Business & Finance: Old Factors

Revered in the frugal offices of James Talcott, Inc. at No. 225 Fourth Avenue, in the heart of Manhattan’s mercantile district, is the old desk of the Connecticut Yankee who founded the famed factoring firm in 1854. On the desk is a richly-bound volume of letters written on the occasion of the firm’s 80th anniversary by the nation’s great. Visitors are allowed to thumb through the volume and, if themselves distinguished, are occasionally invited to sit in the Founder’s own chair. Generations of dead Talcotts gaze from their portraits on the walls of the office of President J. (for James) Frederick Talcott, the founder’s son, who is now 70. His son, James Talcott Jr., is first vice president and the ninth in direct descent from the Worshipful John Talcott, one of the British-born fathers of the State of Connecticut.

Heavy though the atmosphere of genealogical respectability in James Talcott, Inc. may be, it has never been a detriment to trade. In the past ten years the annual volume of Talcott business has grown from $11,000,000 to $68,000,000 and is currently running at the rate of nearly $100,000,000 per year. To finance this expansion, Talcott turned to the public for the first time last spring, selling $1,500,000 worth of preferred stock. Last week it again went to the public, this time with an issue of 100,000 shares of common stock, the first voting stock ever offered to anyone except a Talcott or a Talcott friend.

With the exception of a trifling amount of merchandise taken over on bad debts, the only item of physical assets on the Talcott books is $32,000 worth of furniture and office equipment. But its current assets foot up to more than $18,000,000. Explanation for this astonishingly liquid position lies in the nature of factoring.

All factors are not, as students of the Hudson’s Bay school of literature may be lieve, masterful Scots at lonely fur-trading posts. In the modern business sense they are a cross between financing companies and service organizations, having evolved in the U. S. from the oldtime commission merchants. James Talcott, Inc. will make market studies, find selling agents, provide storage and showroom facilities, handle the clerical detail of foreign or domestic shipments. It does not, as the commission merchant used to do, actually sell the manufacturer’s goods. Like all factors, James Talcott is primarily concerned with cash and credit.

To a manufacturer who needs working capital to build up an inventory of seasonal goods, Talcott will advance the money. Biggest item is the purchase of accounts receivable, providing a manufacturer with immediate cash for goods he sold on credit. Talcott has a tremendous credit department, so that a client, if he wants, may dispense with his own credit department entirely. Sometimes Talcott will merely assume the credit risk without advancing cash, receiving a fee for this service. The firm factors about 400 concerns, makes a point of assigning two officers with the authority to make decisions to each account, insisting that at least one always be at his desk. Most of the clients are small companies, unknown to the general public, unable to duplicate for themselves the facilities and experience offered by James Talcott, Inc.

Factoring in the U. S. grew up around the textile trade in the 19th Century, although the old British common law term was not used generally until Chief Justice Charles Evans Hughes applied the word when he was in private practice. The textile industry, with its thousands of small, independent mills, is still the biggest factoring field. In the past five years, however, the factors have taken to such lines as shoes, furs, gloves, lumber, fuel oil. In the case of James Talcott, Inc. these new industries are largely handled by associated factors, the company itself merely refactoring, which is analogous to rediscounting in banking.

Talcott’s own funds are supplemented by borrowing from banks at low rates. The paper it buys is short-term, the turnover rapid. Income is derived from interest on the money it advances and from commissions for the services it performs. For the first nine months of this year the Talcott profits were $419,000 on a volume of $59,000,000.

Biggest factors in factoring are Commercial Credit Co. and Commercial Investment Trust, both of these big finance companies having factoring subsidiaries. The two biggest independents are L. F. Dommerich & Co. and James Talcott, Inc.

President Talcott of James Talcott, Inc. went to Princeton (Class of 1888), then into the ministry by way of Union Theological Seminary. When he was about 30, his father summoned him to learn the family business, but his deep religious feeling has found outlets in innumerable charities and philanthropies. Cultured, musical, humorous, an inveterate joiner, he lives half the year in a big mansion on Manhattan’s East 66th Street, half the year on an estate in Sea Bright, N. J.