help you bridge the gap. They help with materials and orders. They continually look at our business outside normal parameters,” he said. “They go to all the trade shows and they make sure they spend time with us,” said Stein, adding that “they take us out to dinner at every show.”

Accessories from Mad Style. 

His firm became acquainted with Rosenthal & Rosenthal when he found out they were looking to expand into the gift industry. They met a few times in Atlanta. The company had been using a banker for its factoring needs “and they [Rosenthal] won us over.”

Stein explained that last year, the industry saw a lot of challenges and a downturn in retail, along with a lot of store closures. “There were a tremendous amount of challenges, and they were there for us as partners. They understand the business so well. They have so much experience and can guide you in some turbulent times,” he said. Stein noted that few times a year, Rosenthal & Rosenthal will loan him money to buy goods if it has a large purchase order.

Paul Schuldiner, senior vice president, division head of Rosenthal Trade Capital, said his client base looks to its purchase order financing division as a consultative resource on business matters, ranging from supply chain management, which includes purchasing product from foreign and domestic suppliers, logistics, product quality control, as well as distribution and fulfillment.

“Our purchase order financing group has a long history of deep industry operating expertise in all matters related to the cash flow requirements of sourcing, financing and distribution of apparel, accessories, footwear and for that matter all types of consumer products, across the globe,” said Schuldiner.

Many times his client base wants to discuss how to structure a particular type of transaction to mitigate their supply chain risk before they enter a transaction, he said. His division is involved in purchase order financing, which is a form of production financing required by clients to obtain the product required to fulfill their sales.

He said that depending on what state their clients’ trade cycle is at within the year, “we can be in daily or weekly contact and then less frequent until there is a transactional financing requirement.”

Schuldiner said the company offers a “one-stop shop” solution by partnering with factory or asset-based lending divisions which can provide financing of a company’s accounts receivables. He said that their purchase order and production financing is flexible and designed to work with a company’s existing factor or a bank. He added that his firm works in conjunction with other lenders when they are called due to their expertise and history.

Schuldiner also noted that since the division specializes in inventory financing, it is capable of providing assistance to finance inventory for importers that need international pre-shipment financing as well as in-transit financing of goods and logistics costs. “We can also consider assisting with work in process financing for companies that require inventory financing for e-commerce distribution. We perceive this to be a growing need for our client base as most consumer product companies are all looking to execute on an omnichannel distribution strategy,” he said.

Stephen Gordon, founder and ceo of Guideboat, said he’s been working with Rosenthal & Rosenthal for under a year. “They’re assisting us in growing our business in financing and helping to provide working capital. We’ve been growing 30-plus percent a year,” he said. The firm is going into its fourth year.

Guideboat designs and produces 80 percent of its apparel offering. Because of lead times, it’s rather capital-intensive. The company is a catalogue-driven online business. “The vast majority of our revenue is from e-commerce, but we do have four retail stores as well,” he said.

Guideboat’s early spring catalog. 

Gordon said Rosenthal & Rosenthal has been most helpful in providing working capital for the corporation in general. Gordon, who previously founded and ran Restoration Hardware and was ceo of the Sundance catalogue division, said, “I’ve worked with a lot of financial institutions, and they [Rosenthal & Rosenthal] were straight shooters from the very beginning. What they said they’d do, they did, and they were incredibly fair and seem like they have our back.”

He uses Rosenthal & Rosenthal for asset-back debt financing. Guideboat doesn’t use it for factoring. While they have a relationship with the New York office, his company deals with the L.A. office on a daily basis.

Guideboat also sells Adirondack guideboats, which were first designed in the 1850s. They’re the fastest fixed-feet rowboats in the world, Gordon said. Boats are a small percentage of the business, accounting for about 5 percent. The apparel business, which makes up the lion’s share, is equally divided between men’s and women’s. This year, Guideboat will mail five million catalogues to consumers nationwide. “We’re still small in the scheme of things, quite frankly. We’ll mail 12 to 13 different catalogs over the course of the year,” he said.

The company primarily produces in New York, the U.K., Canada, Romania and Portugal. “We believe the degree of authenticity and quality is a step above. We produce a fair amount in Italy as well,” he said.

Gordon will frequently attend trade shows for the accessories that they sell. While they produce and design 80 percent of their apparel, they buy accessories, footwear and bags that are part of their merchandise mix.

Sydnee Breuer, executive vice president and Western region manager, at Rosenthal & Rosenthal, said the team travels to numerous trade shows to get a better understanding of the business. Besides MAGIC in Las Vegas, the trade shows they attend are Agenda, Outdoor Retailer, Furniture Markets (both Las Vegas and High Point), and Natural Products Expo (food), she said.

She noted that categories the firm is looking to get more involved in are furniture, food and beverage and beauty products. “These are all consumer products which is what we know well, so they fit nicely into the retail distribution/consumer products knowledge base that we have,” she said.

Mickey Klein is partner and founder of Astor Group, an M&A advisory and investment firm, as well as ceo of Brooklyn Brands, whose brands include Schick’s, Lilly’s Baking Co., Mezonos Maven, Smilowitz Bakery and Mehadrin.

Klein said he was working with Rosenthal & Rosenthal for a dozen years getting financing for Astor’s clients, as he does a lot of consumer-facing deals in the apparel, home, personal-care and fragrance industries. About two years ago, Astor acquired Brooklyn Brands, which he now runs as ceo. “Naturally being a business owner, I’ve given Rosenthal all this business for my clients, so it was time for me to use them personally now,” he said.

“Rosenthal & Rosenthal is Brooklyn Bakery’s asset-based lender for working capital needs as we grow, and they’ve been fantastic,” he said. “They treat you more than a piece of paper. When we bought the company we needed an ABL lender, and we had a lot of guys who wanted our business, quite frankly, including who we normally bank with. We said no, we wanted to go with somebody who would treat us like family. Because we’re also growing so rapidly, we needed to have flexibility. We needed someone to say, ‘As your needs grow, we’re here for you,’ without getting stuck in committee for 90 days,” said Klein.

When Brooklyn Bakery has a big season coming up and has to increase their line, Rosenthal says, “‘absolutely, here you go, show us the numbers,'” Klein said. “It doesn’t get held up. They take an educated approach to working with their customers.”

According to Klein, some parts of their bakery business are highly seasonal such as Passover and Rosh Hashanah and there’s a big push, and they have to build up their inventory.

“For Passover, for example, there’s no way we can produce enough to ship in one month. They start building inventory a couple of months in advance and they take up a lot of the working capital. They have the sales order, and they advance you. It’s not like apparel, where you miss the mark and people don’t want to buy it, and you’re out of luck. This is food. We’ve already got the orders, it’s going to get consumed. It’s a wonderful business,” said Klein.

He understands that Rosenthal & Rosenthal is looking to do more in the food space. “I was a great resource for them,” Klein said. “I know how to work with them, and they know how to work with me. It’s been exactly what I hoped for,” he said.

Begun in Brooklyn, the bakery recently moved into a new 50,000-square-foot facility in the Bronx. There’s a sign there that says, “Welcome back to Brooklyn.” They have kept their facility in Brooklyn, as well. They like to say they work 24/6 since they’re closed on Saturday for the Sabbath.

The company, which is well-known for its babka, marble cake, hamantashen, rugelach and black and white cookies, sells to retailers such as Whole Foods, Stop and Shop, Publix, Ralph’s, Costco, Trader Joe’s and B.J.’s. “We deal mostly with big, national accounts. We’re spreading our babka joy all around the country,” he said.

Black and white cookies from Lilly’s Baking Co. at Brooklyn Brands. 

Klein and Brooklyn Bakery started with Rosenthal & Rosenthal a year-and-a-half ago and has already increased their line because of their growth. “It was an easy process, it was a few conversations back and forth. They’re in the business of deploying money. It always astonishes me when I deal with larger banks and they’re in the same business, and you just can’t get more money out of them. They’re working under these archaic rules. You’re dealing with an ocean liner and they don’t turn that fast. When I deal with Rosenthal, they’re a significant, meaningful bank and they operate swiftly and quickly.

“They’re here to help you grow,” he said.

Discussing what they look for in a potential client, Cassie Rosenthal said, “When we look at a potential client, we like to see passion, a great story and enough collateral to support that. The great thing about being privately held is that we can go into every deal with fresh eyes and if we can make sense of how to structure the deal, we’ll do it. At Rosenthal, we can be creative and that has been invaluable to our clients.”

The company believes that it’s beneficial to take on several clients in the same category in order to become familiar with the overall business.

“The more companies you have in a particular space, the better off both the client and lender are,” said Rosenthal. “Obviously we have to manage our exposure, but along with that comes a greater knowledge of an entire industry, their customers, and ultimately their day-to-day and longer-term needs.”

As for how the company markets itself to those outside of New York and in different industries, Rosenthal said they don’t do much in the way of traditional advertising, but they do some digital marketing targeted at various industry trade publications as well as more regional outlets to cover other parts of the country. “But what has been more successful is just physically getting on a plane and going to trade shows or conferences and meeting both entrepreneurs and financial service professionals and educating them about who we are and what we are all about. To that end, we have found success following speaking engagements or webinars we have hosted. Education is key when you are prospecting businesses who are unfamiliar with your services. And while developing those relationships may take longer, it is really worth it in the long run.”

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