Look for Financing Alternatives
Take a lesson from Dreyer's playbook and turn to nontraditional lenders when the bank says no. Asset-based lending — loans against a company's equipment, inventory, accounts receivable or other liquid assets — has been used for centuries. The economic crisis has served to highlight the role of this type of bridge capital, which is ideal for thinly capitalized companies working on tight margins. That's why interest is booming. Last year, lenders in the industry — estimated at $500 billion by the Commercial Finance Association — saw a double-digit increase in demand, while syndicated lending dropped by 39% according to Dealogic Inc.
Entrepreneurs like Dreyer love its flexibility. "I now fund 40% of my business using purchase-order finance and factoring," he reveals. "This allows Fantasma to better compete on price and manage cash flow." Of course, there are challenges. Wells Fargo does site inspections of the overseas factories and audits the company quarterly. Fees can be high — typically 1% to 3% of the purchase order depending on the supplier's creditworthiness. Any way you look at it, it's been a way for the master illusionist to do what he does best — escape from peril and land on his feet.