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Published Birmingham BUSINESS JOURNAL
March 14, 2003

Curbing the Cash Crunch - Porter Capital Finds Success Lending Money on Unpaid Orders
By Leslie Zganjar / Staff

When the owner of Birmingham based GRITS (that stands for Girls Raised in the South) saw that her logoed clothing and gift line was going to take off quicker than expected, she didn't go the traditional route for the capital needed to handle that growth.

On the suggestion of her accountants, Deborah Ford instead turned to Porter Capital Corp., which specializes in accounts-receivable financing.

Ford says she needed capital right away to buy more materials and hire additional workers "to fill orders that were coming in fast." But since she hadn't yet been paid for those orders, cash flow was a problem.

"We were growing so quickly," Ford recalls of those early days in 1997. "Having a company like Porter Capital made the difference."

Founder and president Marc Porter says accounts-receivable financing is especially helpful for small, young companies such as GRITS that have solid business concepts but lack the requisite business history and cash flow on which banks typically lend. Porter says during a cash crunch - as is common with unex¬pected growth, hard times or periods of expansion - accounts-receivable financ¬ing provides quick capital, and owners don't have to give up equity in their com¬panies or put their businesses in debt.

Here's how it works. Clients sell their accounts-receivables - sales they've made but for which they haven't yet been paid - to Porter Capital, and if those accounts meet certain criteria, the client receives a loan or line of credit, some¬times overnight. Porter Capital is repaid when the account invoices are paid.

Offices in four states
The company charges a fee for its work, which Porter says amounts to a small percentage of the receivables it purchas¬es. In addition, Porter Capital provides daily, weekly and monthly reports to clients about collection activities.

Since opening its doors more than a decade ago, Porter Capital has provided, among other deals: $200,000 in startup funding for Open Gate Media in Birmingham, which does business as Portico magazine; a $500,000 line of credit to RockSolid Industries, a local manu¬facturer of architectural stone; $600,000 to an optical company in Tampa, Fla. to purchase new retail space; $1.5 million to a specialty food company in New York to launch a new line of low-fat products; and it helped a Long Island software company meet payroll so it could land a multimillion-dollar contract with AT&T.

Porter Capital maintains offices in New York City and Ridgefield, Conn., in addition to its home office in Birmingham. It employs 20 people and generates annual revenue of between $100 million and $150 million.
Pounded the pavement
Porter started the company with his brother, Don Porter, and a colleague, Ron Williamson, in 1991 after reading an article in a financial magazine about accounts-receivable financing. It wasn't a new concept; Marc Porter says its origins can be traced to the early American colonists. But accounts- receivable financing wasn't being done at that time in Birmingham and wasn't prevalent across the country, he says.

Porter attended a seminar in Houston and returned to Birmingham to pound the pavement. He went to trade shows. He made hundreds of telephone and sales calls - "327 of them before I sold the first service," he says

The early years were as much about educating the business community on accounts-receivable financing as they were about getting the business off the ground. Porter says he also had to con¬vince investors to put money in his firm and bankers to provide lines of credit.

"This type of financing had been done. Banks did a limited amount. But it's a dif¬ferent type of lending and a different way of doing things," Porter says. "It's not like banking school where you're taught a certain way to loan money - that there needs to be good credit, positive cash flow and a business history."

Credit lines exceed $23 million
Porter Capital looks for several key elements in potential clients: strong management teams and committed owners; accounts- receivables with stable cash flows from service, distribution and manufacturing companies; and annual sales or revenue between $1 million and $20 million. Porter Capital typically provides between $50,000 and $1 million in financing and may take on partners for funding in the million-dollar range "so that we're not taking all the risk," Porter says.

Today, Porter Capital has nearly 80 clients nationwide, most of them located east of the Mississippi River. The Porter Group, which includes Porter Capital, Porter Bridge Loan Co. and CapitalPartners Leasing Inc., has lines of credit totaling $23 million with eight banking institutions, in addition to investor money.

Porter Bridge Loan Co., which Porter started in 1994, is a direct bridge lender to corporations, providing mortgages rang¬ing from $100,000 to $5 million and with terms from several months to two years. The loans typically are used to help fund acquisitions, to buyout a partner or for tax situations.

Three years ago, Porter started Capital Partners Leasing, which leases machinery and equipment to businesses throughout the Southeast.

Porter doesn't have a banking or lending background, which he says is "sometimes a hindrance, sometimes a help," but he's always been interested in finance.

He grew up as one of seven children in Gallion, Ala. His mother managed three dairy farms, and his father started Relco Inc., a distributor and brokerage services company to the U.S. military post-exchange system, in Demopolis in 1948. Relco represented such manufacturers as Oneida Ltd. and Sunbeam Corp. and worked to get Oneida's stainless steel and silver-plated flatware and Sunbeam's small home appliances into the military's retail stores worldwide.

Porter says his parents "instilled an entrepreneurial spirit in all of us," and today all of his siblings are in business for themselves.

After graduating from Auburn University with a degree in business administration, Porter moved to Texas as a regional manager for Relco. Three years later, he moved to Birmingham as Relco's Southeast regional manager and later served as the company's executive vice president.

In the late 1980s, he began thinking about starting his own firm and in 1991 launched Porter Capital.

GRITS, meanwhile, remains a client. Ford says whenever she gets a large order, she goes to Porter Capital for financing.

"What I've learned in business is that you look at the person who runs the company or who owns the company, because it all starts at the top. And the top of Porter Capital is Marc Porter," she says. "He's a wonderful businessman, and Porter Capital is a wonderful company."