Finance Agency Oarex Secures $50 Million Credit score Line to Shore Up Liquidity in a Recovering Sector
Digital media has been widely hailed as a rare growth area for the advertising industry, which is expected to see a nearly double-digit decline in spending this year.
A steady flow of liquidity in a recovering market is not always certain, however, as advertisers often push the boundaries of their payment terms with providers.
During such times, companies often turn to outfit financing known as “factoring firms” that are effectively buying invoices from digital media buyers and sellers who need capital to receive instant payment.
Oarex Capital Markets, a Cleveland, Ohio-based company, is one such organization that works with smaller companies that banks don’t typically fund. Today Oarex announced that it has closed a $ 50 million line of credit with the East West Bank.
Hanna Kassis, founder and CEO of Oarex, said the fundraising is a sign that banks have confidence in the general health of the digital advertising industry.
“We finance [companies] by getting loans from the Xandrs and the Googles of the world … and that’s what banks like right now, “he said. “If the bank didn’t like the loans we bought, they wouldn’t give us a line of credit.”
The new capital doubles Oarex’s line of credit after receiving $ 50 million from Arena Investors LP in July 2019. Kassis said the additional funding means Oarex can offer the industry “more aggressive rates,” meaning vendors will be better compensated for the bills they sell to its outfit.
The Covid-19 pandemic also decimated the US advertising industry GroupM’s forecast spending will decrease 9% this year. However, digital advertising spending will counter this trend with an expected increase of 5% this year and 18% in 2021, according to the media buying giant.
Marketers are investing more in digital because of the flexibility programmatic trading offers in the face of pandemic uncertainty and the decline in traditional channels like linear television.
Problems arise when advertisers continue to extend agency payment terms, which can trigger a number of events that can affect ad tech providers. smaller players are particularly susceptible to such phenomena.
The ad tech sector in particular is still very much aware of the number of companies that have changed on short notice in recent years due to the high profile bankruptcy filings of outfits like Sizmek and Videology that owed hundreds of millions of dollars to their customers .
Kassis expects CPMs to rise over the next year as more investment flows into digital channels, especially if a Covid-19 vaccine comes out. “A lot of people will be chasing dollars they missed out on in 2020,” he said. “There’s a FOMO in the industry.”
The initial financial blow of the pandemic forced many companies to extend their payment terms, which in some cases can be as long as 120 days. Despite the recovery in digital media, Kassis expects payment cycles to remain long: “Once you’ve extended them, why should anyone return?”