When a young designer gets that first big order from a retailer, it’s a dream come true — provided the designer has the wherewithal to fill the order.
That’s where the Rosenthal & Rosenthal purchase order financing team, known as Rosenthal Trade Capital, enters the picture.
“We fill an incremental short-term working capital need,” explained Paul D. Schuldiner, senior vice president, manager of the purchase order finance division.
“Say a designer in apparel or accessories all of sudden gets a breakthrough $10 million order and needs money to get the product made and shipped to the U.S. customer. That could cause a significant cash strain to a company,” said Schuldiner. Purchase order financing enables companies to take advantage of large sales opportunities that they otherwise would have had to pass on. It’s a great tool for both a growth story and an up-and-coming designer.
“But it doesn’t have to be just that. You may have a more mature company that’s hit a bump in the road, a downturn, or maybe the company obtained a new license and needs short-term working capital,” he continued. “Our clients are typically involved in product — it could be an importer, a designer, a wholesaler, a distributor, someone in e-commerce, and fundamentally, they don’t have sufficient financing to procure inventory. We are essentially providing pre-sold inventory financing at 100 percent of the landed cost, which includes funding the product cost as well as ancillary imports costs such as ocean and air freight, duty and other logistical costs involved in the supply chain. The client doesn’t have to grapple dipping into the cash flow.”
The purchase order team helps fund the production and movement of goods around the world, dealing with logistics, freight forwarders, inspections for quality control and customs regulations. When coupled with factoring, the purchase order finance division provides a one-stop supply chain solution for purchasing inventory through to delivery and invoicing of sales to brick and mortar as well as e-commerce retailers.
The purchase order finance team at Rosenthal & Rosenthal began operations on July 1, 2016, but it wasn’t out of the blue. “It was a a result of the relationships I had with senior management here,” said Schuldiner. “I had been in the purchase order finance space for over 22 years and frequently I would get calls from the various members of the Rosenthal team. We’ve been working on transactions together for years, in the New York office and the L.A. office. Over that time period, we developed a great trust and rapport. Ultimately they became attracted to the business,” enough so to start one of their own.
“Rosenthal is very good at reacting to their clients’ needs,” Schuldiner said. “They were seeing more and more of these requests from their client base, or prospective client base. So in the early part of 2016, they approached me to start this team. It began on July 1 of 2016.” Schuldiner spent over 20 years of his career in purchase order financing first at Transcap Trade Finance, where he became a principal and sold the business along with his partners to a large financial institution.
To jump-start Rosenthal’s purchase order business, Schuldiner brought along a colleague from a previous job, Jennifer Draffkorn, senior account executive, portfolio manager. He’s also brought in a collateral analyst and an account executive.
Currently, Rosenthal’s purchase order financing division has more than 30 clients. Compared to factoring, purchase order financing can be used on a more transactional, seasonal basis or on a spot basis as needed. Rosenthal’s average purchase order relationship lasts two to three years, depending on the growth trajectory of the client and the ability of conventional working capital financing to fill their overall borrowing needs. Purchase order financing is used as a bridge financing tool and is an alternative to raising permanent capital for a short-term inventory financing problem.
The division works with men’s and women’s apparel firms; licensed products; footwear; accessory brands; industrial products such as computer hardware; beauty, food and beverage companies; and government contractors selling equipment, supplies, uniforms and other products. Clients range from $1 million to $150 million in sales. Typically a company that needs purchase order financing borrows anywhere from $250,000 up to $20 million at any point in time.
In one case, Rosenthal’s purchase order team enabled a private equity firm to acquire a footwear/active lifestyle company just when it received a very large seasonal order from a big box retailer. “There was a tremendous need to build inventory over a short period of time, over four months. They were able to use purchase order financing to leverage the cost of the goods at 100 percent advance rate which enabled them to fund part of the acquisition cost of the company by using less of their own capital for the inventory,” Schuldiner said.
In another case, a luxury urban line geared for young men found itself attaining licenses and tremendous sales orders, but it wasn’t able to buy the inventory to fill the orders. Rosenthal helped finance the entire supply chain so the company didn’t have to raise additional capital.
“There is never a dull moment,” said Schuldiner. “I love dealing with entrepreneurs, helping them through the various challenges of growth or the challenge of a turnaround. I love hearing their story, and figuring out if our financing can help solve the problem and being able to structure a solution.”