Factors on the Ground: Addressing the Immediate Challenges of COVID-19

As COVID-19 impacts every aspect of business around the globe, we’ve been gathering first-hand perspectives from a wide variety of factors. This week we spoke with Eric Belk, vice president of Match Factors in South Carolina, which specializes in transportation factoring; Brent Chambers of CapitalPlus in Tennessee, which specializes in factoring for the construction industry; and Tania Daniel of ENGS Commercial Capital in Alabama, which works with a wide variety of industries and company sizes. Here’s what they’re seeing as they work on the front lines of funding small businesses across the country.

Q. With all the impacts of COVID-19, what challenges are you seeing among your client base?

Eric Belk: Since we serve clients in the transportation sector, most of our clients benefitted from the initial surge in freight demand resulting from stores stocking their shelves with toilet paper, grocery items and other essential products. But now as the COVID-19 crisis continues, freight is significantly tapering off. Some of our clients will be in a better than position than others to absorb the changes. Dry goods, produce and refrigerated carriers will still be able to move freight in this new market; however, intermodal and auto haulers, for example, will be severely impacted.

Brent Chambers: Construction has been deemed an essential industry and therefore most of our clients are continuing to work with limited delays. There are a few municipalities hit the hardest by the virus where all construction has halted and this is where we are seeing the biggest impact. In areas where construction has continued we are seeing a slow-down in collections.

Tania Daniel: The biggest challenge to our client base is the impact on their customers. Many businesses are paralyzed while waiting to see if they will be approved for any of the SBA programs such as the EIDL and the PPP. Not knowing if and when they will be approved or how much money they will actually receive makes it difficult for a company to plan for its short-term cash flow needs. That uncertainty is causing account debtors to manage their cash flow by extending payment terms. There are also certain industries where the ability of the account debtor to survive the pandemic is of concern. All of this creates a ripple effect, putting additional pressure on our clients during an already stressful time.

Q. What are you doing to help small businesses respond?

EB: First, we are remaining open and continuing to serve our clients. Truckers need working capital and cash flow in order to operate, and our country needs trucking companies to move essential freight. It’s imperative that our clients — truckers — can continue to factor their receivables. Secondly, we are making things easier for clients to conduct business with us during this crisis by simplifying some of our submission and funding guidelines in order to get capital to them faster. We are also working longer days and assisting customers outside of normal business hours.

BC: It’s important that we communicate frequently that we are still funding, even in these difficult times, and that clients can reach out to us at any time for advice. We have been funding in the construction industry for over 20 years and several of our staff managed businesses in the construction industry and through difficult financial times. Sharing this experience is extremely important. We are putting our collective experiences in a blog series that offers strategies for managing through these tough times.

TD: Between ENGS’ equipment finance group and our working capital division, we finance tens of thousands of small businesses who need help navigating these unchartered waters. We have assembled a team dedicated to learning every detail of the EIDL and PPP programs so we can help clients maneuver through the ever-changing programs and guidelines. As part of the Mitsubishi UFJ Lease & Finance company, we can serve as a resource and reach out to the broader Mitsubishi organization and to our network of trusted finance partners to help businesses find the perfect solution for their situation.

Q. Are you doing anything different than what you usually do?

EB: We are taking proactive steps to ensure the safety of our customers and employees. Most of our office staff has transitioned to remote workplace accommodations, and we have limited in-office staff to the bare minimum, serving local customers by appointment only. As far as operations, we are relying more on technology to conduct meetings and process invoices. Similar to how 9/11 changed airline travel, I firmly believe COVID-19 will have a lasting impact on how businesses will be structured in the future. You will see companies using more technology and embracing telecommuting since the current pandemic required companies to quickly adopt these platforms.

BC: Although we are considered an essential business, we asked all staff to work remotely in order to keep them and their families safe. For the business, we implemented a three-part COVID-19 Client Monitoring Plan. The first part is focusing more on up-front prospect/client screening with the goal of understanding the pandemic’s potential impacts on their business to screen out troubled prospects before they get into underwriting. The second part is keeping in close contact with our current clients, checking on the status of their jobs, their supply chains and what they are hearing from their clients about schedules and payments. Third is looking upstream at the company owners and how they managed the 2008-2009 financial difficulties. If the owners had a history of pulling up stakes and leaving their general contractors, subcontractors and suppliers to fend for themselves, we do not want to fund projects with these owners.

TD: We have been proactive in anticipating the shifting needs of our clients as the market continues to change. Our working capital division is providing cash flow relief by extending invoice eligibility days for existing clients whose customer base is most affected by the mass shutdowns. We are being extremely flexible when partnering with businesses to ensure the programs we customize will be able to support them through any condition. We are also providing short term working capital facilities to the market for those businesses who need help right now but are uncertain about the future. I anticipate we will continue to evolve throughout this situation in response to the needs of small businesses.

Keep an eye out for more Factors on the Ground to hear perspectives from around the country and from factors serving different industries.