Jonathon Tupper·December 5, 2024

Buying in a Huge but Overlooked Market | Jonathon Tupper Interview

Jonathon Tupper, a Canadian-born finance professional with nearly 20 years in fixed income and credit (including a decade at PIMCO in Newport Beach), bought JSI Factoring — a 30-year-old asset-based lending and factoring company based just north of Houston, Texas — for $750,000 after leaving a fintech company whose valuation collapsed 99.5% post-SPAC IPO. The business factors roughly $30 million in receivables annually, primarily for trucking and logistics clients, and generates approximately $1.5 million in revenue with about 100 long-tenured clients. Jonathon financed the deal roughly 70% from his own capital and 30% from his brother-in-law after a planned private credit firm equity partnership fell through weeks before closing; the SBA was unavailable for this asset class. A key attraction was an inherited investor base providing $3 million in capital at a below-market 6.5% interest rate, plus an unusually sticky client roster averaging 10+ year relationships in an industry where 1-2 years is typical. The central challenges are rebuilding a business development pipeline (the co-founding sales driver died two years prior), investing in technology automation, and raising additional capital to fund growth — both organic within Texas and potentially through acquisitions of other factoring companies in similar logistics-heavy markets.

Deal facts

purchase price: $750,000
multiple: 2.1x EBITDA; ~6x price-to-earnings (pre-tax); ~30% premium to net funds employed
revenue: $1.5m revenue; $30m in annual receivables factored
financing structure: ~70% self-funded equity, ~30% equity from brother-in-law; no SBA (ineligible for asset-based lending companies); stock sale structure
notes: Seller was 89-year-old founder; company had ~$3m in low-cost investor capital (6.5% rate) that transferred with the stock sale. Prior private credit firm partnership at 50/50 equity fell through ~6-8 weeks before close.

Why this business

Jonathon was drawn to asset-based lending and factoring because it directly matched his nearly 20-year career in fixed income, credit, and lending (including 10 years at PIMCO). He saw the industry as a massive, fragmented market ripe for consolidation — analogous to the multi-trillion-dollar investment management world he came from. He specifically wanted to be a liquidity provider to small and medium-sized businesses, a thesis he developed from his experience during the Global Financial Crisis. The demographic wave of aging owners with no succession plans, combined with a low-multiple entry point and a strong retained investor base at a below-market 6.5% cost of capital, made this particular company compelling.

What's working

Exceptional client retention: many clients have been with the company 10-15+ years in an industry where 1-2 years is typical, a testament to the firm's client relationships and service quality
Below-market cost of capital: inherited investor notes at 6.5% interest — a major competitive advantage over peers who must raise capital at market rates
Strong existing management team: three long-tenured staff (15-18 years each) carry day-to-day operations, allowing Jonathon to learn the business while maintaining continuity
Stock sale structure preserved client and investor base, avoiding the need to renegotiate legacy relationships
Trucking/logistics niche expertise: 80-85% of clients in trucking, a well-understood segment with recurring working capital needs
Scalable model: technology and automation (AI/ML for invoice processing) reduce the need for proportional headcount growth
Days outstanding averaging 34-35 days, indicating strong collections performance

What's hard

No SBA financing available for asset-based lending companies, requiring more personal capital and a scramble when the planned private credit equity partner fell through weeks before close
Primary co-founder (and head of business development/sales) had passed away two years prior, leaving a gap in the growth pipeline that must now be rebuilt
Technology underinvestment by prior ownership: prior owners were older and reluctant to spend on automation; Jonathon faces a meaningful upcoming technology spend
Operating remotely from Southern California while the business is in Houston requires weekly cross-country travel to instill culture
Labor challenges: finding quality people in factoring is difficult since few people target the industry intentionally
Capital raising is the key constraint to growth — scaling the business requires continuously raising more debt or equity to fund additional receivable purchases
Credit risk is ever-present; monitoring clients for tax issues, missed payroll, and delinquencies requires ongoing vigilance

Notable quotes

you want to be a liquidity provider in periods of stress you need to be a liquidity provider you need to be able to provide capital when people need it most whether it's people or a company but in periods of stress people are always looking for some form of liquidity and ultimately like when you think about what we do today that's essentially what we do we provide a form of liquidity for small and medium-sized businesses

I don't want this to be just um this is not just a lifestyle business for me I do want to grow it I do feel like there are a lot of areas for opportunity

it's not a question of if it's a question of when so with any lending industry and this goes all the way back to you know my days when I was on the fixed income desks at other firms look countries go bankrupt right you've seen that with Argentina many times companies go bankrupt right even ones that you never think will go bankrupt

I'd love to say it's all me but it's not the reality of it is that I rely on those three in that management team heavily and so you know the if I was to give any advice it's you know make sure you have a great management team