Andy Moser, a former lender to RadioShack, and Thomas J. Lynch, the onetime chief executive of Frederick’s of Hollywood, have joined forces to provide a new avenue for funding to retailers.
According to a report by Bloomberg, the two are making the move to capitalize on an overhaul of shopping malls. The firm, called Scargo Hill Capital, will provide asset-based loans to consumer-facing companies. The founders are gearing up to work with startup businesses that would have a tough time getting a loan from a bank. It’s also aiming the funding at struggling retail chains.
“There’s plenty of turmoil in the market for us to focus on,” Moser said in an interview with Bloomberg. Moser noted that emerging retailers tend to have similar characteristics to distressed companies, which is traditionally where asset-based lending is focused. He noted that a lack of solid, historical financial performance and a need for capital to grow the business are characteristics of the type of companies the new firm is looking to lend to. Scargo Hill Capital also plans to make loans available to smaller suppliers and merchants that have been hurt by consolidation in the industry. The new business is also working with Schottenstein affiliate SB Capital Group and 360 Merchant Solutions.
The move to lend to struggling retailers comes at a time when there is upheaval in the industry. While retail sales were in-line with expectations for the holiday season, it was eCommerce companies — particularly Amazon — that were the big winners. Retailers with physical stores saw a decline in foot traffic and sales that will have long-term ramifications. Macy’s, for one example, is closing stores and slashing its headcount, while Kohl’s lowered its forecast due to lackluster holiday sales.