The company: Access Capital is a private financing company whose primary business is factoring -- purchasing receivables -- which gives small businesses immediate cash. Factoring is a way for young companies, with light capital reserves, to avert cash-flow crises when their customers don't pay their bills fast enough to cover business expenses.

Access will also take an equity stake in a business that it has come to know over the course of several years, usually after it has some experience with factoring. In addition, Access provides conventional lending backed with collateral to long-standing small-business clients. Access is primarily interested in businesses with significant customer receivables or the potential to generate a lot of cash. In return for financing, companies provide Access with their customer account information, and the factor manages their collections processes. Access will finance only companies involved in business-to-business transactions, such as importers, distributors, manufacturers, and wholesalers.

Access Capital is a national company, but it does all of its business from one office in New York City. It has 40 employees, including seven officers who handle new accounts. The company was founded in 1986 by Miles M. Stuchin, its president. The company currently has 100 clients. "By definition, our companies are undercapitalized before they come to us," Stuchin says. They're typically run by people who are skilled and whose businesses are expanding fast. But either their companies are usually considered too risky for loans from commercial lenders or they may have exhausted lines of credit at their local banks.

The goal: Access Capital focuses on young service businesses and distributors that provide value-added services to their customers. Typical service businesses include temporary agencies, maintenance companies, computer consultants, and security guard agencies. Access won't get involved with any businesses whose receivables might be disputed, such as lawyers, accountants, general contractors, and medical professionals.

Generally, Access prefers working with companies that are less than five years old and that are actively generating orders and selling goods or services to customers. It will finance between $50,000 and $10 million of receivables, representing 75% to 85% of the balance owed the business at two to three percentage points above prime, plus a commission off the top of 1% to 2%.

Access considers its business a financing technique for companies that to banks might look as underdogs. "When an entrepreneur goes to a bank, it lends based on the past and what's on your balance sheet," says Stuchin. "We are betting on their future. We look for talent, and we back the jockeys."

The typical deal: Edmond Grimaldi had just filed for bankruptcy in 1992 and reorganized his business. His light bulb distribution company, Erik Lighting Inc. in Mt. Vernon, N.Y., had fallen on hard times during the recession. Prospects for 1993, however, looked good, and orders were flooding in again. But Grimaldi didn't have enough money to fill them. He turned to Access for a $500,000 factoring deal against a backlog of uncollected receivables, and he got the money within two months.

Today, his annual revenues, which were less than $1 million in 1993, have increased to $12 million. Grimaldi continues his financial relationship with Access, which lends him $500,000 a month to finance his cash flow, using his monthly receivables as collateral. He says the difference between the factoring deal he had before and his current asset-lending arrangement is that he handles his own collections and pays back Access. Grimaldi says his revenue continues to increase at 25% a year. But without financing from Access in the first place, he says he would not have been able to finance his orders from large national chains. "[Access] made it possible. There is no other way I could have done it," Grimaldi says. When asked why he doesn't go to a bank now that he's on his feet again, he says, "We have a comfort level with them."

The process: When you approach Access for financing receivables, the company performs an in-depth investigation of your business to determine what the prospects are for collecting the money and how you can improve them. Its main tool is your customer list, but Access' credit department will also scrutinize your financial statements and business plan. If you manufacture a particular product, Access will want to see it, too.

"We will review both the company itself and the individuals in the company -- and what the business looks like as well as the creditworthiness of the customers to whom the company is selling its goods and services," Stuchin says.

Although Stuchin says Access can take as little as two weeks to complete its review, the internal procedures of some of its bigger customers can drag the process out. Once you have been approved for receivables financing, Access' staff takes over collections and manages your accounts. It pays you weekly or monthly, depending on your business cycle. "Access looked at our balance sheets [and] income statements, both personal as well as business. We had to get what I thought were good prospects for business approved by them," says Grimaldi. "My manufacturers had to vouch for us."

What works: Having a dependable customer base, preferably consisting of large corporations. "A small business selling to a large corporation has the opportunity with more capital to provide more goods and services," Stuchin says. Although Access likes to see Fortune 500 companies in a client's customer base, it will also finance a business that has a large and diverse base of smaller customers. In Grimaldi's case, General Electric is his chief vendor, and he sells light bulbs to large national shoe store chains and such upscale clients as Sak's Fifth Avenue and Tiffany's. Also, having a clearly articulated business strategy before you approach Access is essential. This isn't the time to be giving your first thoughts to how to present your company, says Stuchin: "If someone doesn't have information, it's not the best use of time to start preparing stories about the company."

What doesn't: Situations where there's any doubt about the client's ability to collect -- and by inference Access'. Stuchin cited the example of a gold jewelry designer and manufacturer with annual revenue of $2 million. The company needed financing to cover basic operating costs. What the manufacturer didn't say was that it placed much of its merchandise on consignment with retailers. "In speaking with the jewelry stores, enough said if they did not like the product, they had the right to return it and not pay the bill," Stuchin says. The financing fell through.

Another deal killer is lying. Having a business failure in one's past isn't necessarily a disqualifier for financing, says Stuchin. "But if the person doesn't tell us up front what the issues were, that absolutely would be a problem." One potential client tried to conceal a prior bankruptcy. Access found out about it anyway, and the deal fell through. "We do our homework," Stuchin says.

Parting advice: "We look to people who are extremely capable of selling and providing the products and services they produce," says Stuchin. "We're looking for the integrity of the entrepreneur.... We're looking for someone who is focused about his business, someone who can say, 'This is what I do for a living.'"

By Jeremy Quittner in New York
jeremy_quittner@businessweek.com

To: LENDER PROFILES