supply finance

STAR Finance Success Story:
APPAREL MANUFACTURER
A newly formed co. with its own designer line of apparel needed financing. STAR purchased the fabric domestically, and had it shipped to the manufacturer located in the Dominican Republic. When the manufacturer completed the cut, make and trim process, and the garments were completed, STAR paid the manufacturer for the finished garments. The product was delivered to the client's US customer in a timely fashion, and STAR factored the receivable.

From Highlights of a Study by the US Small Business Administration:
The results of this study portray both captive and non-captive finance companies as mainstream lenders, attracting a mix of borrowers similar to other lenders and charging these borrowers competitive loan prices. Borrowers who acquire leases or loans from finance companies are typically larger small businesses with some previous lending experience with a commercial bank.

Captive and non-captive finance companies are significant lenders in the financial market for small businesses, especially as vehicle and equipment lenders. Captive finance companies supply 3.9 percent of all lease funds and 4.8 percent of all loan funds to small businesses. Non-captive finance companies supply 11.5 percent of all lease funds and 3.9 percent of all loan funds. When all institutional sources of capital are considered, finance companies rank as the third most important source of financial capital, following commercial banks and thrifts.

Finance companies are not the pawn shops of the financial services industry. They charge lower prices in the vehicle loan market than other lenders. In other loan and lease markets, finance companies were shown to offer competitive prices, based on the risk of the borrower and the transaction costs associated with initiating and monitoring each type of loan. Finance companies do not appear to be a better conduit for SBA loans or loan guarantees than other lenders. When captive and non-captive finance companies are compared, captive finance companies have a higher probability of attracting borrowers in high concentration financial markets. However, when all finance companies are considered as a group, they have a higher probability of attracting low risk borrowers who reside in low financial concentration markets than any other group of borrowers. (Credit: Small Business Administration Office of Advocacy)

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