The New “Old-time” Banker: Growing in a Recession
When Greg Donnelly bought a small respiratory staffing company in 2006, he immediately set to work growing the business, focusing on providing excellent care and nurturing solid client relationships. First Select Medical Staffing gained a foothold in the market and began to grow, from five therapists to 51. What Donnelly didn’t count on was the deepening recession and resulting credit crunch. His relatively new fast-growing company needed funding for payroll: his first payroll in 2006 was $700, and by April of 2008 it was $40,000 every two weeks.
“Banks weren’t lending to small businesses, especially one that was a staffing company: they didn’t have a lot of experience with companies like mine,” Donnelly recalls.
A Medical Staffing Lender Who Understands
He started looking into funding options and found PRN Funding, LLC, a medical staffing factor, and Phil Cohen.
“I wanted someone who would understand my business and had a track record. Right off the bat his company name told me he understood the medical field. PRN is medical shorthand for patient administered treatments, on an as-needed basis. When we first met and I showed the owner my business plan with my respiratory niche, the increasing demand due to aging population and the seasonal capabilities of respiratory therapy, he totally understood it. He’s a very knowledgeable businessman and I was very impressed. PRN Funding was very responsive from the very beginning and they stayed right with me for any questions I had. I wasn’t just an entity, they made me feel like I was important to them.”
Phil Cohen, founder and President of PRN Funding, felt that even though First Select was non-bankable, they were a fit for PRN Funding. “First Select met all of our criteria very comfortably. They were a start-up company, selling to customers with very good credit. Unfortunately accounts were taking longer to pay than expected and First Select did not have the cash flow to meet its payroll.”
First Select had contracts with more than 100 hospitals and long-term acute care facilities with customers among some of the best in the nation, such as the Cleveland Clinic. Though his clients were stable, the recession affected their cash flow like all other businesses which resulted in their stretching payables to vendors like First Select Medical Staffing.
AR Funding to Survive, Thrive & Monetize
Factoring was a very good option for First Select, allowing Donnelly to grow the business without worrying about having the cash flow to meet payroll and tax obligations. Additionally, it allowed First Select to grow revenue and, in doing so increase the value of the company. PRN Funding gave Donnelly the flexibility to factor invoices when he wanted, without being locked into a contract.
“What was nice about it was that I’d send in my invoices and funds were always available, whether the amount I needed went up or down. I didn’t have to worry that the cash would be there to meet payroll and other obligations. I could focus on growing my company. I don’t think I would have been as successful without it. Like anything else there’s a price to it, but I found the cost very reasonable in order to have that security blanket.”
Value-add: Trusted Business Counselor
Beyond a medical staffing payroll funding solution, Donnelly found a business advisor in Cohen with whom he could discuss business challenges both operational and financial, and rely on for impartial and educated advice.
“Phil was a great sounding board for me and that’s incredibly valuable when you’re in business for yourself. We’d meet for lunch periodically and he’d give me advice if I asked for it. He’s a very experienced businessman and he’s willing to share his knowledge. He would play devil’s advocate and that helped me make decisions. He was interested in my company’s growth, but I didn’t feel it was because he wanted me to factor more invoices. He was an advocate for my company and its growth, and helped where he could, to survive in such a harsh economic environment.”
“I felt the same comfort level with his people; he had obviously instilled a high work ethic in his employees. My primary representative was excellent. When he was away and I worked with another representative, it seemed as if they had been handling me from day one. I really think it’s the organization Phil built around him that makes PRN Funding stand out.”
Finding a Buyer: An Unusual Role
By 2009, First Select was more than doubling in size each year and Donnelly was working 24/7. Other interests caused him to think about selling the business and he turned to Phil for advice.
“He was very sincere about giving me information so that I would maximize my return on investment. He gave me his opinion on the value of my business, the earnings multiple that was appropriate for similarly sized companies in the medical staffing industry, and how to negotiate an earn-out provision from the sale. I found his advice very helpful in negotiations with several strategic and financial buyers. And I thought that was very impressive given that whoever bought the company might not use his services. He wasn’t worried about keeping First Select as a client, he was trying to help me with advice like he always has.”
In an unusual twist, it was Phil who found the buyer for First Select. “At PRN Funding we have a philosophy that is different than most, we don’t treat clients like we are the end game. Factoring is by definition a bridge to get from point A to point B. When a client comes to us and says I’m ready to move on, I think I can go to a bank, we’ll make the introductions and help them package their business whether for a bank, for sale, or self funding. It’s like sending your kids off to college – it’s gratifying to see them grow, but you know you’ll miss them.”
“Phil was sincere about helping me, I still feel that to this day,” Donnelly says. He has since gone on to start another business venture and has no hesitation in calling on PRN Funding again if needed.
“I still stay in touch because he just feels like a good friend. With PRN Funding, I not only gained a funder, I gained a business colleague in Phil. Whenever we met, I’d leave feeling that we’d had a good conversation and he’d offered good advice. When I was younger, you could go to your local bank and they knew you and you called your banker by their first name. If you needed a loan you’d sit down and talk about it, you had a relationship. Guess what? With PRN Funding I found someplace I can do that again.”