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Jeff Pomerantz is no stranger to mainstream businesses, but in recent months he has been hanging out on the fringes.

Businesses in need of cash can sell their invoices to Pomerantz at about 90 percent of their face value. This year he launched a Greater Des Moines office for Interface Financial Group, a 35-year-old company that provides a variety of business financing services.

One of those is debt factoring – a way to provide short-term financing, in most cases, that might not be available from banks or traditional lenders.

Debt factoring caught Pomerantz’s attention as a way to help businesses that are struggling in a weak economy and also provide him with an opportunity to work from home.

Because it is an alternative to more traditional business loans, Pomerantz readily admits that factoring draws some suspicion.

“I want to make certain that no one thinks we are a competitor with banks,” Pomerantz said.

Joseph Folsom, district director for the U.S. Small Business Administration (SBA) in Des Moines, said factoring might work for some businesses, but if he were to offer advice, it would be to work with a bank to obtain an SBA-backed business loan.

“If you are creditworthy, it would be good to pursue conversation with a lender,” Folsom said.

Pomerantz hopes to work with banks that might have business customers who don’t qualify for more traditional bank financing or are having problems with existing lines of credit.

“The banks have really tightened their standards,” Pomerantz said. “We’re an option in some of those instances. We like to think that we are a resource for the banks.”

Interface is not a lender. Instead, it buys invoices at 90 percent of their face value and makes its profit on the 11 percent return when the bill is paid in full.

Pomerantz provides the funds for most of those purchases, turning to Interface if a customer seeks a large investment.

“A lot of banks have accounts receivable pledged as security, and that is kind of on the edge of what we’re doing, but it is not exactly what we’re offering,” Pomerantz said.

Debt factoring is more common in Europe, Canada and Australia, where some banks operate their own factoring departments.

“In Iowa, not many people are aware of factoring,” Pomerantz said. “It is something that is becoming more well known. It is a timely option for a lot of people.”

It is a growing industry in the United States, with most of the business in the Northeast and West. The Midwest accounted for 4 percent of national debt factoring volume of $135 billion in 2007, according to a report from the Commercial Finance Association, an industry trade group.

The association will not report its 2008 numbers until midsummer, but indications are that the volume will be about $200 billion, said Mike Trainor, an association spokesman.

“Anecdotally, we did see a big spike last year,” Trainor said. “Our members were showing significant pickup, especially in the last quarter.”

Debt factoring is an option for companies engaged in business-to-business transactions, such as a vendor selling to a retailer.

“We can’t help all businesses,” Pomerantz said. “We’re not really for consumer-oriented business.”

In fact, Pomerantz said he has turned down more businesses seeking a short-term cash infusion than he has accepted.

“Some just weren’t strong enough financially for us to do a transaction,” he said. “It’s one thing to offer this service, but it’s another thing if it’s not going to benefit someone in the long run.”

Pomerantz said he has been involved in transactions ranging from $1,000 to $1 million.

Businesses use the money for equipment purchases, payroll and other expenses.

Interface will purchase up to 60 percent of a company’s current receivables at 90 percent of their value.

Part of his due diligence is to research the creditworthiness of a client’s customers.

“If a bank doesn’t want to work with a business, chances are we don’t either,” Pomerantz said.

Pomerantz has observed a few businesses built from scratch. He worked for his father, Harry, and uncle, Marvin, at First Midwest Corp., an agricultural packaging business that the family eventually sold.

He has pursued a variety of careers, including real estate investment and travel services.

“I’ve had some pretty good teachers,” Pomerantz said. “I’ve been fortunate to be around some really good business people. … I learn more as I go along.”