Huntington Woods, MI

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Mike Semanco, President of Hennessey Capital, outlines how Hennessey assures themselves of the collateral value of their clients' working capital assets. Hennessey uses advanced systems to track performance down to the invoice level.

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Filed under: Financing Innovation | Hennessey Capital | Huntington Woods, MI | Michael Semanco | Working Capital

 Hennessey Capital focuses almost exclusively on working capital finance including working capital lines of credit and factoring. They target "pre-bankable" companies that do not yet have the track record to qualify for bank financing. In this context, the question arises as to how Hennessey assures themselves of the collateral value of these companies' working capital assets. Mike Semanco, President of Hennessey, provides the following insights:

• Often, pre-bankable clients do not have the systems in place to track performance of things like receivables. Hennessey has these systems, and with the client's help uses them to gain a more accurate view of the client's business.
• Once Hennessey has been tracking performance of various assets, it can adjust the terms under which it offers financing to clients. If the assets perform more favorably than anticipated, the financing terms can become more favorable.
• A major issue for firms in Fall 2008 is access to capital. Due to its tracking systems, Hennessey is able to serve a wider client base than most banks.
• Hennessey makes its loans using its own capital as well capital provided by other financial institutions.

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Factoring is like mini loans against invoices. Mike Semanco, President of Hennessey Capital, explains the ins and outs. Factoring is a higher cost source of capital used when lower cost loans are unavailable.

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Filed under: Financing Innovation | Hennessey Capital | Huntington Woods, MI | Michael Semanco | Working Capital

As explained by Mike Semanco, president of Hennessey Capital, factoring can be thought of as mini loans against invoices. As such, factoring is another way to finance the day to day money you need to run your business, otherwise known as working capital.

When might you turn to factoring?

• You have a customer who pays in 60 days when all your others pay in 15. You want the money that customer owes you sooner.
• You have a few slow pay invoices that you need to collect on.

Factoring is a more expensive form of finance. The cost of financing decreases as the assets used to secure loans improve and as the company seeking the loan gains a better track record.

Additional links:

• Charlie Penner of the SBTDC explains the difference between debt and equity financing.
• This commercial hosted on YouTube gives another take on factoring.

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Mike Semanco, President and COO of Hennessey Capital, outlines the fundamentals of working capital finance. Hennessey complements banks by providing financing to companies that do not yet have the risk profile that banks seek.

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Filed under: Financing Innovation | Hennessey Capital | Huntington Woods, MI | Michael Semanco

Hennessey Capital is a commercial finance company that specializes in working capital finance. As we described at the start of this series, working capital is the difference between payables and receivables.  Companies seek working capital finance because the pace at which they can collect on receivables lags the rate at which they must pay their bills. As we discussed with Bank of Ann Arbor, banks will provide working capital finance (also called receivables or inventory financing) to companies that have a good track record.

Hennessy provides working capital finance to companies that are earning revenue but do not yet have the track record to receive bank financing. Mike Semanco, President and COO of Hennessey, highlights the following aspects of Hennessy's operation in this segment:

• Hennessey bases its receivables financing decisions on the company's ability to collect on its receivables going forward.
• The cost of capital is higher with Hennessey because Hennessey is taking on more risk than a bank by working with companies before they have a bankable track record.
• Companies often come to Hennessey because they do not want to take on additional equity investment just for working capital. They would rather use that investment to build infrastructure for future growth.
• Hennessey works with venture capitalists and other sources of early equity to provide working capital finance.

In future segments, we will examine the mechanisms Hennessey has in place to provide working capital finance before a company might be eligible for a bank loan.