In the wake of the 2008 recession and a credit crunch for bank lending to small-and-midsize businesses, even the New York Stock Exchange got into the business of accounts receivables lending.
With analysts warning of a new economic dip, short-term lending for small-and-midsize businesses may see an increase in demand for this form of nontraditional lending, for which there was a six-fold increase from 2009 to 2010.
Formed in 1936 in the depths of the Great Depression, north Alabama’s The Southern Bank, headquartered in Gadsden, has set itself up to specialize in this commercial lending niche, also known as invoice factoring — turning to a third-party, for a fee, to collect past due receivables. It does so through a Birmingham-based division, altLINE, established six years ago.
“Businesses have a lot of options for funding these days, both with banks and independent financing companies, so it is not something we take for granted,” says Gates Little, president of The Southern Bank. “We pride ourselves on offering the most transparent communication and reliable services — things that are hard to come by in the world of invoice factoring.”
Transparency, he points out, is largely owing to the fact that altLINE is regulated by the FDIC, unlike nonbank accounts receivables agencies, including the one set up by the NYSE. The NYSE outfit traded through the Receivables Exchange, a platform for companies to auction their accounts receivable to buyers, such as hedge funds and commercial banks.
By contrast, says Little, borrowers who go to altLINE deal directly with the lender, with no middleman, resulting in lower rates.
The website business.com in 2019 ranks altLINE among the best rates for invoice factoring.
“On average, most factoring companies charge between 1 and 5 percent for each invoice you factor with the service,” says business.com. “altLine’s rate starts lower at 0.75 percent and goes up to 3.5 percent. While this fee is lower than that of most of its competitors, keep in mind that your actual rate will depend on your business, industry and specific needs.”
According to altLINE Marketing Director Grey Idol, most altLINE loans originate with a form that borrowers fill out on the company’s website, altline.sobanco.com, as well as a team of sales people in the field. Most banks do not choose to get into the receivables lending business, he explains, because of the back-office requirements, including account maintenance underwriting regulations. The collections process also demands a special skill set, he adds.