Wednesday, June 08, 2005

Kerbel, you have some Chuztpah.........

expecting to get paid and all that fancy stuff!

Just got turned down for a financing assignment we were bidding on (a nice little financing of about $2 million) based on the fact that we expected to get paid for our work. Let me explain:

Prescott Thackery functions as both a direct funder and as a financial advisor, depending on the situation. In the transaction we were bidding on we were to be functioning as an advisor. After we tendered our proposal to the client, they came back to me with the following response:

The major reason for declining to move further with your proposal was the
request for up front monies

None of the other parties we are dealing with made this request. All of them have a no success, no fee form of proposal


My response to the would-be client was:

If you are dealing with intermediaries, then they are simply being
compensated by the lender, who builds the fee into the cost structure of the
transaction. This creates an inherent conflict of interest as the
intermediaries are going to be looking for the funding source that pays them the
best fee for piecing together the deal, rather than the lowest cost of funds for
the client.

Typically the fees on A/R financing transactions are based on the size of the monthly discount, the larger the monthly discount, the bigger the fee. In most situations, the fee is 10% to 15% of the monthly discount rate.

I prefer the transparency of my client knowing how I am getting compensated. My
experience in finance, like most things in life, is you get exactly what
you pay for.


So much transparency!

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