Jay Sachetti joined Jeff O’Brien, partner at Husch Blackwell and Dyanne Ross-Hanson, president of Exit Planning Strategies talked about the market for mergers and acquisitions, exit planning opportunities for companies that don’t end up for sale and how companies can maximize their eventual sale price during an early October panel at the first Upsize on Tap event at Summit Brewing Co. in St. Paul.
When the state Legislature passed a law requiring employers to provide paid leave and safe time for employees, Justin Bieganek started hearing differing details from friends, colleagues and peers.
Cathy Sedacca seems to have a habit of starting businesses her clients wish they didn’t need — but then really coming in handy when they do.
In addition to contributing a couple articles in recent years, Sedacca appeared in Upsize as part of an Upsize/Club Entrepreneur event in 2018, when she was co-founder and director of sales and marketing for Sage Business Credit, an asset-based lending and factoring company that served small businesses with lending needs between $100,000 and $4 million.
The company differed from factoring companies in that in addition to its lending services, it would provide coaching aimed at helping its customers become bankable for more traditional credit options. But factoring companies, while handy, often are seen as an option for companies challenged with cash flow who would struggle to get financed by traditional banks.
She and co-founder Karen Turnquist built Sage over seven years before selling in late 2019 when Turnquist was ready to retire. Sedacca thought about bringing on a new partner or other investors but was unsure about the future of factoring or about the prospects of finding the right person or people to replace Turnquist.
“It’s like a marriage,” Sedacca says. “You are more financially tied to that person than you already are to a spouse. You’ve got to make sure it is the right person. The more we talked and looked and talked to people, the more I just felt like I was okay getting out and trying something different.”
A few months after selling, she joined Integrated Consulting Services, a Bloomington-based fractional CFO firm dedicated to helping small businesses with revenue between $5 million and $30 million. ICS clients were typically struggling with the ups and downs of cash in seasonal businesses, falling behind on their own debt or growing sales with stagnant profitability.
She was there through the end of 2023. But she started The Collection Dept. on the side in 2021, working on a few side projects. She left ICS to do this full time and this time her partner will actually be her husband, Al Sedacca, who has been in collections for much of his career.
“I’m excited to start something new and something that is back in my own wheelhouse,” she says, adding that she spent about 25 years in factoring and asset-based lending, where clients sell their accounts receivable invoices in order to speed up cash flow. “The things you have to be really good at as a factor are trade credit and collections, because that’s how you underwrite and how you get paid back. What I basically figured out is there are a lot of companies that don’t know how to do either of these things and they wind up with cash flow problems.”
Thing is, in most cases, when companies end up with a lot of late receivables, it isn’t that their customers don’t want to pay. It’s usually a paperwork issue — an invoice got lost or buried in emails. Bigger companies with automated systems will reject invoices and not pay if there is a digit off or if there isn’t a purchase order number.
“There’re a million reasons why an invoice may not be paid and it’s not because someone’s trying not to pay you or because they don’t have the money,” she says.
Sedacca notes that most small businesses don’t have people dedicated to making follow up calls on late payments and, because they’re thought to be contentious calls, nobody wants to make them.
“I saw these companies all the time, they came up to me saying ‘We need more money,’” she says. “Have you tried making a couple of calls? And they haven’t. Collections is something that you have to do regularly. It’s not something you can just do once and then expect everything to work.”
The Collection Dept. will come in and work alongside a client’s existing team, teaching them the questions to ask, the red flags to look for from companies that might be struggling financially and how to hold those customers accountable.
“We’ll teach them all that and get out of the way,” she adds.
She also works with clients to create systems that include setting limits on the amount of business a company is willing to finance over time.
“If I go to Lowe’s and want to buy a refrigerator, they offer financing, but I have to fill out a credit application,” she says. “I don’t just automatically get a refrigerator for 24 months free.”
Sedacca spent more than 20 years in finance, specifically factoring, helping companies that needed assistance collecting on bad debt.
Factoring — and the companies that engage in the practice — have long collectively had beat up reputations because they charge higher interest rates and take a significant cut of the return.
“I didn’t like that factoring was such a seedy industry,” she says. “I think factors are taking advantage of companies when they are down.”
But she thinks factoring can be a great option for companies that have had losses or that are starting out without a credit history or are temporarily tied too heavily to one customer.
“Those are all reasons you’re not going to get a bank loan, but you can still factor your receivables,” she says.
Much like with Sage, Cathy Sedacca says, The Collection Dept. is offering clients coaching that will ultimately help them handle such calls themselves.
“We’ll help them get to bankable,” she says. “We’ll coach them on how to get control over their cash flow, we’ll introduce them to CFOs so they can understand their numbers better, understand their cash flow better and make better decisions — and then we’ll introduce them to banks.”
She acknowledges that in doing so, she may cost herself business, but she thinks it’s a differentiator for The Collection Dept. and the right thing to do. That’s borne out, she says, in receiving client referrals and, in a couple cases, businesses returned to Sage even after becoming bankable because they liked the flexibility and working relationship.
“I believe it comes back to you,” she says. “At the very least, I feel better about it. I’m not taking advantage of people.”
Sedacca says one thing she’s learned over her years is that many people want to but are afraid to start a business. She encourages people to have faith and take the leap.
“Why wouldn’t you be successful,” she says. “There’s an abundance of opportunity out there. I think people are afraid they are going to fail. They’re afraid it’s not going to work.”
In starting The Collection Dept, she’s taking the mindset that there are companies out there selling similar services and there isn’t any reason she won’t be able to find a market.
“There’s no reason why I shouldn’t be able to build a successful business doing collection work or finance or any of the things that businesses are out paying for,” she says. “Businesses are out looking for this stuff. There’s no reason my company shouldn’t be as successful as the next one.”
