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Data Drive Thru Inc. was on a roll. The Dallas company had received $1.5 million in start-up money from
an angel investor. Its signature product, a tool to transfer data from one computer to another, won an award
at a trade show and landed on shelves at big-box stores like Staples.
But the company hit a financial wall in the second half of last year. A second round of angel funding,
expected to come in at $7.5 million, fell through as credit markets froze. The company was too young to
have the well-established cash flows needed to get a bank loan, and retail customers were taking longer
and longer to payas many as 30 extra days in some cases.
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Keeping It Real
While the generally steady cash flow from receivables appeals to bank lenders, many say they just dont
have the infrastructure or manpower to monitor each borrowers customers to make sure their invoices are
up to snuff. Thats where FTrans Corp. comes in. The Atlanta technology company offers a sort of virtual
clearinghouse for companies, their bankers and their suppliers. A company posts its receivables on
FTranss online system, and FTrans verifies that the invoices are real, giving banks enough information to
lend against them.
Typically a community bank does not have a department set aside to do that, says David Dunbar, the
chairman and chief executive at Synovus Bank in St. Petersburg, Fla., a member of Synovus Financial
Corp.s regional-bank system.
For a bank customer to qualify for a receivables-based credit line, it generally would need to offer full,
audited financial statements, which most small businesses dont have. Indeed, when FTrans first
presented the system to Synovus bankers about two years ago, a few executives voiced concerns about
whether FTrans would be able to sufficiently monitor invoices to make sure they were real, says Mr.
Dunbar. So far, he says, there have been no major problems.
The bank, in an attempt to branch out from real-estate lending, is now aggressively pitching FTransfacilitated receivables lending to new and existing clients, many of whom wouldnt qualify for other types of
commercial loans, Mr. Dunbar says.
Today, a year and a half since Synovus first implemented the FTrans system, more than three dozen
clients from the banks three commercial offices are using it. The bank has a right to choose how much of
each invoice it is willing to advancemaybe 90% for a well-known retailer but only 70% for a lesser-known
company that seems like a greater risk. Borrowers typically pay between 1% and 3% on each transaction,
Mr. Dunbar says. The bank and FTrans each take a chunk of that.
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FTrans also administers a handful of loans on its own. Thats the case for Billy Teagle, president of Atlantabased retail-merchandising company Rocket Retail Merchandising LLC. In October, Mr. Teagle went to his
bank to ask for a $300,000 line of credit to fund a geographic expansion.
They wouldnt give me the time of day, despite having four years of profits, Mr. Teagle recalls.
Mr. Teagle called FTrans, and they set up a line of credit, secured by receivables, with a $300,000 limit. He
estimates that hes financing as much as $75,000 each week through FTrans, inputting invoices into the
FTrans system when he bills clients and borrowing against them until his customers pay. Mr. Teagle says
he had a problem when a client paid a $25,000 bill 30 days late and he was forced to pay the interest on the
loan for the extra time. If multiple customers did that at the same time, it would be a problem. So far,
though, that has happened only once.
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