FACTORING & SPECIALTY
FINANCE ISSUE
For the Commercial Finance Professional
APRIL 2011
VOL. 9, NO. 3
Marquette Transportation Finance —
Factoring Trucking Receivables
for the Long Haul
BY LISA M. GOETZ
After cutting his teeth at the “granddaddy” of transportation financing companies, Richard Voreis,
developed and has led Marquette Transportation Finance for more than eight successful years. Although
the trucking industry faces economic challenges, Voreis does not envision the truckload segment, or its
$350 billion annual revenues, to go away any time soon.
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hen Richard Voreis returned to work for
his former employer, Marquette Financial
Companies, he brought with him experience
that would not only define his career, but would also
launch Marquette’s successful transportation financing
operation. Working on the banking side at Marquette,
Voreis left in the mid-1990s to learn the factoring business from the “granddaddy” of the trucking financing
industry, Transport Clearings (TC). Several years
later, after Transport’s original partners sold the business, which no longer exists today, Voreis returned to
Marquette, armed with the knowledge necessary to
create Marquette Transportation Finance (MTF).
Now president and CEO of MTF, Voreis, recalls its
origin, “Marquette was a lender to Transport Clearings
and was an unsuccessful bidder for the company... In
2002, I was asked to put together a business plan to
RICHARD VOREIS
President & CEO,
Marquette Transportation
Finance
“
hen we first started off, we used in our marketing
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the common cliché that we offer ‘the best of both
worlds’… We had the same kind of backing that the
big boys like GE and Textron had. The other thing
we had going for us: we were entrepreneurial, we
were small, we were nimble, we could make credit
decisions, we could control how we managed our
services. We hung our hats on that and we also
delivered on it.
”
start a transportation factoring company for Marquette.
So, that was the genesis for MTF, and we launched in
late 2002. All I knew was that grandfather of transportation factoring, Transport Clearings, and I basically used
that as a model. In the subsequent three-year period,
I was able to attract many people who were managers
for me at TC. Seventy-five percent of our managing and
marketing staff, including myself, had been at TC, and
brought this wealth of industry experience.”
MTF provides accounts receivable financing to
trucking companies that, for the most part, do not
qualify for traditional bank financing. The company is
headquartered in Bloomington, MN with four regional
sales offices located throughout the United States.
MTF is a wholly owned subsidiary of Phoenix-based
Meridian Bank, part of Marquette Financial Companies,
a $1.6 billion diversified financial services holding
company located in Minneapolis. The holding company
is comprised of banking and specialty financial service
companies and is privately held by the Carl Pohlad
family, whose interests include a variety of businesses
in different industry segments. Founded by Carl R.
Pohlad in the 1950s, the initial focus was on banking
and related financial services. Throughout the years, the
business interests have expanded to include bottling,
real estate, technology, entertainment and major league
baseball with the Minnesota Twins.
Explaining that MTF markets solely to the trucking
industry, Voreis notes, “When we first started off, we
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used in our marketing the common cliché that we
Financial
offer ‘the best of both worlds.’ We were smaller but
had strong financial backing. We had the same kind of
backing that the big boys like GE and Textron had. The other thing we
had going for us was that we were entrepreneurial, we were small, we
were nimble, we could make credit decisions, we could control how we
managed our services. We hung our hats on that and we also delivered
on it. It’s still how we operate, which has given us a strong advantage.”
Challenges to the Trucking Industry
Although the trucking industry has shown a rebound in early 2011 with
an increase in freight tonnage and rates, Voreis’ outlook is cautious.
“I sure don’t claim to be an economist, but it’s kind of interesting. If
you talked to people in the industry in October or November of 2010,
they were predicting the trucking industry would have modest benefits
and increase in the first half of 2011, but would be well poised to
experience great growth in the last two quarters of 2011 because they
were right-sized in terms of expenses and the economy was going to
start cranking better. From my standpoint, it’s iffy. Toward the tail end
of last year and beginning of this year, tonnage was going up because
inventory was at historical lows. There was a rebound in 2010 that had
manufacturers replenishing inventories at just-in-time levels, but that
has flushed through the system. Unless we get more growth coming
in the economy, I envision that flattening out.
“Now, I’m not an expert and some industry people might say I’m
wrong, but there’s a lot of potential for that scenario. Seventy percent
of our economy is household spending, and household spending isn’t
going out the roof... So, if you hang your hat on 70% of the economy
being really stagnant, what happens a few quarters out? I see for the
industry [that] it’s not going to be as robust as some people thought
six months ago.”
Voreis also notes the impact of rising fuel costs on the trucking
industry. When the cost of fuel rises quickly, it causes a lag in the cash
cycle because fuel surcharges written in many contracts to help recoup
the increase are paid on average from 35 to 45 days out. However, fuel
has to be paid for up front, causing the trucking company to absorb the
fuel cost for more than a month.
Risk Management
Risk management is a significant aspect of MTF’s business model
because its prospects are financially stressed more often than not,
and MTF must be able to collect the receivables it finances. The
trucking industry is capital intensive and has low operating margins.
Cash cycles are tight because two big expenses — payroll and fuel
— require cash up front. MTF understands that being able to sell
receivables the day after the load is hauled narrows the cash cycle.
In evaluating a new prospect, MTF’s business model routinely results
in having experience with the prospect’s existing customers 65% to
70% of the time.
“There’s a big balancing act in managing risk and providing service,
and we do it very well,” Voreis explains. “All of the nuances make the
difference — how your collection staff interacts with account debtors;
the professionalism; the expertise of maintaining good relationships
and making sure everyone gets paid; and, especially, efficient cash
application. You can be factoring receivables, but if your cash application department does a poor, untimely job of applying cash that’s
already in a lock box, that ties up cash for your client.”
He adds, “Many factoring companies don’t do a good job at cash
application. We excel at it. We make sure if cash comes in today, it
gets applied today. And if we can’t apply it, we make sure we get on
the horn with the payor and our client and to make sure where to apply
it. That’s what has allowed us to be very strong. We’ve got some good
competition out there. We’ve got some folks who do a nice job, but I
would put our shop against anybody’s in all areas in terms of offering
w.financialexecutives.org
the complete package.”
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2011 #
MTF’s
business
model also stresses that the company is not a
low-cost provider, and it rarely walks away from a deal as the lowest
bidder. Acknowledging that MTF must be competitive to book business, Voreis notes that MTF’s bids are priced to generate solid income,
which in turn allows it to be viable to clients in the long term. Although
MTF tends to bid higher, it attracts and retains clients based on its
reputation in the industry. MTF has grown every year since its inception and has exceeded its five-year plan dating back to 2005. Its 2009
pre-tax profit was 20% greater than in 2008, and in 2010, it was 70%
better than in 2009.
“With our business model we look very strongly at concentra-
“
ith our business model we look very strongly at concentrations,
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and we try to make good credit decisions on the front end of who
we are financing, and we have come through the last three years
unscathed with charge-offs. We have not lost any money on
receivable finance over the last three years. Zero dollars charged
off. We grow on average well over $100 million annually.
”
tions, and we try to make good credit decisions on the front end of
who we are financing, and we have come through the last three years
unscathed with charge-offs. We have not lost any money on receivable
finance over the last three years. Zero dollars charged off. We grow on
average well over $100 million annually,” Voreis says.
Why Factoring?
MTF offers two factoring products that purchase receivables via
assignment on a recourse basis. One is a traditional factoring line
and the other is a modified factoring line containing a borrowing base
structure. In 2008, MTF launched an ABL product to have a credit
offering available for existing clients with improved financial capacity.
To date, the company has not funded an asset-based loan, due to the
financial stress in the industry.
Voreis explains why providing factoring options specifically to the
trucking industry has been the source of MTF’s success: “For us it’s
a good market model. We only finance truckload carriers, carrying
one load for one shipper. We don’t finance the less-than truckload,
where one truck carries several loads for several shippers, because the
average receivable size is too small and your backroom efficiencies get
ruined. An average less-than truckload receivable size is going to be
about $50, but in the truckload side that average is going to be in the
$1,000 to $1,200 range.”
The target market for MTF is truckload motor freight carriers with
annual revenues ranging from $2 million to $100 million. Presently
there are approximately 12,000 carriers that fall within MTF’s target
market. The truckload segment of the transportation industry has total
revenues of approximately $350 billion.
“It’s a huge market, and the pie is very big. And trucking is going
to be here tomorrow, and it’s going to be here 50 years from now.
It might look different, but goods need to be transported. So, it’s an
industry that’s not going to become obsolete. The revenue stream is
always going to be there,” Voreis says. abfJ
LISA M. GOETZ is an associate editor of ABF Journal. She started with
Xander Media Group, ABF Journal‘s parent company, in February
2011.
©2010 Xander Media Group, Inc. ABF Journal is an Xander Media Group (XMG) publication. The views and opinions expressed in this publication throughout are not necessarily those of XMG management.
Reprinted with permission from ABF Journal, April 2011, Vol. 9, No. 3 by IPA Publishing Services 800-259-0470 (12252-0511)
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