Blog/News

Gracious Home Enters Chapter 11… Again.

Sadie Keljikian, Top Billion Finance

New York-based Gracious Home has entered Chapter 11 “reorganization” bankruptcy protection for the second time in six years.

Gracious Home started as a small hardware store on the Upper East Side in 1963. Since then, it has grown into an upscale furniture and housewares retailer with four locations in uptown and midtown Manhattan.

The retailer has had a difficult and complicated few years. Gracious Home’s last brush with financial disaster started after the retailer opened a new location in Chelsea. Several experts and periodicals considered the new shop an overzealous expansion move. Shortly thereafter in August of 2010, the company filed for Chapter 11, blaming fallout from the 2008 financial crisis. Fortunately, an investor group consisting of principals from Fortunoff and Sciame Development, Inc. purchased a majority stake in December of 2010, saving the business.

downtown-690827_1280This time, Signature Bank declared Gracious Home in default of a loan in May of 2016 and eventually accelerated repayment of the loan. This left the retailer unable to pay rent and other bills on time. The Chelsea location closed last month and experts took the closure as a sign that the buy-out was ultimately not enough to keep the business going. Representatives told the New York Post “there is a viable business remaining, albeit on a smaller scale.”

Several publications have attempted to contact the retailer without success, inspiring further suspicion about the future of the company. The Gracious Home website is currently unavailable with a banner proclaiming: “We’re currently improving our online shopping experience.” Last week, the shop conducted a close-out sale with signs in the windows proclaiming “Everything must go!” Unresponsive email contacts and phone numbers associated with Gracious Home are also contributing to rumors that the company is not long for this world.

According to current Chief of Operations Robert Morrison, the business was dramatically affected by a lack of foot traffic due to the recent uptick in online shopping. He insists, however, that the business is worth saving and says that they hope to use the relief offered by Chapter 11 to reorganize operations with “as little disruption and loss of productivity as possible.”

Someone close to the litigation commented on the retailer’s future, saying that the company plans to close select locations and “skinny down” to one or two stores. Whatever the case, the retailer’s public stance is that they are making every effort to survive the myriad of difficulties it has faced in the last few years. Despite public gestures, questions linger whether Gracious homes is indeed capable of reorganizing and successfully rejuvenating itself from the ashes of bankruptcy in a new competitive environment.

As briefly mentioned above, this development also highlights a broader shift in the consumer goods market. Retailers are struggling to adapt to a changing economic landscape where consumers are turning to increasingly convenient e-commerce channels that sidestep the pitfalls of costly brick and mortar operations. Although the notoriously high property costs in New York City may have put more pressure on retailers locally, the overall trend extends throughout the US economy, which is evidenced by the slew of bankruptcies filed by prominent retailers in 2016: Vestis Retail Group (operator of retailers like Eastern Mountain Sports, Bob’s Stores, and Sports Chalet); Pacific Sunwear of California, Sports Authority, Wet Seal, Quicksilver American Apparel, and Radioshack, among others.  While this is unlikely to be the end of brick and mortar retail, it is clear that retailers need to adapt to the e-commerce revolution.

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Choosing Charities: A Guide to Corporate Giving

Sadie Keljikian, Top Billion Finance

December holidays are a time when many businesses give to charitable organizations. However, in our technology driven, globalized society, giving wisely can be a challenge. While the internet is flooded with opportunities for charitable giving, as we all know, anyone can write anything online. So, how does one sort out the charities that will effect genuine change from poorly run non-profits or outright scams?

With this in mind, here are a few tips to help you donate wisely this holiday season:

1. Do your research.

Unfortunately, there is no substitute for a good background check on an organization before you choose to give.  Fortunately, there are now websites solely devoted to investigating the habits, policies, and practices of charitable organizations and rating them accordingly. These sites consider factors like transparency, salary of the charity’s employees and offer analysis on how each dollar donated is spent. With a comprehensive overview, you can choose charities more easily and make more informed choices.

Below are five sites we trust to evaluate charity organizations (all are publicly funded):

Charity Watchgifts

Give Well

Giving What We Can

Give.org (a BBB organization)

GuideStar

2. Give back to your industry.

Now that you know where and how to check if charities are going to put your money to good use, you have to decide which causes are best suited to your business. One helpful hint is to give back to your industry if at all possible. If you sell food, give to organizations that fight world hunger or assist farmers in underdeveloped countries. If you sell or finance apparel, give to organizations that support fair treatment of garment manufacturing workers or prevent pollutive practices in the garment industry. Your industry undoubtedly benefits you, so giving back directly is an easy choice that also has the potential to build goodwill for your own company

3. Go local whenever possible.

Most cities and neighborhoods are home to charities that benefit those areas specifically. These organizations are often a good choice because they benefit your local area directly and since they are usually smaller operations, every dollar will have a larger impact on their efforts vis-à-vis dollars given to larger entities. Another advantage is that you can more easily verify the effect of your contributions on these charities.

4. Give what you can.

Just because your business is new and isn’t reaping astronomical profits doesn’t mean you can’t give. Starting small is never a problem and it affords you the opportunity to earn some goodwill and network with other donors early on.

Some businesses commit to giving a certain percentage of their profits, generally between 1 and 10%, annually. This is a simple way to hold one’s self accountable without promising more than is reasonable. Organizations like Giving What We Can (link above) offer the option to pledge a percentage as well as an app to track your donations online, making it easy to keep tabs on your involvement.


With these guidelines, you should be equipped to pare down your options and choose a charity that will make a real difference, address issues that are important to you and your business, and boost your company’s goodwill.

We at ETC truly believe in the power of educated giving. For example, we recently chose to give to Two Ten Footwear Foundation. Two Ten provides financial, social, and educational support to members of the footwear industry, an industry in which we have many clients. The foundation is based in Massachusetts and offers assistance to employees, owners, and family members throughout the country. Their goals are clear and their operations completely transparent. They provide a detailed audit of the last two years of donations on their website, which means that the foundation is very well rated. Over all, Two Ten satisfied all of the important points discussed above and we are proud to support them.

Here are a few more organizations we already support:

Project JUST: A New York City-based organization working for fair, responsible garment manufacturing. They fight for fair treatment and pay for manufacturing workers as well as environmentally responsible practices in the industry.

Fashion Business Incorporated: Los Angeles-based non-profit offering financial assistance and educational opportunities for designers and other apparel startups.

The Sylvia Center: A New York City-based charity helping children learn to cook and eat healthily. The organization focuses on low-income neighborhoods and families with the goal of fighting childhood obesity locally.

Brooklyn Fashion Incubator: A Brooklyn-based funding and networking resource for designers and fashion entrepreneurs, aiming to encourage economic sustainability and nurture creative minds.

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Collateral Damage Control

Sadie Keljikian, Top Billion Finance

If you need to finance your business, you will be required to provide collateral. No matter what kind of funding you seek out, nearly every bank and private financial institution will require an asset to secure the loan. This makes a lot of people nervous, the word “collateral” has developed an unfortunate connotation of expendability and brings foreclosure to many minds. Fortunately, this doesn’t mean that you’ll have to risk losing your business, home, or savings. Unbeknownst to many, collateral can take many forms and most business owners aren’t aware of the full scope of their options.

Collateral is a general term for assets against which a bank or private lender can provide your business with funding. Aside from the well-known practice of using buildings, equipment, or savings as collateral, trade financing also allows the use of accounts receivable, inventory, and purchase orders. Top Billion Finance can offer solutions to numerous business models thanks to a variety of lending options. This means that you can receive funds to supplement your operational costs without risking your business or crucial assets.

With solutions like factoring and purchase order financing, you can borrow against existing orders for which you have yet to be paid. This is an excellent solution for vendors selling to retailers on open terms and allows you to increase your business’s cash flow without incurring long-term debt or potentially sacrificing your business.

If you own a retail shop or other store-front type of business, a merchant cash advance may be the best solution for you. MCAs are loans against your day-to-day credit card sales. You receive one lump sum and the lender takes a portion of your credit card sales until your loan and interest is repaid. Again, this means that your sales are your collateral, leaving you less at risk of losing vital capital.

The collateral you offer also helps to establish and raise your credit line in Top Billion Finance. This means that as long as you keep making sales and your customers pay on time, your credit with your lender will remain strong. You can fulfill as many orders as needed without worrying about deficient operational funds. Trade financing is also immensely helpful in padding out your working capital without accruing interest on the funds you’ve received. When your customer accepts the sale, the documentation thereof (either a purchase order or an invoice) becomes valuable for trade financing and leaves your jurisdiction. You receive payment earlier than you would have, minus fees, and are able to continue running your business without the concern of costs outweighing revenues.

In short, collateral is not a dirty word. Despite the understanding that your lender will hold a lien against your assets until you’ve repaid your debt, you can borrow funds to keep your cash flow healthy without fear of losing everything. Financing in smaller amounts and against your active assets allows you to grow with the knowledge that you are both sufficiently funded and protected from crucial losses.

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Potential Issues with Invoice Factoring: More from our Upcoming White Paper

David Estrakh, Top Billion Finance

Unforeseen Costs.  Like any financing arrangement, factoring can come with unforeseen fees and high reserve requirements. Be sure to carefully read your factoring term sheets and agreements before you sign them. Factoring is labor intensive and time consuming, not to mention, risky, so expect to pay for the service.  Although interest on factoring loans are more expensive than banks, you should still shop around to make sure you get reasonable market rates.

High Minimums.  Most factors have monthly and/or annual minimums to cover overhead and ensure consistent sales, which can be difficult if everyone is not on the same page regarding expectations.  If you sign up with a factor and do not like the relationship, you may not be able to terminate without paying off the minimum commitment.  It is therefore important to make sure that the minimum is not so onerous that leaving early becomes too costly. Otherwise, you may be stuck in an unwanted relationship.

Bad Credit Accounts.  Factors look at customers’ credit in order to determine the risk of advancing funds on receivables to be paid by that customer.  This is an advantage for clients because they can know the credit of their customers in advance, before shipping goods to them.  Unfortunately, a customer with bad credit can make things difficult when you’re factoring their receivables.  If a customer has a history of late payments or delinquency, that customer’s orders may not eligible for funding.

Many factors will still advance funds against non-approved receivables, especially if those receivables are bundled with credit-worthy accounts. But the client must be aware that the risk of non-payment on non-credit-approved receivables falls to them; such receivables are with recourse to the client.  Amounts advanced on poor credit receivables are usually less than what is advanced against credit approved receivables – often up to 60% instead of 80%.  But this is not always the case and many factors will simply refuse to factor receivables from accounts with bad credit.

It is important to note that different factors treat bad credit accounts differently and factors may look at the same customers differently.  For example, one factor might approve an account that another factor will not, although most factors will make similar credit decisions when presented with the same customer information. The reasons for a bad credit determination will also affect how much, if any, advances the factor is willing to make.  When these instances arise, tread carefully, heed the advice of your factor, and handle all poor credit accounts on a case by case basis.

Choosing the Right Factor. Let’s be honest, every industry has unscrupulous and unethical business people who give the others a bad name. Factoring is no different. Factoring is, at its core, a relationship. Once engaged, factors (especially those who also provide purchase order funding) control the levers of cash flow for their clients. Flexibility, speed, and understanding are paramount for a successful factoring and lending relationship.

The above is a segment from our upcoming white paper, Factoring Basics, keep an eye out for the full piece coming soon!

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