Factoring company finds its niche with small companies

Thinking small worked out just fine for Ron Weber and Bob Neu.

The duo, who own Reno-based Prime Time Funding Inc., decided a decade ago that their company would focus on buying receivables and invoices from small companies.

Known more commonly as factoring, the business of buying receivables at a discount has plenty of competitors chasing after big-dollar accounts.

Weber and Neu, however, work almost exclusively with companies looking to sell as little as $500 in receivables.

Their biggest customers typically liquidate no more than $15,000 in invoices.

"Most of the big boys want $50,000 as a minimum," says Weber.

As a two-man shop with limited overhead neither of them looking to work full time Prime Time Funding can afford to take on those tiny accounts.

A typical account,Weber says, is a laborintensive small company that contracts with a big company.

A janitorial service, for instance, needs to pay its employees weekly.

Its customer, however, pays monthly or even more slowly.

The janitorial service turns to a factor such as Prime Time Funding that buys its receivable at a discount of 4 percent to 6 percent, depending on the risk that Neu and Weber identify.

A group of investors join with Weber and Neu in providing the capital that allows Prime Time Capital to hold receivables until they're paid off.

The potential risk, the two executives say, is almost entirely in the ability of the ultimate creditor their customer's customer to pay the receivable.

That keeps them away from many potential deals with construction subcontractors,where payments can be snarled in red tape.

"If you want something to go wrong, that's the place where it can go wrong,"Neu says.

The companies that turn to a factor,Weber says, range from staffing agencies and security companies to manufacturers with slow-paying customers and auto repair shops that wait for insurance companies to write a check.

"You won't find strong companies that need our services," says Neu, a CPA who handles the firm's number crunching.

Typically, he says, they're not strong enough to turn to banks, and they're so thinly capitalized that they can't weather small storms.

As Prime Time Funding's customers build their working capital and credit they move on to traditional sources of business financing.

That means that Weber needs to generate a continuous flow of new customers.

Some come through leads generated by a national factor group.Others come his way through LeTip of Reno, a business leads group.

Neu finds satisfaction in watching customers outgrow the need to use a factor.

"It's a great feeling,"he says."You're actually helping someone."