Working Capital

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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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We discuss KeyBank's services to small and medium sized businesses in Michigan. Key offers both traditional bank loans and venture and growth equity. KeyBank approaches equity both by making its own investments and by acting as an agent for groups of investors.

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Filed under: Ann Arbor, MI | Bill Koehler | Financing Innovation | KeyBank | Tim Gretkierewicz | Venture Capital | Working Capital

 In this segment, Bill Koehler and Tim Gretkierewicz of KeyBank detail the services KeyBank offers to small and medium sized businesses. These businesses may range in sales from just starting up to $20 million.

Often, while potential clients are aware of their own financial needs, they do not really understand how the bank might view their situation. For instance, would the bank issue a line of credit against accounts receivable or seek a mortgage on a piece of property. Essentially, banks are risk averse and make sure there are adequate assets to secure any loan.

Equity tends to be a less risk averse form of finance. KeyBank has the capability to make equity investments through its venture capital branch. It can also act as an agent, putting together groups of investors.

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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.