Amul Purohit

DAVIS, Calif. – Two years ago, Amul Purohit took a leap of faith into the franchise industry with Liquid Capital, a financial services concept. Considering the subsequent credit crisis and the tightening noose on the loan industry, his move now seems prophetic as Liquid Capital provides small- and medium-businesses with cash that is increasingly no longer available through traditional outlets.

Liquid Capital provides immediate financing through its franchisee principles secured by credit-worthy account receivables. Known as factoring, Liquid Capital purchases invoices from clients and once goods and services are delivered, it gives businesses an immediate cash advance, typically 80 percent of the invoice. Upon collection, Liquid Capital pays clients the remainder of the invoice amount, minus its fee. Clients are charged 3.25 percent to 4.5 percent on the first 30 days, which additional charges for longer terms.

The concept of factoring is not new and, in fact, dates back to the Roman Empire. As Liquid Capital explains, factoring provides financial stability and relieves the age-old headache induced by hearing the phrase, “The check’s in the mail,” from customers. It provides a way for companies to cash in on their sales without having to wait the 30, 60 or 90 days for payments to come in from customers.

Purohit, who has a scientific background, was not familiar with factoring when he came across Liquid Capital as a franchise concept. However, he was quickly sold on the concept and opened for business in Davis, Calif., in January 2007 – and what he has seen so far in the current credit crisis-dominated society has convinced him it is a growth industry to be in.

“I am slowly picking up. I am getting busier and busier day-to-day,” said Purohit, who. “It takes some time for people to get squished by cash flow and come to us.

“[Factoring] is a large economy,” he added. “Bankers cannot please all the people who are coming to their doors to get money … factoring is another option.”

Well-known or not, factoring is a $1 trillion industry worldwide and worth more than $100 billion in the United States, according to Factors Chain International, a global network of factoring companies. Liquid Capital points out companies such as Texas Instruments Inc., 3M and Abbott Laboratories have used factoring to manage their short-term cash flow.

In a franchise industry, often cluttered with similar concepts, Liquid Capital stands out pretty much on its own with its factoring services. The chain was started in Canada in 1999 by longtime associates Sol Roter, Brian Birnbaum and Barnett Gordon – all of whom have been active in finance, factoring and controllership since the mid-1970s. The chain has its headquarters in Toronto and runs its U.S. business, Liquid Capital of America Corp., out of Irving, Texas.

Liquid Capital currently has a network of more than 35 franchise owners in 20 U.S. states along with 25 franchise owners throughout Canada. Liquid Capital's first U.S. location opened in Miami in 2005. The United States is divided into 300 qualified territories, while Canada has 50 qualified territories. The chain is looking to continue to expand in the United States and Canada, as well as internationally in Latin America, India, Australia and England.

Liquid Capital founder and director Roter said the chain has particularly high hopes for India. “It is one of the markets we have really targeted as a future expansion,” he added. “It is a perfect, perfect market for us.”

In addition to factoring services, Liquid Capital also offers financial management services – including processing and ledgering of accounts receivable, credit checks, collections and receivable administration.

Purohit said that educating businesses about the option of factoring is key to his success.  Since he has launched his Liquid Capital franchise he has spent a lot of time beating the streets and getting the word out about what factoring has to offer. This has included logging many hours at local networking events, running ads in local media and also touching base with local and regional banks to try and collect some of the run off clients that they cannot give loans to.

“I think this whole idea of getting money from your receivables is a unique concept from the whole general business owner point-of-view,” he said. “Using receivables to expand your business is just part of an education process that business owners need to go through.”

According to Purohit, he has received some very positive feedback on his efforts to educate the local business community about factoring. “They never realized you could do this,” he said. “Factoring is looked at as a last resort, usually. We must change this attitude because you can use factoring all the time.”

Roter

Roter backs up the assertion that education about factoring is critical. “There is no question that in North America factoring has not seen the overall penetration in the market that other countries have seen,” he said. “But it is growing very quickly in North America.”

Factoring has typically enjoyed the most success with garment and shoe manufacturers and Roter said now more and more non-traditional factoring businesses, such as oil and gas companies, importers/exporters, service companies and human resource firms, are embracing the practice.

“More and more people are becoming aware of it,” he added. “There are becoming very few industries that we will not factor in.”

On the corporate level, Roter said Liquid Capital will continue to throw resources behind education, marketing and public relations efforts for factoring.

Purohit’s education efforts have been paying off, but it was a tough start and he said he didn’t have a client for seven months, but once he got rolling it has started to snowball. “Once people get to know you and have a personalized service that makes a big difference because they start telling all their friends and you get a lot of referrals,” he said.

He believes the individualized service he tries to provide is very important. “I always tell my clients – all the time, evenings, weekends – any time I am there,” he said. “And I do provide that help – it is not just talk.”

A graduate of the Gujarat Agricultural University, Purohit came to the United States in 1973 and graduated from the University of Delaware with a master’s degree in plant science and then went on to receive a doctoral degree in plant physiology from the University of Maryland. After graduating from his doctoral work in 1979, he went on to do post-doctoral work studying synthetic seeds at the University of Florida. This led to additional scientific work at the University of California, Davis.

Purohit put his scientific background to work in a more corporate environment with companies such as Monsanto Co. and Weyerhaeuser. About two-and-a-half years ago, though, he said he began to look for other options. “I got sick of working for others,” he said. “I wanted to do something on my own.”

His sentiments reflect many who have entered franchise, Purohit spent a year research franchise concepts, before settling on Liquid Capital, which he felt was the complete opposite of his scientific background, but still would take advantage of his experience working in a corporate environment. “I didn’t feel myself opening a store and starting something – that didn’t appeal to my tastes,” he said.

What did appeal to him, however, was having a backbone of corporate support as he ventured out on his own, which he says Liquid Capital has been tremendous at providing. “In franchising there are ups and downs, but as a proven technique it is easier to get into the business world,” he said.

Still, he admits the move was “a little shocking.” But he is certainly over his shock now. “I am enjoying it actually,” he said. “It is fun.”

Liquid Capital’s Roter is not surprised by Purohit’s success so far because of his solid business experience and committed attitude toward customer service.

“[Our franchisees] need to have a high degree of empathy with clients because we are dealing with small business owners,” he said.

He added that Purohit’s demonstrated capability to get out in the local community and network also makes him an ideal franchisee.

“You are not going to get business just from opening the door. You have to go out and get it,” Roter sid. “We don’t have a store front, and frankly even if we did, it wouldn’t matter. People don’t walk in off the street and say, ‘I’m looking for factoring.’ You have to go out and find them.”