CEO Todd Ehrlich of BAM says his company is using technology to capitalize in blue collar fields. “It’s all about vertical integration,” he said in a presentation at Venture Atlanta 2018 last week. “We use factoring, an elegant form of financing with technology that’s stuck in the 90s. It’s a proven, scalable technology.”
The company is effectively bridging the gap for underbanked, blue collar industries. “Incongruent payment cycles make it hard for low-credit businesses to fund their operations,” says Ehrlich. “It’s a Fintech solution for the world’s oldest method of raising capital, factoring.”
Headquartered in Atlanta, BAM recently acquired Multi Service Factoring (MSF), the freight factoring division of Multi Service Technology Solutions, Inc. (MSTS).
BAM’s specialty finance and operations platform, BAMwire, will provide current MSF customers with access to additional technology and capital to streamline back-office operations and scale faster. In addition to the acquisition, BAM and MSTS has formed a partnership to provide customers with access to a full range of fleet solutions. BAM’s customers will have access to MSTS’ Fuel Card and MSTS’ customers will continue to have access to BAM’s cash management and working capital solutions.
“We are always looking for opportunities to grow our team with top talent in the industry. The MSF team has built a successful business and we are looking forward to blending the skill sets of the teams,” says Ehrlich. “We’re looking forward to this partnership thriving. MSF was a great acquisition. We’re super psyched about the team we’ve got. It’ll do better under us because it’s what we do,” Ehrlich tells FreightWaves.
But isn’t factoring a rather complicated means of payment? Traditionally, it’s also been associated with high credit rates.
“It’s only elegant if you use technology,” Ehrlich says. “It’s cumbersome if you don’t. The problem with factoring is, sure the guys the get the money, but it doesn’t necessarily make their lives any easier.”
What it does now, however, is inject growth to the kind of companies that could use a way to give them more access to capital quickly.
The challenge is its very difficult for some companies to have the financial discipline to maintain a factoring operation within their company. “It has weird effects on their balance sheet,” says Ehrlich.
We’re not just in transportation, we’re delivering working capital solutions with incongruent pay sectors across the board.
Why “blue collar” operations in particular? “Most big companies have sophisticated departments and their customers are too,” says Ehrlich. “For the little guys it takes a lot of cash. Say a 12 million company has say $250,000 every month in cash expenses. And what if 50% of your cash has to go out the door, and if you’re not getting paid but every 30-60 days you could be in a ‘cash hole’ of like a million in no time.”
“Also, there aren’t a lot of friendly players in the space,” he adds.
Part of the key is that the technology stacks together. Ehrlich hates to use the “uber disruption comparison” because it’s done so often as to become cliché, but that’s really how he sees what’s happening with their new solution. The challenge was to get financial and technology together at the same time.
“Our customer attrition rate is like less than 1%,” he says. “The tech just makes their lives easier.”
“We’ve had customers—there’s a company called Network—that went from a little over a million to $28 million in less than 12 months. And they would say they’ve done this because of our platform. You need extra capital to float deals. Quick pay the carriers for free so you get a better margin. Carriers are less price-sensitive when they know they’re getting paid faster. It’s a difference to getting paid tomorrow rather than in say 45 days. Once they figure out how to utilize our platform, the sky’s limit,” Ehrlich attests.
Was there an educational learning curve? “Yes, at some point there was not knowing what we didn’t know.” For customers there was also the idea of how their customers were saving money, but they didn’t know how much they were saving. The BAM team had to figure out how to track the savings to prove their value.
How does it work? The company uses the system for free. It’s like a TMS (Transportation Management System). If they process payments on it, it’s a few dollars a transaction. “For factoring, it’s a market-leading rate,” says Ehrlich.
Currently, the team has about 50 employees right now. The operations team is tiny right now. The tech and sales side is where the company has mainly invested in its team to date. They’re raising money for what would amount to a Series B (although Ehrlich doesn’t care what you label it) in order to accelerate their growth. “Big investors are starting to realize that’s where the puck is going. The real opportunity is where freight payments are going,” he says.