On July 11, Rosenthal & Rosenthal, Inc., announced the launch of Rosenthal Trade Capital, a new division that provides alternative inventory financing solutions to cash-constrained companies. The new group will be led by finance veteran Paul D. Schuldiner and will add a suite of new offerings to complement the 78-year-old firm’s already robust factoring and asset based lending business divisions.
A seasoned financial executive, Schuldiner joins Rosenthal as Senior Vice President of Rosenthal Trade Capital, bringing nearly 20 years of experience in the purchase order and trade finance business. In his new role, Schuldiner will be responsible for driving the overall business strategy for Rosenthal Trade Capital.
As a partner and Managing Director of Business Development at King Trade Capital, Schuldiner was responsible for providing purchase order and contract finance for small to middle-market companies. He previously held a senior leadership role in the Purchase Order Finance Group of Wells Fargo Capital Finance and was a principal at Transcap Associates for 11 years before Wells Fargo acquired it in 2008.
Schuldiner discussed the new division and his priorities as he leads the division with Michele Ocejo, editor-in-chief of The Secured Lender.
What will be the focus of Rosenthal Trade Capital?
The focus will be on offering an alternative inventory financing program and products designed to support the incremental financing needs of importers, exporters, wholesale distributors, light manufacturers and assembly businesses. We will also offer work-in-progress financing. It can truly be a complete supply chain solution. Geographically, obviously, the core of our business will be in the United States, but we will also provide funding in Canada as well, and our focus is typically on closely held companies that have purchase orders, contracts, and other finite sales opportunities, but don’t have the sufficient liquidity to purchase and fund the inventory required to fill these orders and contracts. These kinds of companies would first go to their conventional financing sources or trade credit, but both may be insufficient to take advantage of those opportunities. The next alternative usually is to raise equity and equity may not be a preferred option for a lot of these companies. They don’t want to give away a percentage of the ownership of their company because they need bridge financing to alleviate a short-term working capital deficiency. Purchase order financing is an option that really helps to fill that gap in a company’s capital structure.
Why did Rosenthal decide to launch this new division now?
What about purchase order financing made it attractive to Rosenthal?
Rosenthal has obviously been involved in factoring and asset-based lending for many years and have a tremendous base of clients as well as prospective clients that know the Rosenthal name. And that name has become synonymous with quality and responsiveness and the ability to provide capital to companies going through rapid growth or even a restructuring or turnaround situation. Rosenthal saw the opportunity to add this type of product to its array of financing products that they already provide because they were getting requests from clients and prospective clients day in and day out for this type of financing. It really made sense to offer this as a distinct product line that could be used as required, instead of as a temporary measure. If the company really needed this type of product several times a year, or year after year, because of cash flow issues associated with rapid growth, seasonality, or turnaround, it made sense to have a dedicated team with specific product expertise that could assist clients and prospects with needs that went beyond temporary overadvances.
What personally attracted you to this new division?
I was fortunate for many years to be working in tandem with the Rosenthal family and employees, both in New York and in their California offices, on many transactions. My experience was always extremely positive and working with the Rosenthal team made the execution of providing the financing seamless. I’ve seen it work for the benefit of our mutual clients in the many years that I’ve been doing purchase order financing.
That being said, I really saw that, for Rosenthal, because of its place as one of the leading factors in the United States and abroad, as well as a growing asset based lender, this product made a lot of sense to add on, to complement and supplement these existing product lines. Rosenthal has an impeccable reputation and they have the capital, commercial finance expertise, and infrastructure support, so this opportunity really attracted me as a way to add my expertise in PO financing. It was a good, logical fit for everybody and I thought that Rosenthal and I, would be a great fit for each other to launch this product and be able to assist existing clients and prospective clients that need this type of specialized financing.
As senior vice president, what are your immediate priorities and goals?
My first priority was to add one of my colleagues, Jennifer Draffkorn, who has joined me and has worked with me in the past at Transcap and Wells Fargo. We are building an experienced team and because of that I think that we’ve started a good foundation to make sure that we respond to new clients immediately. But the key is to make sure that people in the marketplace know that Rosenthal now offers this product as a standalone business. We will work not only with Rosenthal clients, but we’ll continue to work, as I’ve done in my history, with other factors, asset-based lenders and banks where we can offer the PO finance product while they continue to offer their senior debt financing product. And we do that because, quite honestly, Rosenthal has been a participant with other banks and factors and asset-based lenders through its history and Rosenthal saw the value of not disrupting those relationships and being able to continue to work in tandem with other lenders. It’s something that they are very comfortable with and they also realized that I am very comfortable with it.
I’ve been gratified by the positive feedback that I’ve received from people in the financing community. Now that I’m at Rosenthal, they know that we have the capital to be able to execute, they know we have the team that understands the business of PO financing, and they’re very comfortable because of Rosenthal’s reputation to work collaboratively when that’s required. They can feel comfortable that we can work seamlessly together without any difficulty and work as a team to solve the client’s financing problem.
How do you envision Rosenthal Trade Capital’s position in the marketplace?
Obviously our end goal is to be the preferred choice of any prospective client, as well as a prospective lender or intermediary that may be seeking purchase order financing for either the company itself, or for the prospective lender or intermediary’s client. Because of Rosenthal’s reputation and our knowledge of how to originate, prudently structure, and fund in a timely manner, we certainly would like the opportunity to be the preferred choice and to get that call first and be able to respond quickly. We have the ability to do small deals of only $250,000 or a half million, to upwards of $15-20 million. And so I think we envision leveraging the Rosenthal name and reputation as well as the fact that our team at Rosenthal Trade Capital has successfully executed onsmall as well as many of the largest and more complex transactions in the PO financing space throughout our long history in this segment.. We’re going to understand what a prospect’s financing needs are, propose and structure accordingly, be competitively priced and deliver what we promise. If we propose something on a transaction, we’re going to deliver on what we propose. If we can’t deliver it then we won’t propose it.
What factors are affecting purchase order finance right now? For example, are the recent retail challenges having an effect, such as Sports Authority?
Obviously, you have to always be cognizant of the economic climate that we’re operating in. In terms of retail, yes, there’s obviously been some bankruptcies of late that affect importers, that are seasonal businesses, and are selling into a retail channel of distribution. When people think of PO financing that certainly has always been the typical transaction they imagine.
We’re always looking at the end customers that our clients or prospective clients are selling to. And that’s why it’s ideal to also have the in-house capability of providing factoring. We’ve got the depth and knowledge of what’s going on in the retail community so we can be responsive. For me and for our group, that’s an added piece of support that we find crucial when we’re early on in a discussion with a prospect and we’re determining what their needs are.
In general, certainly we’d love to see more rapid growth. There are certain segments, like any economic cycle, that are doing better than others. But I would say what has been impacting PO financing right now, and will probably continue for the near term, is the extensive amount of liquidity in the marketplace across the board from all corners, whether it be banks, finance companies, hedge funds, FinTech and merchant cash advance lenders, as we go up and down what I call the food chain of finance. Obviously that affects pricing and it affects structure. My philosophy has always been, and I think it’s something that Rosenthal believes as well, that we want to get a fair price for what we provide. That being said, we do not want to compromise structure. If we’re going to compromise, we’d rather compromise on price than compromise on structure. History has taught us that typically those who compromise on structure are at risk of being able to fund in more difficult business cycles. Rosenthal has a long and successful history of assisting clients in varying economic and credit cycles and will continue to do so prudently and effectively to the benefit of all parties that we work with.
Michele Ocejo is editor-in-chief of The Secured Lender.