Tight credit is one of the major factors fueling the current economic downturn, a pain point that the system developed by Advanced Technology Development Center (ATDC) graduate FTRANS addresses directly. The FTRANS technology allows banks to see a company’s accounts receivables directly, giving them the confidence to lend with less risk, explains CEO Dan Drechsel.
The company’s Web-based system called Trade Credit Express, helps businesses get bank loans based on account receivables for a fee that is less than they would pay to take a credit card payment (which is 2 to 2.5 percent).
Drechsel, formerly with S1 Corp and CheckFree, took over the CEO position at FTRANS from founder and board chair John Hayes in November.
FTRANS Founder and Chairman John Hayes and CEO Dan Drechsel.
In 1976, Hayes organized the team that created Peachtree Accounting, the first mass-adopted business application for personal computers. Hayes has said, “The world is in the midst of a credit crisis and possible recession that will impact every business.”
In June last year, he published a book on the topic, Using the Credit Crisis to Grow Your B2B Business.
Founded in 2001, FTRANS graduated from Georgia Tech’s ATDC in 2007 and is currently headquartered in the same building as the incubator, across from the Georgia Tech College of Management. Both Hayes and Drechsel are Georgia Tech grads.
The Technology Square location in Midtown works for FTRANS. Drechsel, who was general manager of SAP’s financial services business and left to join FTRANS last fall, says the company takes clients across the street to the buffet at the Georgia Tech Hotel & Conference Center. “They’re very flexible on timing,” he says.
For a “speed-eat” the FTRANS team hits Moe’s Southwest Grill for burritos.
Drechsel says he also likes The Varsity, but doesn’t get a lot of support from co-workers for the choice.
Selling more than 2 miles of hotdogs and 300 gallons of chili per day – some of the FTRANS crew prefers the downtown Varsity (61 North Avenue) more than others.
“Atlanta is a great place to live,” he says. “There’s a lot more access to water, such as lakes, than in Denver, and the technology community is quite robust.”
FTRANS is optimistic about the coming year, seeing itself as positioned to do well even in the current down economy.
Drechsel points out that for most small to medium-sized businesses doing $1 million to $200 million in revenue, “The largest source of capital is accounts payable, effectively, the credit granted them by other businesses.” In other words, he says, “Their vendors are effectively providing them with 30 days or more of financing at zero interest.”
“For business to business sellers, people who sell on terms, such as PR firms that bill, for instance, accounts receivable, the trade credit they grant to buy stuff, is their largest investment of capital. We take that large investment and arrange for them to borrow money on it instead of needing to sell equity, which is one of the most expensive ways to finance a business.”
It also allows the companies to sell more by offering more flexible terms with a sales pitch that goes something like, “Will you buy another truckload of widgets if we give you 60 day terms,” explains Drechsel.
In the past, most small to medium-sized companies have not found it easy to borrow money on their accounts receivables except at steep 20 percent to 30 percent discounts through receivables discounting. “That’s because accounts receivables have been difficult for a lender to track,” says Drechsel, “so banks were reluctant to do it.”
Midtown’s Technology Square: Home to FTRANS and dozens of other high growth tech firms.
The company has more than 100 customers and works closely with the Synovus Financial Corp.’s (NYSE:SNV) network of banks in the Southeast and has itself raised money from Synovus’ venture arm, Total Technology Ventures. FTRANS raised a $3 million round from TTV, New Atlantic Ventures and Greenhill SAVP in December 2008 bringing its total venture backing to $18 million so far. The company will be one of 40 showcase companies in next month’s Southeast Venture Conference in Atlanta (www.seventure.org).
On the heels of its latest raise, the 40-employee company plans to expand its sales and marketing outside the Southeast and may bring on additional staff as it adds new bank partners.
Last year, Drechsel says, the company’s December to December revenue tripled and it expects to double revenue in 2009. The potential market for the company’s bank partners that offer the product – about $3.6 trillion in trade credit – is gigantic, he notes. “It’s the only significant large outstanding credit not provided by financial institutions or the credit markets,” he adds.
“Companies with less than $200 million in revenue, where we’re focused, do $8.5 trillion in sales volume.”
Is it working? The Synovus banks increased their lending in the third and fourth quarters of 2008 and they are lending to new accounts where FTRANS is involved, says Drechsel, as are a couple of the company’s other bank partners.
“We’re out helping small and medium businesses get funding, helping banks lend with less risk, and creating growth in America,” says Drechsel. “We’re doing our small part.”
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