TSL March 2022

THE ACCOUNTS RECEIVABLE ISSUE MARCH 2022 WWW.SFNET.COM

Putting Capital To Work

Interview With

Bob Grbic PRESIDENT & CEO OF WHITE OAK COMMERCIAL FINANCE AND THE CHAIR OF SFNET’S FACTORING COMMITTEE

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TOUCHING BASE SPRING FORWARD

SFNet Offers Full Calendar of Events and Content

Thanks to so many of you for participating in this year’s SFNet Annual Member Survey which had the highest response rate ever. The data was very instructive and will help us make important resourcing decisions to help our members thrive.

Our overall Net Promoter Score, which along with member engagement is our key proxy for value provided, rated world class among trade associations and continues to climb. A particular source of pride is that The Secured Lender magazine and TSL Express led the pack of your most valued SFNet offerings. Not that it’s any surprise given the great content, thought leadership and industry insights our namesake publications provide year in and year out. Congratulations to Michele Ocejo, Eileen Wubbe and Aydan Savaser, along with our dedicated Content Council for the great work you do here.

Speaking of great performance, SFNet’s Factoring Committee has been hard at work creating content and events geared toward this sector of the SFNet Community, including this issue of TSL. Thank you to Bob Grbic, chair of SFNet’s Factoring Committee, and the rest of the Committee for planning and creating much of the content in this issue (for a full list of Committee members, please see page 45).

A surge in start-ups and the increasing awareness of factoring among prospective clients has driven new business, but challenges still remain, such as supply chain constraints and inflation. Members of the Factoring Committee discuss these issues and more in a roundtable interview on page 24.

Of particular interest to less-seasoned industry members, the Factoring Committee wrote an overview of factoring on page 42: Rain or Shine: Factoring Delivers Critical Working Capital. They discuss how factoring has evolved to help modern businesses avoid disruptions and stay competitive regardless of economic conditions.

Don’t miss the Interview with Bob Grbic on page 20. Bob discusses the Factoring Committee’s goals for 2022, the current industry landscape as well as what’s new at White Oak. As we emerge from the pandemic, without the benefit of federal subsidies SMBs across industries are seeing rapidly declining financial performance, leaving them with new challenges, including how best to finance their company in the future. On page 34, Kyle Wilson of eCapital points out how

partnerships between banks and factors can bring about the best solutions for borrowers.

On page 32, we catch up with Secured Finance Foundation board members Bill Brewer and Bethani Oppenheimer and hear from several Foundation benefactors about why they support the Foundation. The mission of the SFNet Foundation is to cultivate education, RICHARD D. GUMBRECHT innovation and charitable SFNet Chief Executive Officer works for the betterment of the secured finance community. Despite the challenges posed over the last two years, in 2021 the Foundation raised nearly four hundred thousand dollars to fund Foundation supported initiatives (a 10% increase over 2020).

I’m looking forward to connecting with many of you at SFNet’s upcoming events. SFNet’s Diversity, Equity and Inclusion Committee is hosting our first DEI Conference, May 16-17, in Tampa, FL. This inaugural gathering of professionals in the secured finance industry is focused on providing attendees with ideas, best practices, and tools to build a more diverse, equitable and inclusive workplace and industry. This will be a great opportunity to network with industry peers and colleagues to gain practical strategies and advice to bring about lasting change.

The International Lending Conference is returning to London, May 23-25, after being held virtually for two years. If you are active in the international lending space, you’ll appreciate a clear understanding and implications of the current global and geopolitical landscape, what may be on the horizon, and what it all means for your business.

On June 16, SFNet will celebrate the 2022 40 Under 40 Award recipients at The Plaza in New York City. Please reach out to James Kravitz at jkravitz@sfnet.com for attendance information. Prior to the celebration that evening, SFNet’s Women in Secured Finance Conference will also be held in New York City, with a reception the night before. Details and registration will be available shortly. The theme of the Conference is “What’s Next?”…no doubt a question that is on all of our minds. Together, the SFNet community will find the answers and move forward.

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THE SECURED LENDER MARCH 2022

TABLE OF CONTENTS. MARCH 2022 VOL. 78 ISSUE 2

COVER STORY INTERVIEW WITH BOB GRBIC, PRESIDENT & CEO OF WHITE OAK COMMERCIAL FINANCE AND THE CHAIR OF SFNET’S FACTORING COMMITTEE P20

Interview with Bob Grbic, president & CEO of White Oak Commercial Finance and the Chair of SFNet’s Factoring Committee Bob Grbic has more than 30 years of commercial lending experience. He has been with White Oak and its predecessor since 2005, previously serving as senior executive vice president and chief credit officer where he was involved in creating a hands-on, best-practices credit culture, as well as helping the Company expand its client portfolio. 20

BY EILEEN WUBBE FEATURE STORIES

Members of SFNet’s Factoring Committee Discuss Sources of Business, Supply Chain Issues and More TSL’s editor-in-chief sat down with several members of the SFNet Factoring Committee to review the current landscape in early 2022. 24

BY MICHELE OCEJO

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THE SECURED LENDER MARCH 2022

FEATURED STORY MEMBERS OF SFNET’S FACTORING COMMITTEE DISCUSS SOURCES OF BUSINESS, SUPPLY CHAIN ISSUES AND MORE P.24

An Interview with Tim Knight, Senior Managing Partner, ThinkingAhead In this installment of our series of executive interviews, Charlie Perer sits with Tim Knight to hear his perspective on executive development, advice for lenders, the growth in the non-bank market, what every executive should be thinking about, the importance of diversity and lessons learned, among other things. 28

BY CHARLIE PERER

SFNet Foundation Board Members Provide Update Bill Brewer, and Bethani Oppenheimer, provide an update on the Foundation’s focus in 2022. 32

BY MICHELE OCEJO

Articles

BUSINESS INSIGHTS

Drive Financial Recovery Through a Factoring Alliance In the current climate, a partnership between banks and factors could be the perfect solution for many clients. 34

BY KYLE WILSON, CPA, CMA

FACTORING INSIGHTS

Factoring Trends for 2022 What’s in fashion for factoring this coming spring? Quite a bit. This year’s trends show what we’ve all been keeping under wraps for the last two years, and we’ll be seeing some definite changes. 36

BY GEN MERRITT-PARIKH SUPPLY TRENDS

How Does a Business Deal with Supply Chain Issues in 2022?

As companies and lenders evaluate performance risk and expectations for 2022, the trends previously considered to be emerging need to be considered a permanent part of the 2022 business environment. At this point, it is unrealistic to expect supply chain stresses to disappear in 2022.

Businesses will need to develop tools to plan for and manage through supply chain issues. This article reviews supply chain indicators as well as approaches business management can take to survive and thrive in this environment. 38

BY JUANITA SCHWARTZKOPF BACK TO BASICS

Rain or Shine: Factoring Delivers Critical Working Capital Age-old financing solution has evolved to help modern businesses avoid disruptions and stay competitive regardless of economic conditions. 42

BY THE SFNET FACTORING COMMITTEE

SFNET MEMBER PROFILE

FrontWell Capital Partners: Well-Positioned for Growth and Opportunity FrontWell Capital Partners, a private credit fund focused on providing transitionary senior debt financing to middle-market companies in the United States and Canada, officially launched in September 2020.

Headquartered in Toronto, Canada, the company is led by Patrick Dalton as CEO, a credit industry veteran who previously served as founder and CEO of Gordon Brothers Finance Company, and John Ho, CFO, and a finance executive with a proven 15-year track record. 46

BY EILEEN WUBBE

A Geopolitical View of Complex Global Supply Chain Issues: Ukraine, China, the Pandemic, Nationalism and the Perfect Storm At SFNet’s Asset-Based Capital Conference in Las Vegas last month, geopolitical analyst David Chmiel addressed how a Russian invasion of Ukraine could set off far-reaching geopolitical impacts and further accelerate China’s aggressive geopolitical plans. 48

BY SUSAN CAROL

Departments TOUCHING BASE 1 NETWORK NOTES 4 INDUSTRY DEALS 8

The Secured Finance Network is the trade group for the asset-based lending arms of domestic and foreign commercial banks, small and large independent finance companies, floor plan financing organizations, factoring organizations and financing subsidiaries of major industrial corporations.

The objectives of the Association are to provide, through discussion and publication, a forum for the consideration of inter- and intra-industry ideas and opportunities; to make available current information on legislation and court decisions relating to asset-based financial services; to improve legal and operational procedures employed by the industry; to furnish to the general public information on the function and significance of the industry in the credit structure of the country; to encourage the Association’s members, and their personnel, in the performance of their social and community responsibilities; and to promote, through education, the sound development of asset-based financial services.

The opinions and views expressed by The Secured Lender’s contributing editors and authors are their own and do not necessarily express the magazine’s viewpoint or position. Reprinting of any material is prohibited without the express written permission of The Secured Lender.

The Secured Lender, magazine of the asset-based financial services industry (ISSN 0888-255X), is published 8 times per year (Jan/Feb, March, April, May, June, September, October and November) $65 per year non-member rate, and $105 for two years non-member rate. SFNet members are complimentary.

Secured Finance Network 370 Seventh Avenue, New York, NY 10001.

(212) 792 -9390 Email: tsl@sfnet.com

www.SFNet.com Periodicals postage paid at New York, NY, and at additional mailing offices. Postmaster, send address changes to The Secured Lender, c/o Secured Finance Network, 370 Seventh Avenue, New York, NY 10001 Editorial Staff Michele Ocejo Editor-in-Chief and SFNet Communications Director Eileen Wubbe Senior Editor Aydan Savaser Art Director Advertising Contact: James Kravitz Business Development Director T: 646-839-6080 jkravitz@sfnet.com

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THE SECURED LENDER MARCH 2022

DEPARTMENT DEPARTMENT NETWORK INDUSTRY NOTES MOVES Bank of America Names Al McRae President of Bank of America Atlanta Al McRae succeeds Wendy Stewart, who was recently named a member of the company’s senior management team and the president of Global Commercial Banking. As Atlanta president, McRae will continue Stewart’s work to establish and nurture strong relationships both inside and outside the company to connect the banking and investment resources offered through Bank of America’s eight lines of business to people and companies across metro Atlanta.

Bank of America Names Rita Sola Cook President of Bank of America Chicago Rita Sola Cook succeeds Paul Lambert, who announced his retirement after 30 years with the company. As Chicago president, Cook will be responsible for connecting the banking and investment resources offered through the bank’s eight lines of business to people and companies across Chicagoland.

John J. Lim Joins Bank of America Business Capital Metro NYC Team as a Senior Business Development Officer Based in New York City, John J. Lim will provide asset-based lending solutions and banking products to large corporate and middle market companies, intermediaries, and financial sponsors in New York City, Westchester and Connecticut. With more than 15 years of financial services experience in ABL and C&I lending, Lim previously served as corporate ABL BDO at TD Bank.

Callodine Group Announces Acquisition of Thorofare Capital

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THE SECURED LENDER MARCH 2022

Callodine Group has entered into a definitive agreement to acquire a majority stake in Thorofare Capital. Thorofare is a leading real estate investment firm, managing over $1 billion in assets under management, with offices in Los Angeles, New York, Miami and Dallas. In connection with the closing of the transaction, Thorofare will become the real estate arm of Callodine Group, with the full team of 23 employees continuing with the firm.

CohnReznick LLP Opens New Office in Miami, FL to House its Growing South Florida Team The new office is centrally located at 1221 Brickell Avenue in the heart of Miami’s financial district. The Miami office is led

by Mike Micholas accompanied by Emily Butler, Bill Pidgeon, Steve Kreinik, David Weinstein, Elena Mervine, Vivian Lara, and Jaime Angarita. Approximately 20 team members are based in Miami with plans to expand hiring for both campus recruits and experienced talent. eCapital Gains Foothold in Texas with Flexible Funding Asset Acquisition eCapital Corp. announced that they have acquired the assets of Flexible Funding, a payroll funding company for staffing agencies across multiple industries, along with its freight factoring subsidiary, InstaPay. eCapital Corp. Names Brian Gagel as Managing Director of General Factoring Brian Gagel will report to Dave Ciccolo, CEO of the division, and will lead a team of account management and operations professionals to support the continued growth of the general factoring business.

Gagel previously served as senior vice president, national portfolio manager for eCapital Commercial Finance. eCapital Corp. Names Kash Ahmad as Managing Director of New Staffing Division Kash Ahmad will report to Dave Ciccolo, CEO of eCapital’s Commercial Finance Division, and will lead the account management and operations teams to support the growth of the company’s staffing business. Prior to taking this role, Ahmad served as executive vice president, chief credit officer for eCapital Commercial Finance. He joined the company after the purchase and consolidation of Bibby Financial Services (BFS) Canada where he was managing director.

First Citizens Completes Merger With CIT Group First Citizens BancShares Inc., parent company of First-Citizens Bank & Trust Company First Citizens Bank, completed its previously announced merger with CIT Group Inc. North Carolina-headquartered First Citizens is now a top 20 U.S. financial institution (based on assets), with more than $100 billion in assets, and the largest familycontrolled bank in the nation. The merger brings together complementary strengths of both organizations, combining First Citizens Bank’s robust retail franchise and full suite of banking products with CIT’s strong market position in nationwide commercial lending and direct digital banking. The combined company now operates under the First Citizens Bank name.

First Horizon Corporation Names Hope Dmuchowski as Senior Executive Vice President and Chief Financial Officer Hope Dmuchowski will serve on the company’s Executive Management Committee and report to president and chief executive officer Bryan Jordan. Dmuchowski joins First Horizon from Truist Financial Corporation where she most recently served as executive vice president head of Financial Planning and Analysis and Management Reporting.

Former Wells Fargo Capital Finance Credit Leader Jeff Stanek Joins Gibraltar Business Capital Gibraltar Business Capital has bolstered its team of senior-level credit and asset-based lending professionals with the addition of Jeff Stanek as executive vice president.

With a proven record of developing and managing strong and diverse portfolio teams, Stanek brings a breadth of expertise in structuring and growing an asset-based portfolio whilst managing carefully for risk.

Haversine Bolsters Expertise with Senior Hire Edward Mun Edward (“Eddie”) Mun, CPA has joined as controller. In his role as controller, Mun will be responsible for managing the finance, operations, compliance and investor relation functions for the company. Most recently, he

served as an associate for Goldman Sachs within its Fund Accounting Group.

Haynes and Boone, LLP Promotes 13 Lawyers to Partnership Ranks.

Effective Jan. 1, the new partners are Raquel Alvarenga, Robert Bruner, Jamie Carter, Matt Costello, Tiffany Ferris, Maria Hopper, Mini Kapoor, Jennifer Kreick, Kim Mai, Kinne Manute, Arsalan Muhammad, Courtney Smith, and Alan Wang. The new partnership class includes 69% women and 62% racial and ethnic minorities and is the most diverse in the firm’s history.

Commercial Banking Leader Betsy Ratto Joins Hilco Global Team as Senior Vice President of Capital Solutions Hilco Global announced that long time Bank of America executive Betsy Ratto joined the Hilco Global team as senior vice president of Capital Solutions with responsibility to drive business for ReStore Capital and Hilco Corporate Finance.

In this new role, Ratto will be responsible for originating and executing corporate finance and capital markets transactions, with focus on the retail industry and other financing transactions.

She will be based in Hilco’s Boston office and will work on identifying and originating lending/investment opportunities through Hilco Global’s and her own existing network of professional contacts and relationships, including investment banks, private equity firms and hedge funds.

Hilco Appoints Dan Arnold Appointed to New Role as Senior Managing Director, Enterprise Valuation Services In this new role, Dan Arnold will focus on building the Enterprise Valuation Services (EVS) practice, including originating new business in the core business valuation segment, as well as disputes and financial diligence practices. Additionally, he will be contributing to the development of a growth strategy and supporting recruiting efforts for the practice. Arnold first joined Hilco Global in 2012 and most recently served as senior vice president at Hilco Global.

CIFC To Acquire LBC Credit Partners CIFC Asset Management LLC, an alternative credit specialist serving institutional investors globally with more than $35 billion in assets under management, has entered into an agreement to acquire LBC Credit Partners, a leading middle market direct lending platform. As a result of the acquisition, LBC’s team and investment funds will become part of the CIFC platform as a subsidiary and continue to trade as LBC. LBC’s investment strategy, senior management, origination, underwriting and research, and portfolio management processes will remain unchanged.

Magnolia Financial Hires Larry Artman as Senior Vice President and Expands into Atlanta with a Regional Sales Office Magnolia Financial has announced the opening of a regional sales office in Atlanta, GA to expand its presence in the southeast. The Spartanburg-based company also announced that industry veteran Larry Artman has returned to Magnolia to head its new office. With over 30 years’ experience in commercial finance, Artman will serve as senior vice president and lead Magnolia’s originations and business development efforts throughout Georgia, Alabama, and Tennessee.

Mitsubishi HC Capital America Welcomes John Nocita as Underwriter for Syndicated Credit and ABL Previously, John Nocita held the position of senior vice president at Wells Fargo Capital Finance in the business, syndicated, and technology finance divisions.

Mitsubishi UFJ Financial Group (MUFG) Hires Kimberly Boulmetis as Managing Director to Lead U.S. Financial Institution Coverage for Debt Capital Markets Group Based in New York, Kimberly Boulmetis assumed her new role in January and reports to Richard Testa, head

of Investment Grade Finance. She is responsible for leading coverage of MUFG’s broad roster of financial institution clients—including banks, insurance companies, asset management firms, private equity sponsors and business development companies (BDCs)—and for delivering the group’s full gamut of capital markets capabilities to issuers of investment-grade debt.

Moritt Hock & Hamroff’s Leslie A. Berkoff Appointed Chair of The ABA’s Dispute Resolution Committee of The Business Law Section Leslie A. Berkoff, a partner and chair of the Dispute Resolution practice group in the Garden City office of Moritt Hock & Hamroff, has been appointed by the American Bar Association to serve as Chair of the Dispute Resolution Committee of the Business Law Section.

The mission of the Dispute Resolution Committee is to aid business lawyers in understanding and using alternative dispute resolution processes.

Moritt Hock & Hamroff (MHH) Welcomes Three Associates Michael J. Borger, Johanna C. David and Grace Y. Lee. Borger and David joined the firm’s Trusts and Estates practice group and are based in the firm’s Garden City office. Lee joined the firm’s Secured Lending practice group and is based in the firm’s New York City office.

Parker, Hudson, Rainer & Dobbs LLP is Pleased to Announce Kelley C. Gass Has Been Admitted to the Partnership Kelley C. Gass is a member in the firm’s Commercial Finance practice group, representing national and regional banks and other financial institutions in a broad spectrum of secured lending transactions. Her work includes asset-based financings, syndicated loan facilities, healthcare financings, acquisition financings, and debtorin-possession financings. Gass is a proud recipient of the Secured Finance Network’s 40 Under 40 Award in 2020.

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THE SECURED LENDER MARCH 2022

DEPARTMENT DEPARTMENT NETWORK INDUSTRY NOTES MOVES Brandon J. Smith Joins Peapack Capital as Senior Vice President, Head of Asset Management Based out of the Bank’s Short Hills, NJ location, Brandon J. Smith is responsible for all aspects of the asset management function at Peapack Capital including equipment valuations and reviews, portfolio analyses, end of lease negotiations, equipment inspections and dispositions. Smith takes on this role as successor to David Santom, Peapack Capital’s current head of Asset Management, who retired after more than 35 years in the industry.

Regions Bank Announces Anil Chadha as Controller; Brad Kimbrough Retires in February 2022 Following Distinguished Career Regions Bank announced Brad Kimbrough retired on Feb. 28, 2022, following a nearly 29-year career at the bank, the last 14 of which he has served as controller and chief accounting officer. Kimbrough will be succeeded as controller by Anil Chadha, a 20-year banking industry veteran who joined Regions in 2011 and currently serves as head of Risk Shared Services and Analytics. Chadha will lead the bank’s broader Controller Group, which includes Karin Allen, who has been elevated by Regions to serve as assistant controller and chief accounting officer. In addition, James Eastman of the Controller Group has been named assistant controller and will manage business unit controller functions. Jon Harden will continue as Accounting and Treasury Operations manager.

Regions Bank Closes on its Acquisition of Sabal Capital Partners

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THE SECURED LENDER MARCH 2022

Regions Bank completed its acquisition of Sabal Capital Partners, LLC, a diversified financial services firm that leverages an innovative, technology-driven origination and servicing platform to facilitate off-balance-sheet lending in the small balance commercial real estate market.

Sabal Capital Partners will be integrated into Regions’ Real Estate Capital Markets division.

Regions Bank Names Leo Loughead as Financial Services Group Leader Regions Bank announced Leo Loughead has been elevated to lead the bank’s Financial Services Group, part of Regions’ Specialized Industries division within Corporate Banking. Based in Atlanta, Loughead joined Regions in 2018 as a managing director for the Financial Services Group Revolution Capital Opens New Office in Kansas Increasing Market Presence in America’s Mid-West Revolution Capital, a leading provider of factoring and cash-flow financing in Canada and the United States, is continuing its strategic growth strategy by opening a new office in Kansas to service the American Mid-West.

The office will be headed by Davinder Singh, formerly of Compass Funding Solutions, who specializes in customized factoring solutions for the transportation industry and brings with him a stellar reputation and strong contacts within that field throughout the Mid-West United States.

The Kansas office located at Commerce Plaza, 7300 West 110th Street, 7th Floor, Overland Park, KS. Revolution Capital Acquires Grand Financial New York Revolution Capital acquired Grand Financial New York., a factoring company specializing in staffing and transportation. The move expands Revolution Capital’s reach in the U.S. market, solidifies its presence on the East Coast, and allows clients of Grand Financial New York to access faster funding, personalized service, and transparent online reporting. Jacob Ross, VP of Grand Financial New York, will stay on with Revolution Capital to help contribute to the company growth and by expanding the reach and the presence throughout the U.S. Revolution Capital Acquires Growth Capital Revolution Capital, the leading provider of factoring and cash-flow financing in Canada and the United States, has acquired Growth Capital, a factoring firm specializing in the

transportation industry.

This consolidation is an important step towards continued customer service standards that exceed expectations across the industry. Growth Capital built its reputation in the transportation industry with innovative technology and resources, which over the years expanded into additional industries.

Tradecycle Capital Expands into the Southeast Region of the US Tradecycle Capital is excited to announce that it is expanding into the Southeast region of the US. Based in Atlanta, Dennis Phelps will be expanding Tradecycle’s relationships with senior lenders and private equity sponsors to deliver Tradecycle’s unique trade payables financing program to operating companies throughout the region.

Most recently, Phelps worked as a managing director and southeast regional manager of the asset-based lending team for Sterling National Bank.

Umpqua Bank Expands Middle Market Banking Division to Arizona Umpqua Bank, a subsidiary of Umpqua Holdings Corporation announced its expansion into the state of Arizona with the hire of Kevin Gillette to build and lead the bank’s newly formed Phoenix middle market banking office. Gillette is one of Arizona’s top banking leaders with more than 25 years of experience helping banks establish and grow commercial and corporate offices across the region.

Priscilla Wallace Named Head of Supplier Diversity for Wells Fargo Priscilla Wallace will report to Barb Kubicki-Hicks, chief procurement officer, with a dotted line to Kelley Cornish, head of Diverse Segments, Representation and Inclusion Program Management Office and Enterprise Initiatives. In her new role, Wallace leads a team of supplier diversity professionals to build relationships within the communities Wells Fargo serves through the development, inclusion, and utilization of certified minority, women, LGBTQ, veteran, disability-owned and small business enterprises.

Mark Allen Smith Joins White Oak Commercial Finance as Managing Director of Originations in the Midwest Based in Chicago, Mark Allen Smith reports to vice chairman Andy McGhee.

Smith has nearly 30 years of financial services experience with expertise in M&A, capital advisory and restructuring and special situations across an array of industries. Before joining White Oak, he was a founder and managing partner at Sentinel Capital Advisors, served as a managing director for Hilco Global, and was the head of Metals for Houlihan Lokey.

Winston & Strawn Names 21 New U.S. Partners Winston & Strawn LLP is pleased to announce that 21 attorneys have been elevated to partner. The class represents Winston’s ongoing commitment to diversity with 42.8 percent being women, persons of color, and LGBTQ+.

Established members of eight different practice areas and seven U.S. offices, this year’s slate of new partners highlights both the breadth of our practices as well as the firm’s growth in key markets.

This year’s partner class is as follows: Dave Bauer (Chicago) concentrates his practice primarily in the areas of private equity, mergers and acquisitions, and general corporate advice for publicly and privately held companies.

Josh Birenbaum (Los Angeles) focuses on mergers and acquisitions, private equity transactions, leveraged buyouts, and joint ventures.

Daniel Bley (New York) focuses his practice on derivatives, structured products, and structured finance, including esoteric asset classes.

Jason S. Campbell (Los Angeles) is an employment advisor and litigator.

Chase J. Cooper (Dallas) is a complexcommercial litigator with a substantial white collar investigations practice.

Laura Franco (San Francisco, Silicon Valley) focuses her practice on intellectual property counseling, litigation, and transactions, providing clients with comprehensive brand protection and

enforcement strategies.

Hao Huang (Los Angeles) represents financing parties and sponsors in a wide range of financing and acquisition transactions in the renewable energy and infrastructure sectors across the United States.

Jeffrey Huelskamp (Chicago) concentrates his practice on complex commercial litigation, financial services matters, and securities litigation. He represents and advises numerous public and private companies, including Fortune 500 companies, private equity firms, real estate trusts, and startups.

Andrew Hutchinson (Chicago) has broad commercial finance experience with a focus on complex domestic and crossborder acquisition financings, mergers, recapitalizations, refinancings, take-privates, and restructurings.

Brian Jansen (Dallas) advises his clients on a variety of debt financing transactions, including acquisition financings, asset-based lending, debtor-in-possession facilities, mezzanine debt, and equity co-investments.

Samantha Katz (New York) represents private equity firms and their portfolio companies in connection with platform and add-on acquisitions, mergers, dispositions, and growth equity investments and coinvestments.

Blaise Latella (New York) represents private equity sponsors, corporations, and a wide range of lenders, including banks, hedge funds, mezzanine funds, and SBICs, in connection with acquisition, cash flow, and asset-based syndicated and club-financings.

financial services litigation, and advertising litigation.

Aaron C. O’Dell (Los Angeles, Dallas) is a trial lawyer with significant experience in securities and complex, commercial, and business litigation.

Justin Podjasek (New York) represents clients in all aspects of real estate, ranging from acquisition, disposition, leasing, financing, development, construction, and asset management of various classes of real estate assets.

Katherine (Katy) A. Preston (Houston) focuses on complex commercial and bankruptcy litigation. She represents individual and corporate clients in contractual disputes and other complex litigation in state and federal courts.

Grant K. Schmidt (Dallas) specializes in complex commercial disputes, high-profile white collar criminal defense matters, and intellectual property matters.

Jeffrey L. Steinfeld (Los Angeles) focuses on securities litigation, white collar criminal defense and SEC enforcement actions, class action defense, duties of corporate officers and directors, and mergers and acquisitionsrelated litigation, including advising on de-SPAC business combinations.

Kristin D. Wickler (Chicago) focuses on mergers and acquisitions and private equity transactions.

Austin Leach (New York) advises private equity firms and their portfolio companies in connection with platform and add-on acquisitions, divestitures, and other exit strategies; joint ventures; and general corporate matters.

Jason A. Lewis (New York) has extensive experience with energy, commodities, and derivatives. Jason has represented a wide range of market participants in financings, acquisitions, and other commercial matters, and he has advised clients with respect to related regulatory issues.

Shawn R. Obi (Los Angeles) focuses her practice on complex commercial litigation matters, specifically consumer protection cases, class actions, securities matters,

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THE SECURED LENDER MARCH 2022

DEPARTMENT INDUSTRY DEALS

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THE SECURED LENDER MARCH 2022

Lender/Participant

Lender Type

Amount

Borrower

36th Street Capital

Non-bank

$14 Million

Leading provider of medical air rescue and Healthcare transportation services

Equipment financing

Access Capital

Non-bank

$1 Million

Life science and engineering talent, New York, NY

Life sciences

Credit facility

Accord Financial

Non-bank

$1.85 Million

Group of construction companies

Construction

AccordExpress BCAP loan in combination with a factoring facility

Alleon Healthcare Capital

Non-bank

$2 Million

Skilled nursing facility operator

Healthcare

Medical accounts receivable financing facility

Amerisource Business Capital

Non-bank

$1 Million

Bioscience firm, Texas

Bioscience

Senior credit facility

Amerisource Business Capital

Non-bank

$10 Million

Water infrastructure, treatment and recycling firm, Texas

Water treatment

Senior credit facility and real estate term loan

Amerisource Business Capital

Non-bank

$6 Million

Energy infrastructure firm, Texas

Energy

Senior credit facility

AmeriFactors Financial Group, LLC

Non-bank

$20 Million

Security technology company, California

Technology

Account receivable financing

AmeriFactors Financial Group, LLC

Non-bank

$250,000

Oil field trucking company, Texas

Trucking

Accounts receivable financing

AmeriFactors Financial Group, LLC

Non-bank

$5 Million

Roofing contractor, Idaho

Roofing

Accounts receivable financing

AmeriFactors Financial Group, LLC

Non-bank

$500,000

Electric and datacom installation company, New York

Datacom

Accounts receivable financing

AmeriFactors Financial Group, LLC

Non-bank

$600,000

Clothing manufacturer, California

Manufacturing: Clothing

Accounts receivable financing

AmeriFactors Financial Group, LLC

Non-bank

$1.2 Million

Underground site utilities company, Florida

Utilities

Accounts receivable financing

Ares Management Corporation

Non-bank

$400 Million

CrossCountry Mortgage, LLC, a leading independent retail mortgage lender operating across the U.S., Ohio

Mortgage lending

Credit facility

Assembled Brands

Non-bank

N/A

Premium olive oil brand, Kosterina

Food

Financing facility

Audax Private Debt [Administrative Agent and Sole Investor]

Non-bank

Non-bank

Supporting Wind Point Partners’ acquisition of good2grow, a national provider of clean label children’s juice and other beverage products, Atlanta, GA

Beverage

Second lien credit facility

BofA Securities, Inc., and Citibank, N.A. [Co-sustainability structuring agents] and Sumitomo Mitsui Banking Corporation [Sustainability Structuring Agent]

Bank

$3 Billion

Digital Realty, the largest global provider of cloud- and carrier-neutral data center, colocation and interconnection solutions

Data

Amended, extended, and upsized its existing global revolving credit facility from $2.35 billion to $3.0 billion

Bank of Montreal

Bank

$40 Million

MAG Silver Corp., a development and exploration company focused on becoming a top-tier primary silver mining company by exploring and advancing high-grade, district scale, silver-dominant projects in the America, Canada

Silver mining

Revolving credit facility

Industry

Structure

Lender/Participant

Lender Type

Amount

Borrower

Industry

Structure

Bank of the West

Bank

N/A

Acquisition of Ste. Michelle Wine Estates by the private equity firm Sycamore Partners Management

Wine

Financing

BNP Paribas [Sustainability Coordinator], Credit Agricole CIB and HSBC Continental Europe [Documentation Agent and Coordinators]

Bank

€900 million

Elis, an international multi-service provider, offering textile, hygiene, and facility services solutions, which is present in Europe and Latin America

Multi-service provider

Syndicated revolving credit facility

Bridge Bank

Bank

$10 Million

Shippabo, a cloud-based supply chain-management platform serving the shipping and logistics industries, Los Angeles, CA

Logistics technology

Asset-based line of credit

Bridge Bank

Bank

$4 Million

Ride Health, a healthcare technology and services company focused on patient transportation, New York City

Healthcare technology

Line of credit

Bridge Bank

Bank

$6 Million

Mixlab, the modern pet pharmacy that partners with veterinarians to deliver the highest level of care at home, New York, NY and Los Angeles, CA

Petcare

Venture debt term loan

BroadOak Capital Partners, LLC

Non-bank

N/A

Gemini Bioproducts, LLC, a leading manufacturer of cell culture products and custom cGMP bioprocess liquids

Biotechnology

Financing

Cambridge Savings Bank (CSB)

Bank

$4 Million

GWA Auto Parts (GWA), an importer, distributor and online retailer of automotive aftermarket parts

Automotive

Credit facility

Cambridge Savings Bank (CSB)

Bank

N/A

To support the growth of LAB Medical Manufacturing, Billerica, MA, for a new manufacturing facility in South Carolina.

LAB Medical is a device manufacturer that produces precision surgical equipment for multibillion dollar organizations.

Manufacturing: Surgical equipment

Acquisition financing

Celtic Capital Corporation

Non-bank

$1 Million

Manufacturer of precision metal stamping, Manufacturing: welding and automated assembly precision metal products for various industries, California stamping

Accounts receivable line of credit

CIBC Innovation Banking

Bank

N/A

Harbor Business Compliance Corporation (d/b/a Harbor Compliance), a technology company that empowers nonprofits and businesses with licensing, tax, and entity management solutions, Lancaster, PA

Technology

Strategic credit facility

CIBC Innovation Banking

Bank

$35 Million

Intradiem, a leading provider of automation technology solutions for customer service teams, Atlanta, GA

Technology

Debt facility

9

CIT, a division of First Citizens Bank Bank

$5 Million

Toward the acquisition of multiple pieces of heavy equipment by a large construction firm

Construction

Financing from CIT's Equipment Finance business

CIT, a division of First Citizens Bank Bank

$35 Million

D.P. Nicoli, a leading provider of trench shoring rental equipment to public utilities, municipalities and contractors in California, Oregon, Washington and Idaho

Trench shoring

Senior secured credit facility

THE SECURED LENDER MARCH 2022

DEPARTMENT INDUSTRY DEALS

Lender/Participant

Lender Type

Amount

Borrower

Industry

Structure

CIT, a division of First Citizens Bank Bank

$50.5 Million

Construction of Amp’s NY3 assets, a planned portfolio of new community solar installations in New York State

Construction

Financing

Citizens Financial Group, Inc. [Left Lead Arranger and Administrative Agent]

Bank

$75 Million

Procentrix, a professional and technology services company serving U.S. federal government customers in civilian, homeland security and defense sectors.

Professional and technology services

New credit facilities

Citizens Financial Group, Inc.

Bank

$125 Million

Destination XL Group, an omni-channel specialty retailer of big and tall men's apparel

Apparel

Asset-based revolving credit facility

Citizens Financial Group, Inc.

Bank

$150 Million

Parts Town, a technology-enabled distributor of genuine original equipment manufacturer parts for the food service industry, both in the U.S. and internationally, Addison, IL

Technology

Upsized asset-based revolving credit facility. The financing also included a $1.52 billion unitranche debt facility from Golub Capital.

Citizens Financial Group, Inc.

Bank

$70 Million

Stonegate Capital Holdings, a leading provider of asset-based credit facilities, to support its acquisition by SG Credit Partners, Chicago, IL

Lender finance

Asset-based revolving credit facility

Corre Management Partners, LLC

Non-bank

$50 Million

Team, Inc., a global leading provider of integrated, digitally-enabled asset performance assurance and optimization solutions

Technology

Delayed draw subordinated term loan facility

Credit Suisse, Hudson Cove Capital Management, Valar Ventures and Third Prime

Bank and Non-bank

$75 Million

Kafene, a fintech company bringing innovation to a key segment of the pointof-sale financing market

FinTech

The package included a $50 million credit facility from Credit Suisse, with an additional $10 million provided by Hudson Cove Capital Management, an alternative credit asset manager. An additional $15 million was added to Kafene's original Series A investment, bringing the total to $30 million, co-led by equity investors Valar Ventures and Third Prime.

Credit Suisse Securities (USA) LLC and Natixis Corporate and Investment Bank [Co-structuring Agents and Joint Lead Arrangers]

Bank

$600 Million

Vmo Aircraft Leasing, a global full-service aircraft lessor

Aircraft

Five-year senior secured warehouse facility. The initial syndicate of lenders also includes Wells Fargo Bank, MUFG, and Credit Agricole.

10

THE SECURED LENDER MARCH 2022

Your partner through strategic change Gordon Brothers Capital provides both short- and long-term capital to clients undergoing transformation. We lend against and invest in assets, both together and individually, to provide clients liquidity solutions beyond our market-leading disposition and appraisal services.

Our firm partners with management teams, private equity sponsors, strategic buyers and asset-based lenders globally and deployed over $695 million in capital last year.1 London-Based Jeweller

$10.6 million

$85 million

£25 million

Term loan

Term loan

Term loan

Term loan

Term loan

Working capital financing

Working capital financing

Acquisition financing

Working capital financing

Working capital financing

$13 million

A$215 million

A$190 million

Term loan

Term loan

Term loan

Term loan

Term loan

Working capital financing

Debt refinancing

Debt refinancing

Working capital financing

Acquisition financing

$15 million

Real Estate Acquisitions

$34 million

€10 million

A$160 million

C$20 million

Equity investments

Term loan

Acquisition financing

Term loan

Acquisition financing

Acquisition financing

1 Over $695 million of deployed capital in 2021 is inclusive of Gordon Brothers total term loan and facility commitments, equity commitments and Gordon Brothers-led syndications. © 2022 Gordon Brothers Group, LLC

GORDONBROTHERS.COM

DEPARTMENT INDUSTRY DEALS

12

THE SECURED LENDER MARCH 2022

Lender/Participant

Lender Type

Amount

Borrower

Industry

Structure

Crestmark, the Commercial Finance Division of MetaBank®, N.A

Bank

$3 Million

Freight All Kinds trucking company, Texas

Trucking

Accounts receivable facility

Crestmark, the Commercial Finance Division of MetaBank®, N.A

Bank

$1 Million

Freight All Kinds trucking company, Michigan

Trucking

Accounts receivable facility

Crestmark, the Commercial Finance Division of MetaBank®, N.A

Bank

$300,000

Refrigerated transport company, New York

Transport

Accounts receivable facility

Crestmark, the Commercial Finance Division of MetaBank®, N.A

Bank

$5 Million

Specialty chemical distributor, Ontario, Canada

Chemical

Ledgered line of credit facility

Crestmark, the Commercial Finance Division of MetaBank®, N.A

Bank

$3 Million

Tree service company, California

Tree service

Ledgered line of credit facility

Crestmark, the Commercial Finance Division of MetaBank®, N.A

Bank

$2 Million

Parts stamping and assembly provider, Illinois

Parts stamping

Ledgered line of credit facility

Crestmark, the Commercial Finance Division of MetaBank®, N.A

Bank

N/A

Food manufacturing company for operational equipment, Western U.S.

Manufacturing: Food

Vendor finance equipment finance

Crestmark, the Commercial Finance Division of MetaBank®, N.A

Bank

N/A

Transportation company for transportation equipment, Eastern U.S.

Transportation

Vendor finance equipment finance

eCapital Commercial Finance

Non-bank

$6 Million

Agriculture supply company servicing both retail and wholesale clients, Florida

Agriculture

Asset-based lending facility

eCapital Commercial Finance

Non-bank

$15 Million

Frozen foods manufacturer, Dallas, TX

Manufacturing: Food

Asset based lending credit facility

Eclipse Business Capital LLC

Non-bank

$45 Million

Coal mining company based in the U.S. and Canada

Coal mining

Senior secured revolving credit facility

Encina Lender Finance, LLC

Non-bank

$50 Million

Crossroads Financial LLC, the industryleading provider of inventory only revolving credit facilities in the below $10 million size range to companies nationwide and the preferred partner to factoring companies and accounts receivable lenders.

Lender finance

Senior credit facility with an accordion feature for an incremental $50 million in potential capacity

Fifth Third Business Capital

Bank

$9.8 Million

Promise to Perform Industries, Inc., operating under three well-established brand names in the industrial materials handling industry- Spanco, Spanco Cranes, and Lug-All

Industrial materials

Senior credit facility

Franklin Capital

Non-bank

$1 Million

Apparel company that had the opportunity to Apparel experience significant growth with their USmade apparel line after receiving new orders from multiple national retailers.

Factoring facility

Gateway Trade Funding

Non-bank

$750,000

Consumer goods company

Consumer goods

Purchase order facility

Great Rock Capital

Non-bank

N/A

WinCup, Inc., a leading manufacturer of traditional and sustainable disposable foodservice to-go ware, including phade® PHA straws

Manufacturing: disposable foodservice to-go ware

Senior secured credit facility

Golub Capital [Administrative Agent and Joint Lead Arranger]

Non-bank

$1 Billion

To finance the merger of 2020 Technologies and Compusoft by Genstar Capital and TA Associates

GOLD facility

Lender/Participant

Lender Type

Amount

Borrower

Industry

Structure

Gordon Brothers

Non-bank

N/A

Family-owned jewelry and diamond retailer, London

Jewelry

Secured term loan facility

Gordon Brothers and J.P. Morgan

Non bank and $215 Million Bank

Myer, one of Australia’s largest retailers

Retail

Four-year assetbased lending facility

Hedaya Capital

Non-bank

$2 Million

Oil and gas pipeline services company projecting CAD $20,000,000 in revenue for 2022, Canada

Oil & gas

Factoring facility

Horizon Technology Finance Corporation

Non-bank

$5 Million

Everstream Analytics, a provider of supply chain risk management software and an existing Horizon portfolio company

Software

Venture loan

HSBC Bank USA and Fifth Third Bank [Joint Lead Arrangers]

Bank

$225 Million

Leading global aviation integration company GA Telesis, LLC

Aviation

Syndicated ABL credit facility with oversubscription and tighter pricing

Huntington Business Credit

Non-bank

$25 Million

Ames Copper Group, LLC, a start-up copper smelter producing copper cathode primarily used in the production of copper wire and rod, Shelby, NC

Copper

Credit facility

ING Capital LLC, Wells Fargo Bank, N.A., and MUFG Bank, Ltd. [Joint Lead Arrangers], HSBC Bank USA NA, Societe Generale, and Coöperative Rabobank U.A.

Bank

$540 Million

Six One Commodities LLC (“61C”), a global merchant of physical energy commodities and provides physical supply services and structures, Stamford, CT

Physical energy commodities

One-year revolving borrowing base credit facility.

The facility increases the current revolving credit facility by $315 million and has a $60 million accordion feature available to support future growth.

InterNex Capital, LLC

Non-bank

$4 Million

Electrical contractor who is a minority, Electrical family, and woman-owned electrical contracting contractor focused on commercial, industrial and residential projects and maintenance services

Line of credit (VelocityLOC) and the Velocity™ platform

InterNex Capital, LLC

Non-bank

$10 Million

Falcone Capital Holdings, LLC, a holding company of award winning, technology driven international and domestic transportation brand, Atlanta, GA

Technology

Revolving credit facility

Iron Horse Credit (IHC)

Non-bank

$3 Million

Leading safety product distributor

Safety products

Stand-alone inventory revolving line of credit

Iron Horse Credit (IHC)

Non-bank

$1 Million

Eyewear distributor

Eyewear

Stand-alone inventory revolving line of credit

J D Factors

Non-bank

$175,000

Transportation company, Illinois

Transportation

Factoring facility

J D Factors

Non-bank

$300,000

Transportation company, Oklahoma

Transportation

Factoring facility

J D Factors

Non-bank

$75,000

Staffing company, Quebec

Staffing

Factoring facility

13

THE SECURED LENDER MARCH 2022

DEPARTMENT INDUSTRY DEALS

14

THE SECURED LENDER MARCH 2022

Lender/Participant

Lender Type

Amount

Borrower

Industry

Structure

J D Factors

Non-bank

$100,000

Transportation company, Ontario

Transportation

Factoring facility

J D Factors

Non-bank

$200,000

transportation company, Connecticut

Transportation

Factoring facility

J D Factors

Non-bank

$150,000

Transportation company, Texas

Transportation

Factoring facility

J D Factors

Non-bank

$100,000

Transportation company, Manitoba

Transportation

Factoring facility

JPMorgan Chase Bank, N.A.

Bank

$25 Million

iPower Inc. one of the leading online hydroponic equipment suppliers and retailers in the U.S.

Hydroponic equipment

Secured revolving credit facility

J.P. Morgan Chase Bank, N.A., Citibank, N.A., RBC Capital Markets and Truist Securities, Inc. [Joint Lead Arrangers] with additional commitments made by Bank of Montreal, Goldman Sachs Bank USA and U.S. Bank National Association

Bank

$250 Million

NMI Holdings, Inc., the parent of National Mortgage Insurance Corporation

Insurance

Amended senior secured revolving credit facility

JPMorgan Chase Bank, N.A. [Bookrunner and Lead Arranger] and Silver Point Finance, LLC [Syndication Agent]

Bank

$375 Million

Pacira BioSciences, Inc., the industry leader in its commitment to non-opioid pain management and regenerative health solutions

Healthcare

Senior secured term loan B facility

JPMorgan Chase Bank, N.A., BofA Securities, Inc., and Royal Bank of Canada Capital Markets [Joint Lead Arrangers and Joint Bookrunners], Associated Bank, National Association, Citizens Bank, N.A., KeyBanc Capital Markets Inc., and U.S. Bank National Association [Joint Lead Arrangers]

Bank

$825 Million

Essent Group Ltd., a Bermudadomiciled holding company. Through its subsidiaries, Essent Group serves the housing finance industry.

Mortgage lending

Credit facility increase from $625 million to $825 million

KeyBank N.A.

Bank

$300 Million

Trinity Capital Inc., a leading specialty lending company that provides debt, including loans and equipment financing, to growth stage companies backed by technology banks, venture capital and private equity firms

Specialty lending

Credit facility.

Wells Fargo Bank N.A. will serve as collateral custodian and paying agent.

KeyBank N.A.

Bank

$200 Million

Espresso Capital, which empowers Venture debt companies with innovative venture debt solutions

Credit facility

King Trade Capital

Non-bank

$5 Million

Telecommunication device supplier, Georgia

Telecommunications

Purchase order finance facility

King Trade Capital

Non-bank

$2 Million

Plastic cup supplier in support of their growing sales to a Fortune 500 customer

Plastic cup

Supply chain receivable finance facility

Marco

Non-bank

$4 Million

Hayden Products, a distributor of Cosmetics cosmetics and related products including soaps and dental floss, sold to mass retailers and boutiques in the United States and Canada, New York, NY

Asset-based facility

Mars Growth

Non-bank

$4.5 Million

Kontist, a leading fintech company providing banking and bookkeeping services to the self-employed and freelancers in Germany

Credit facility

Fintech: Banking and bookkeeping

Financing for a brighter future.

With over a century of experience, CIT has the expertise to empower you to make the right moves for your business. Learn how our commercial financing solutions can help your business power forward.

Get started today at cit.com ©2022 First-Citizens Bank & Trust Company. All Rights Reserved. CIT and the CIT logo are registered trademarks of First-Citizens Bank & Trust Company. MM#11209

DEPARTMENT INDUSTRY DEALS

16

THE SECURED LENDER MARCH 2022

Lender/Participant

Lender Type

Amount

Borrower

Industry

Structure

MidCap Financial [the Administrative Agent, Sole Arranger and Sole Bookrunner] and Morgan Stanley Private Credit

Non-bank and bank

$1 Million

UPSTACK, a profitable, fast-growing platform that transforms the architecture and sourcing experience for businesses seeking cloud and internet infrastructure solutions

Technology

Financing

MidCap Business Credit

Non-bank

$9 Million

Titan Production Equipment, LLC, a designer, engineer, and manufacturer of surface production equipment, focused on filtration and dehydration units, serving the oil and gas industry, The Woodlands, TX

Oil and gas

Asset-based credit facility

Monroe Capital, LLC

Non-bank

$70 Million

Exiger, the global market leader in tech and technology-enabled compliance and risk management solutions, New York, NY

Technology

Senior credit facility

Monroe Capital LLC

Non-bank

N/A

To support the acquisition of System 3 by CMI Group, an existing portfolio company of Gallant Capital Partners and a leading manufacturer of critical components for engines, APUs, fuel and fluid systems, gears, hydraulics, and valves for the majority of commercial, military and business jet platforms serving the aerospace and defense industry

Manufacturing: Engine components

Senior credit facility

Morgan Stanley & Co. LLC [Placement agent]

Bank

$750 Million

BridgeBio Pharma, Inc., a commercialstage biopharmaceutical company focused on genetic diseases and cancers

Biopharmaceutical

Definitive credit facility agreement

National Bank of Canada

Bank

$55 Million

H2O Innovation Inc., a water and wastewater treatment company leading in water technologies and services, specialty products and contract operations

Water treatment

Revolving credit facility

Ocean Bank

Bank

$2 Million

Globalwing USA Corp., a leading exporter of frozen meats and poultry, Miami, FL

Frozen meat

Factoring facility

Oxford Finance LLC

Non-bank

$20 Million

PlateletBio, a preclinical-stage biotechnology company pioneering an entirely new platform of allogeneic cell therapies based on platelet biology, Massachusetts

Biotechnology

Senior secured term loan

Oxford Finance LLC

Non-bank

$50 Million

Kezar Life Sciences, Inc., a clinicalstage biotechnology company discovering and developing breakthrough treatments for immunemediated and oncologic disorders

Biotechnology

Senior secured term loan

Lender/Participant

Lender Type

Amount

Borrower

Industry

Structure

PNC Bank N.A [Administrative Agent], Citizens Bank N.A, BBVA USA, CIT Bank and Wells Fargo Bank N.A [Joint Lead Arrangers]

Bank

$150 Million

Tecnoglass, Inc., a leading manufacturer of architectural glass, windows, and associated aluminum products for the global residential and commercial construction industries, Barranquilla, Colombia

Manufacturing: Industrial window products

Amended senior secured revolving credit facility to increase the borrowing capacity under its committed line of credit from $50 million to $150 million

Porter Capital

Non-bank

$8 Million

Attract Capital, LLC, a financial advisory Financial advisory firm, New York, NY

Credit line secured by accounts receivable

Porter Capital

Non-bank

$8.5 Million

Tier 1 Auto Parts Manufacturer

Manufacturing: auto parts

Credit facility

Rivonia Road Capital LLC

Non-bank

$20 Million

Steno Agency, Inc., created in 2018 to revolutionize the court reporting industry, Los Angeles, CA

Court reporting

Debt financing, alongside an equity investment in Steno’s most recent fundraise

Rosenthal & Rosenthal, Inc.

Non-bank

$500,000

To support the production financing requirements of an importer of laboratory supplies, Florida

Laboratory supplies

Purchase order finance facility

Rosenthal & Rosenthal, Inc.

Non-bank

$3.25 Million

Fast-growing healthy foods and supplement company, Los Angeles, CA

Food

Consisting of a $2.5 million asset-based lending facility and $750,000 purchase order financing and trade finance program

Rosenthal & Rosenthal, Inc.

Non-bank

$60 Million

To support the production financing Solar requirements of a California-based importer and distributor of solar panels, increasing the initial $30 million commitment to $60 million

Salem Five Bank

Bank

$7 Million

Stran & Company, Inc., a leading Marketing solutions Secured revolving outsourced marketing solutions line of credit provider that leverages its promotional products and loyalty incentive expertise

Sallyport Commercial Finance

Non-bank

$1.6 Million

A growing Canadian manufacturer in the agricultural space

Agriculture

Accounts receivable facility

Silicon Valley Bank and Oxford Finance

Bank and Non-bank

$50 Million

Viracta Therapeutics, Inc., a precision oncology company primarily focused on targeting virus-associated malignancies

Technology

Credit facility

Silicon Valley Bank [Lead Arranger and Administrative Agent] and JP Morgan

Bank

$75 Million

SmartRent, Inc., an enterprise smart home and smart building technology platform for property owners, managers, and residents

Building technology Five-year senior secured revolving credit facility

Upsized inventory purchase commitment

17

THE SECURED LENDER MARCH 2022

DEPARTMENT INDUSTRY DEALS

18

THE SECURED LENDER MARCH 2022

Lender/Participant

Lender Type

Amount

Borrower

Industry

Structure

Sound Point Capital Management [Administrative Agent]

Non-bank

N/A

Lindsay Precast, a premier North American concrete manufacturer specializing in precast concrete products

Manufacturing: Concrete

First lien senior secured credit facility

Sterling National Bank

Bank

$20 Million

Air Industries Group, an integrated manufacturer of precision assemblies and components for leading aerospace and defense prime contractor

Manufacturing: Precision assemblies and components

Revolving credit facility

Sumitomo Mitsui Banking Corporation

Bank

$100 Million

Hercules Capital, Inc., the largest and leading specialty financing provider to innovative venture, growth and established stage companies backed by some of the leading and top-tier venture capital and select private equity firms

Specialty finance

Multi-currency credit facility

TAB Bank

Non-bank

$2 Million

Transportation company, Michigan

Transportation

Asset-based credit facility

The Bank of Nova Scotia and a syndicate of Canadian banks

Bank

N/A

Trican Well Service Ltd., a provider of a comprehensive array of specialized products, equipment and services that are used during the exploration and development of oil and gas reserves

Oil and gas

Revolving credit facility

Third Eye Capital

Non-bank

$100 Million

Aemetis, Inc., a renewable fuels company focused on negative carbon intensity products

Renewable fuels

New debt financing

Tradecycle Capital

Non-bank

$2 Million

Private equity owned specialty merchandising company

N/A

Revolving accounts payable funding facility

Tradecycle Capital

Non-bank

$500,000

Precision welder and fabricator of exotic metals

Metals

Revolving accounts payable funding facility

Tradecycle Capital

Non-bank

N/A

Management-owned distributor of Specialty Bar Quality Steel

Steel

Revolving accounts payable funding facility

TradeCap Partners

Non-bank

$10 Million

Distributor of rolled steel, Midwest

Steel distribution

PO funding solution

Wells Fargo Bank, N.A.

Bank

$500 Million

GameStop Corp., a video game, consumer electronics, and gaming merchandise retailer

Electronics and gaming

Global assetbased revolving credit facility

Lender/Participant

Lender Type

Amount

Borrower

Industry

Structure

Wells Fargo Bank, N.A.

Bank

$400 Million

The Children’s Place, Inc., the largest pure-play children’s specialty apparel retailer in North America

Apparel

Consisting of a revolving credit facility with $350 million of availability and a $50 million term loan, both with five year maturities, lower interest rates, reduced reporting requirements, and increased flexibility under the covenants.

Wells Fargo Securities, LLC [Left Bank Lead Arranger and Left Bookrunner], and BofA Securities, Inc., PNC Bank National Association, U.S. Bank, National Association, and Bank of the West, [Joint Lead Arrangers and Joint Bookrunners]

$1.5 Billion

TTEC Holdings, Inc., one of the largest, global CX (customer experience) technology and services innovators for end-to-end digital CX solutions

Technology

Amended and extended its credit facility, increasing the total commitment amount by $300 million to $1.5 billion and extending the maturity to November 2026.

Wells Fargo Securities, BMO Capital Markets, Fifth Third Bank, and Truist Securities [Joint Lead Arrangers and Joint Bookrunners], Wells Fargo Bank [Administrative Agent, Swingline Lender, and Issuing Bank], BMO Harris Bank, Fifth Third Bank, and Truist Bank [Syndication Agents]

Bank

$880 Million

Tupperware Brands Corporation, a leading global consumer products company that designs innovative, functional and environmentally responsible products

Consumer products

Secured credit facility consisting of a five-year, $480 million revolving credit facility, and a five-year, $400 million term loan. The Term Loan includes a €176 million Euro tranche, which aligns with the Company's international business footprint, operational needs, and evolving tax strategy.

White Oak Global Advisors

Non-bank

$51.5 Million

HRB Brands LLC, to effectuate their acquisition of a portfolio of personal care brands from Helen of Troy Limited

Personal care

Senior secured term debt financing

White Oak Healthcare Finance, LLC

Non-bank

N/A

To support the acquisition of Port 45 Recovery LLC by Sunrise Treatment Center, LLC, Cincinnati, OH

Healthcare

Senior credit facility

White Oak Commercial Finance, LLC

Non-bank

$5 Million

Government contractor specializing in providing support services to the U.S. Government and subcontractors, Texas

Government contracting

Factoring facility

White Oak Commercial Finance, LLC

Non-bank

$3 Million

A family-owned apparel manufacturer focused on delivering high quality and affordable clothing for women

Manufacturing: Apparel

Non-recourse advance factoring facility

Automotive

Factoring facility

White Oak Commercial Finance, LLC

Non-bank

$15 Million

Supplier of parts for the automotive aftermarket

Wingspire Capital LLC

Non-bank

$40 Million

Theragenics Corporation, a developer Medical and manufacturer of innovative devicess medical devices

Senior secured credit facility, including a $20 million revolving line of credit and a $20 million term loan

19

THE SECURED LENDER MARCH 2022

COVER STORY

20

THE SECURED LENDER MARCH 2022

Interview with

BOB GRBIC

President & CEO of White Oak Commercial Finance and the Chair of SFNet’s Factoring Committee 21

THE SECURED LENDER MARCH 2022

COVER STORY Robert Grbic has more than 30 years of commercial lending experience. He has been with the company and its predecessor since 2005, previously serving as senior executive vice president and chief credit officer where he was involved in creating a hands-on, best-practices credit culture, as well as helping the Company expand its client portfolio.

Before that, Grbic was managing director at MorrisAnderson & Associates ltd., a turnaround-consulting firm. He also co-founded MetSource Capital, LLC, a restructuring and corporate finance firm, working primarily with small- and medium-sized companies. In addition, Grbic has also served at GMAC Commercial Credit, LLC, BNY Financial Corp and Bankers Trust. He has served as an instructor for the Finance, Tax and Law Department at the NYU School of Continuing Education.

Grbic holds master’s and bachelor’s degrees in Business Administration from Pace University.

TSL: Please give us a little background about your career trajectory and how you got into ABL.

THE SECURED LENDER MARCH 2022

In 2005, while at MorrisAnderson, I was engaged by an investor group to conduct buy-side due diligence on Capital Factors, then owned by Regions Bank. Capital Factors was later purchased by that investment group, and I was offered the position of chief credit officer for the company. I continued in that role until White Oak Global Advisors’ funds and managed accounts purchased Capital Business Credit (formerly Capital Factors) in December 2016, where I serve as president and CEO of WOCF.

What are some of your short- and long-term goals at White Oak?

“I believe rising interest rates coupled with continued inflation will be a challenge for our industry. In part because many companies have never experienced or operated in such an environment. While I expect supply chain issues will start to ease later in 2022, the days of “just-in-time inventory” has lost some of its appeal.”

GRBIC: I began my lending career at Bankers Trust Factors (BT) in the early ‘80s as a credit analyst. I was promoted to an underwriter/account executive position and, in 1989, was transferred to BT’s Los Angeles office. BT Factors was acquired by BNY Financial (BNYF), a subsidiary of Bank of New York in 1990. In 1991 I moved back to New York to work for White Oak Commercial Finance’s (WOCF) predecessor, Capital Factors, Inc., which back then was a relative startup.

22

MorrisAnderson & Associates, a consulting and advisor firm, to help develop and manage its growing book of business.

In 1993, I was asked to rejoin BNYF in New York to help manage a growing ABL book. BNYF’s portfolio was a mixture of agnostic factoring and ABL loans. During my time at BNYF, I was promoted to team leader and subsequently became credit officer for the North American Regional Offices. In 1999, GMAC purchased BNYF. In early 2001, I decided to go in another direction and started a consulting firm with Tim Strachan -- a good friend and mentor from my days at Bankers Trust. In 2003, I joined

My short-term goals are to remain focused on asset quality in the context of expanding market share in a competitive market. My first manager at Banker Trust summed it up with three simple rules: 1) protect our assets, 2) make a profit, and 3) in the context of one and two, have fun. I am fortunate to have a solid group of seasoned leaders in our company that help us succeed in meeting these objectives.

Long term, my goal is to continue to build market share and recognition of White Oak Commercial Finance, and its affiliated financing verticals, as the place to turn to for many financing needs. We seek to accomplish this by providing responsive and creative financing solutions that are geared to accommodate a borrower’s business model.

What made you decide to take on the SFNet Factoring Committee Chair role for 2022?

Over my career I have been involved as a leader in both ABL and factoring markets. I think of factoring as the first form of ABL and as a financing product readily paired with inventory, IP, and equipment financing for any borrower -- especially ones that are growing.

However, I don’t believe factoring is fully recognized as

a creative financing vehicle. I am hoping that in my role as chair, and with the help of all of our Committee members, the Committee can collectively advocate for greater market acceptance of this important funding solution.

What are your goals for the Factoring Committee in 2022?

In addition to promoting factoring, the Factoring Committee hopes to bring awareness to new and pending regulations governing lenders. It has other important agenda items such as working with the SBA to standardize forms of subordination agreements, which have become an issue with the SBA’s EDIL programs, as well as educational programs geared toward the factoring community

When you are not busy at White Oak what can you be found doing?

Traveling with my wife and family, making wine with my two brothers and our families, and reading books on historical topics. I am currently looking forward to my son’s wedding this August in Croatia.

Eileen Wubbe is senior editor of The Secured Lender.

Specifically, the Committee has formed subcommittees on education, as well as legislation and regulations.

What are the main concerns or challenges you’re seeing within the secured finance community?

I believe rising interest rates coupled with continued inflation will be a challenge for our industry. In part because many companies have never experienced or operated in such an environment. While I expect supply chain issues will start to ease later in 2022, the days of “just-in-time inventory” has lost some of its appeal. We are beginning to see companies planning to carry higher inventories, as well as placing purchase commitments earlier. However, I believe these challenges present opportunities for factors and ABL lenders who possess the mindset and talent to serve their clients with the required financing.

What are the biggest opportunities right now?

The biggest opportunities I see will come from solving leverage issues for companies that face longer working capital cycles related to carrying longer-dated receivables and higher inventory levels. This is especially important for companies that have seen suppliers tighten trade credit terms. In most cases, notification factoring provides privity with a borrower’s debtors, and adds a higher level of payment certainty, which increases a lender’s flexibility to finance lengthier working capital cycles.

What have the past two years taught you in serving in a leadership role at White Oak? The importance of communication, which encompasses listening as much as directing, human capital and creativity, and an inclusive corporate culture for a proactive lender. My favorite saying is “Listen twice as much as you speak.” Our ability to adapt to a fully remote work environment during the initial, difficult days of the pandemic still amazes me. We had over 90 employees working from home for over a year and never missed a beat.

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THE SECURED LENDER MARCH 2022

FEATURE STORY

Members of SFNet’s Factoring Committee Discuss Sources of Business, Supply Chain Issues and More

BY MICHELE OCEJO

TSL’s editor-in-chief sat down with several members of the SFNet Factoring Committee to review the current landscape in early 2022. Participants include Carol Apicella, senior vice president, BankFinancial Government Finance; Tina Capobianco, senior vice president, J D Factors Corporation; Dan Karas, executive vice president, Allied Affiliated Funding; Kevin Laborde, president, Cash Flow Resources; and Paul Schuldiner, executive vice president & chief lending officer, Rosenthal & Rosenthal, Inc.

W

hat were your most frequent 2021 sources of new business?

LABORDE: Some startup activity was evident in 2021, but perhaps the more interesting observation I have is the lack of new business sources, in general, in 2021. As a firm serving the truly small business community, government funding has frozen the entrepreneurial market we serve. The unprecedented competition from the SBA has distorted the financial landscape and shows no signs of abating.

In addition to crowding traditional and non-traditional funders out, it is also putting fear into many of the momand-pop companies CFR serves, with them thinking that if the government is doing this, things must really be bad. It is prompting some to question why they should even put capital at risk.

CAROL APICELLA BankFinancial Government Finance

TINA CAPOBIANCO J D Factors Corporation

DAN KARAS Allied Affiliated Funding

KEVIN LABORDE Cash Flow Resources

KARAS: We all strive for client relationships that are sufficiently strong to lead to referrals for new business opportunities. Half of our new relationships in 2021 were based on introductions from our existing clients. This is a testament to the bond our team builds with clients over time. With respect to industry, 3PL was our strongest sector as those that have expertise in managing the ongoing supply chain crisis needed working capital to support strong growth.

CAPOBIANCO: 2021 was a milestone year for J D Factors.

We hit record purchases and new business numbers.

After 2020, it was unclear what 2021 would bring and we have been surprised by the trends that we experienced. We saw tremendous growth in staffing and transportation, as we expected. We funded a lot of new companies, where we bought their first invoice on day one of the factoring arrangement. In both industry sectors, entrepreneurs were prepared to take on a start-up company and, with J D’s help, became quite successful. We also saw a significant organic growth, our existing client base grew well beyond what we expected. The trend seemed to be the survival of the fittest. We also found that debtor credit became an issue in that there was a large demand of certain account debtors. The same trend followed them as well in that the strongest account debtors succeeded and grew; the weaker ones unfortunately failed to survive.

APICELLA: My bank, BankFinancial NA’s Government Finance department, was a start-up launch in May 2021, therefore I would have to say that my continued interaction with colleagues at other lending companies (i.e., banks, commercial finance, etc.) and in professional

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THE SECURED LENDER MARCH 2022

PAUL SCHULDINER Rosenthal & Rosenthal Inc.

FEATURE STORY

organizations, such as SFNet, TMA and IFA, among others helped industry awareness of my lending programs and kept the phone ringing. The majority of opportunities I reviewed were relative to new contract growth, though many businesses flush with cash from the 2020-2021 government hand-outs programs seemed reticent to make decisions to move forward.

SCHULDINER: Our most frequent sources of new business were a combination of centers of influence such as CPAs, commercial bankers, investment bankers, as well as existing clients. Each of these referral sources has either had clients or are clients of our company and who are able to give credible testimonials to their positive experience with our company. There is no better source of new business than someone who has seen first-hand how we assist companies in all aspects of their financing requirements.

What kind of impact do you think the supply chain issues and inflation will have on factoring/lending markets in 2022?

SCHULDINER: The supply chain issues will continue at a minimum for the first six months of 2022. We are continuing to see logistics delays affecting our clients’ ability to import, off-load, and distribute products on a timely basis and absorb the increase in freight costs. The rise of all costs coupled with an expected rise in interest rates may negatively impact our client’s viability. Close monitoring of financial performance, accounts payable as well as collateral performance will be as important as ever to stay out in front of potential portfolio issues.

APICELLA: Supply chain interruptions have already and will continue to impact most areas of lending in 2022 and the foreseeable 2023. Not being an economist, I sense that we will experience longer turn cycles and those lenders nimble enough to adjust to an extended repayment cycle will be in the forefront, albeit maybe not comfortably. Additionally, inflation’s erosion of purchasing power then adds additional strain on the already delicate state of the economy, which I believe will require lenders to be more creative in back-office credit operations.

Have you witnessed a growing acceptance of factoring as a tool in off-balance sheet financing? What effect has this had?

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CAPOBIANCO: It has an been an interesting year for factoring and the acceptance of it. We thought that banks would be conservative during the pandemic and we would see more accounts go into special loans. It seemed that the banks took the same approach as us and decided to stand by their clients and support them. What we did see was a large surge of start ups and their only option was factoring. Factoring is now on the list of alternative financial tools and it was more widely accepted in many industries. In the transportation industry, factoring is the financial tool for carriers, thus making the sales pitch “what can you do for me?” rather than “what is factoring?” After many years of educating, promoting and explaining the process of factoring, we are finally at a point where you do not see a blank face when you say factoring.

LABORDE: Thanks, in part, to the MCA space, I have seen factoring really become more mainstream over the last several years. The expense of factoring, as perceived by some, is now a middle of the road option. It was not viewed that way when MCA funders first arrived on the scene. Companies embracing factoring, as the financial tool it is, compared to more restrictive banking facilities and more liberal and expensive MCA products, positions factoring in a more competitive position than was the case a couple of decades ago. At CFR we have often compared factoring to merchant products used by small businesses in the retail space as those products have been embraced as a normal way to operate and they can be comparable to factoring on the expense side.

What sort of long-term effects has the pandemic had on employee and client/borrower relationships?

CAPOBIANCO: The client relationship has always been one of the most important parts of our success in factoring. We become partners with our clients and help them manage, advise and grow their business. We make efforts to be in front of our clients monthly and the pandemic affected that the most. We had to put more focus on calling, emailing, even texting clients to keep the connection strong. At the beginning of the pandemic, the goal was simply to make sure the client was safe and healthy. As we got further into the lockdowns and isolation, we switched our efforts to make sure they had the tools they needed to keep operating.

Governments did their best to prop up businesses during the pandemic, but when that funding ran out, we were there to help them make it through. We believe we came out stronger and have built relationships that will last.

KARAS: Though unanticipated at the pandemic outset, the impact of providing first- and second-draw PPP loans to our clients to help them survive, even as our factoring volume declined, brought my team and our clients closer together. While we always focus on what’s best for our clients and finding solutions to their complex needs, burning the candle at both ends in true partnership fashion solidified the bond. I’m really pleased about the result, even if the road was bumpy.

How important is it to offer complimentary products with factoring?

KARAS: Diversification of our product offering is a key strategic objective. Just as we want our clients to have debtor diversification, it’s a smart business model to have more tools in the toolbelt than single-invoice discount factoring. Consequently, we broadened our offering to include ledgered line, asset-based lending, inventory financing and equipment term loans. In addition, if the risk exceeds our appetite, then we have strong partnerships that provide real estate, for example.

CAPOBIANCO: The factoring industry has become very competitive, especially with the increase in consolidation of

companies. For those companies that want to stay relevant they will need to come up with creative ways to do so. Complimentary products have become very popular with factoring companies trying to differentiate themselves from their competitors. It is important to bring value to your clients beyond just funding their invoices. The market has dictated that businesses want more from their financial partner, so as a factoring company you want to keep your client happy. As a result, there has been a trend in complimentary products across the industry. It is important to note, however, that you still need to focus on providing quality factoring to your clients; those complimentary products should always come second and to those who qualify.

APICELLA: BankFinancial, NA offers lending products of inventory but also equipment finance/lease and commercial real estate, among others, which presents a full scope of solutions. Analyzing and underwriting the overall credit tied to a prospective borrower requirement, in many cases, creates an atmosphere of confidence while affording them ease to carry-on with what they do best, while as a lender you may focus on what/how to structure the best credit offering.

LABORDE: As a small shop, we have simply not had the resources to formally entertain a broader product line. Out of necessity, we have found ourselves offering other products, like PO funding /real estate loans/equipment loans to accommodate clients or just to work through difficult situations, rather than formally putting them in our lineup. That experience positions us to offer more, but we remain cautious in staying in our lane of expertise. In fact, when I got into this business in 2003, I was counseled not to venture outside of our defined operating parameters. When we have lost money, it was largely attributable to doing just that!

SCHULDINER: We have a stand-alone purchase order financing division that supports both our existing factoring and asset-based lending clients as well as working in tandem as a trusted and preferred provider of PO finance to clients of third-party banks, factors, asset-based lenders and private equity. These thirdparty capital providers have come to rely on our long-term capital stability and industry expertise especially in supply chain issues.

In 2021, our PO business volume was over 60% related to working alongside of third-party lenders. We also established our PIPELINE division in 2021 that provides rapidly growing e-commerce and direct to consumer businesses with inventory and trade finance programs as a non-dilutive alternative to raising permanent equity.

How is the industry dealing with debtor concentration risks?

SCHULDINER: This is and will continue to be a challenging area, especially for clients selling consumer products into a retail channel of distribution that remains dominated by a narrow field of performing retailers. Non-recourse factoring companies are especially adept at being on the forefront of retailer credit risk and establishing appropriate line of credit approval, which helps clients

to mitigate concentration risk. One of the results of the pandemic was a renewed interest in factoring due to our credit protection (we have our own stand-alone in-house credit department that assesses debtor risk), ledgering and collection effort abilities that became more critical.

CAPOBIANCO: As a nonrecourse factor, we do factor a client with debtor concentration. As long as we can approve the account debtor credit and the verification is solid, we will factor the account. We have seen our competition still stay away from debtor concentration. The industry is still uncomfortable with concentration, but given the competitive climate we have, more and more factors will consider taking on a concentrated deal. They will be forced by what drives the market, not necessarily what they are comfortable doing.

APICELLA: Speaking from the Government Finance side of the industry, the main focus is not necessarily on debtor concentration; it is more focused on the contract of engagement and the performance thereto as if goods were delivered and/or service provided, the government agencies will remit payment.

Further, technology advances that provide electronic tracking, verification and money movement have additionally given comfort.

Perhaps thoughts should be given to the B2B space as well where the main focus should be on contracts of engagement coupled with reliance of the debtor’s credit wherewithal and ever vigilant monitoring.

How concerned are you about legislation that are likely to become effective in 2022, such as the financial disclosure laws in CA and NY? LABORDE: CFR does not market itself as a nationwide funding source. While we do have a few outlying clients in other markets, we mainly serve our region in the Gulf south. As a result, we are not subject to the issues now facing providers that operate in NY and CA. That has caused me to question our industry requesting a federal solution to what is now a regional problem. Still, I appreciate the compliance problem this state legislation creates and hope more education about how things work for factoring clients in the real world will prevail.

SCHULDINER: We are concerned as the legislation needs much more attention to the onerous requirements that will be placed on factoring companies that lend into the small to low middle-market business community.

(Editor’s Note: For updates on this and other advocacy issues, please visit SFNet.com or reach out to Michele Ocejo at mocejo@sfnet.com) Michele Ocejo is SFNet director of communications and editor-in-chief of The Secured Lender.

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THE SECURED LENDER MARCH 2022

TSL INTERVIEW

An Interview with Tim Knight, Senior Managing Partner, ThinkingAhead

BY CHARLIE PERER

In this installment of our series of executive interviews, Charlie Perer sits with Tim Knight to hear his perspective on executive development, advice for lenders, the growth in the non-bank market, what every executive should be thinking about, the importance of diversity and lessons learned, among other things.

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K

night is the vice president and senior managing partner with ThinkingAhead where he is responsible for operations, training and recruiting for the firm. He also leads the partner group that heads up the firm’s Commercial Banking and Commercial Finance, Legal, Life Sciences and Security/Physical infrastructure search practices.

home more often in order to stay married! I kind of happened into search joining ThinkingAhead in 1997 as part of the firm’s expansion and my desire to help great companies and professionals succeed. I was the second person hired in their banking search practice.

Fast forward to today, the firm has grown to over 50 employees and I lead the team that heads up four of the firm’s practice areas including commercial finance/banking. I still spend half of my time working with clients and addressing their talent acquisition needs while leading the firm.

What do most of us take for granted about our careers or not invest personal time into that we should?

TIM KNIGHT ThinkingAhead

Knight is in his 26th year in executive search.

Knight is also a member of SFNet’s Diversity, Equity and Inclusiveness (DEI) Committee. Prior to joining ThinkingAhead, he was with Southwestern Advantage as a District Sales Manager recruiting and training salespeople.

Including his college CHARLIE PERER summers, Knight has been SG Credit Partners, Inc. with Southwestern Family of Companies for 35 years.

Since joining the firm in 1997, he has personally filled over 450 engagements for clients and his teams have filled over 2300 engagements.

Knight is the all-team leader in personal production for ThinkingAhead.

He maintains an active portfolio of client companies in the sponsor finance, commercial finance, turnaround/ restructuring and legal market.

CHARLIE PERER: Thank you for your time, Tim. To begin, can you please talk briefly about your background?

TIM KNIGHT: Thank you, Charlie. My background includes sales and sales management with a company called the Southwestern Company right out of college. Those early years were incredibly entrepreneurial as I was on the road almost 80 percent of the year. After starting my family, I quickly began to evaluate my life goals and how I needed to be

Not taking the time to invest in personal coaching of some kind along the way. We spend so much time “working in” our businesses, growing our careers, but often neglect time to “work on” ourselves. I include coaching or additional training along the way as part of my practice as I do believe there is a real correlation in developing personal skills with long-term career success and happiness.

Along with coaching there is a strong need to be mentored by senior peers as well as mentoring younger people coming up in our respective companies. The most satisfied people I know are those that are plugged into mentor programs, especially those where they are helping younger people learn and grow. If a person can look back on a career and name five people they have positively impacted that is a personal achievement.

Given that hiring plans/budgets are an indicator of corporate planning, what insights do you have into company’s 2022 plans at this point? Are you getting the sense that firms are in growth mode going into 2022?

Yes, most everyone seems to be looking for talent while balancing the need to attract younger workers. That seems to be the real push right now, hiring for the future in our industry while keeping an eye on diversity.

That said, most companies I talk with weekly are struggling to find talent in the current market, as the labor shortage is real everywhere. Unemployment for college educated workers is at historic lows, coupled with demand and lower participation rates and there are not enough professionals to adequately staff the market.

As far as this coming year and likely into next year, most are hoping to grow and gearing up for a solid 2022. If you look at the 122 placements our banking practice filled in 2021, over 70% were in either originations or deal execution roles. We are, of course, a very small snapshot of the market, but it gives the readers an idea of what is happening.

In your experience, what explains why BDOs who are attractive recruiting candidates want to leave one good

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TSL INTERVIEW firm to go to another good firm?

Good business development officers who have managed their careers well are very difficult to recruit away. I often share with clients there is no “science” to recruiting in this position.

We have all seen successful business development officers leave one firm as a “world beater” make a move and struggle in the next. The converse is also true as sometimes a change of scenery can also lead to one’s success In my opinion, this is one of the most difficult roles to recruit for in the market and companies need to be patient when evaluating and onboarding talent. Everyone wants assets right away, but high turnover in a market does more damage to a firm’s brand than allowing more time for the business development officer to succeed.

What are you advising your clients right now, given where the market is?

Build your bench by hiring younger talent…today. The impending crisis looming is around the corner with the baby boomers retiring en masse. Statistics show ten thousand boomers are eligible to retire very day. Let that sink in…. those are real numbers and the need for that level of experience doesn’t evaporate, but the talent pool just isn’t there in the next generation.

Is there an industry dynamic where performing BDOs are worth more financially to new employers than they are to their own existing employer?

It takes longer to on board and train newer people, but the pain will be far greater if you wait and lose five people in a span of 18 months due to retirement in a labor market that is showing no signs of cooling off.

The war for talent between banks and non-banks has been skewed towards non-banks the last few years. Do you see this trend continuing as non-banks continue to raise large pools of capital?

THE SECURED LENDER MARCH 2022

When searching today for the non-bank market, most all clients want true credit, special situations and or collateral lending backgrounds. In other words, the risk-return profile requires a slightly different background. The non-bank market by definition is looking closely at collateral, taking risk with yields reflecting that risk.

During the last ten years, there has been a great deal of movement in that position and often it can backfire if not done well. Savvy business development officers will stay put unless and until their story changes internally. Of course, a change in control is an easy one. Other key reasons that seem to top the list in this group are changes in leadership, credit appetite and compensation plans.

Newer platforms are typically forced to pay above market.

I am seeing newer names in the market, some start-ups, others that are adding lines of business as a means of asset diversification. In those instances, there is a willingness to pay more in order to entice those candidates into newer platforms. Firms that are new, with no track, entering an overcrowded market must be willing to offer above market compensation and guarantees to get performing BDOs to take the risk of moving.

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I call the traditional ABL collateral-focused product with a bank. Before the great recession, many banks had standalone groups that operated fairly independent. Today many banks have turned ABL into a product and while taking some risk, they are less collateral driven than in the past.

Absolutely. When I first started recruiting 26 years ago, there were two primary constituents: bank asset-based lenders and commercial finance companies. Today there are more private credit lenders, finance companies, insurance companies, pension funds, BDCs and sponsors that are in the market looking for the same deals. It’s been amazing to watch this shift in the market.

With so much liquidity in the alternative capital sources, I see this trend only intensifying in the coming years.

What does it take to succeed on the non-bank side as the transition for some is not always easy?

Without question a strong credit background in true commercial finance or at one time having worked in what

It’s no secret that ABL has a talent issue. What do some of the bigger lending platforms (bank and non-bank) need to do to better market to Millennials?

Great question! I believe younger people want and need to see how asset-based lending is making the world a better place by whom and how they serve. Meaning, be able to talk about success stories that make an impact on the greater good through saving jobs, financing companies that create products or services that are mission oriented or simply create cool things that meet the market demands. Like it or not, Millennials have a need to see they are making an impact and the stories are part of illustrating that impact.

Also having everyone on the same page talking about how their companies value and appreciate employees in a tangible way via actions. This resonates with all demographics, but especially with those in the younger cohort. For example, one of my newer clients shared with me that they extend three days a year of PTO to do volunteer work and will set aside $1000-2500 based on level to give to each employee’s cause. Getting all involved in the hiring process to be able to articulate exactly what the company does to show that part is huge for Millennials.

Can you please talk about diversity employee initiatives that some of your lending clients are implementing?

This is extremely top of mind in the current climate as clients

know that a diverse workforce is very good for business as their own portfolio companies’ clients are becoming more diverse just as the demographics of the work force are changing. Just talking about the initiatives and the importance of diversity and how it’s great for business is a start. We are hearing that large and small companies are putting their employees through continuing education classes on the matter. New employee hiring tends to be where the greatest training or awareness is being created through helping leaders be aware of unconscious bias and how fast processes can impact hiring decisions negatively.

You mentioned unconscious bias, tell me more about how that can impact in hiring employees.

Well, biases are natural due to our beliefs that are built over time, what we read, how we are raised and so on. One can believe falsely that good leaders are all tall in stature and we all know height has nothing to do with ability to lead an organization. Thanks goodness! Similarly, if my beliefs are set to only find people to “fit the culture” I may only choose to interview those in my age cohort, look like me and/or have similar experiences. If I do so, I will overlook great diverse talent due to my biases.

Perer joined Super G Capital, LLC (Super G) in 2014 to start the cash flow lending division. While there, he established Super G as a market leader in lower middle-market second lien, built a deal team from ground up with national reach and generated approximately $150 million in originations.

Prior to Super G, he co-founded Intermix Capital Partners, LLC, an investment and advisory firm focused on providing capital to small-to-medium sized businesses. At Intermix, Perer spent significant time sourcing and executing transactions and building relationships within the branded consumer, specialty finance and business services industries. Perer began his career at Oppenheimer & Co. (acquired by CIBC World Markets) where he was a member of the Media Investment Banking Group. He graduated Cum Laude from Tulane University.

Perer is author of The Independent Lender blog. He can be reached at charlie@sgcreditpartners.com.

Another common mistake is rushing to make hiring decisions without fully vetting the entire pool. This rush to hire naturally leads to our default setting which is who is the best cultural fit based on my current team. In short, when we rush, our unconscious biases take over.

Lastly, tell us something you are worried about that the rest of the market has yet to figure out.

Well, Charlie, I am certainly not that smart. I can tell you that what worries me in a macro sense is the lack of younger talent coming into the industry. There is a real disconnect with most companies, not all, if we can just kick the can down the road through only recruiting experienced talent we can address the pressing problem later. It is a balancing act…you need experienced help today and no time to train, but that approach can only last so long.

Our industry has made huge strides in the last ten years and that is encouraging, but more attention is needed. There will be businesses we all know of today that will be sold in the next five to ten years out of necessity due to the lack of talent to adequately staff. We have to be about telling the story on college campuses and recruiting from related fields to see the industry thrive in the years ahead.

Charlie Perer is the co-founder and head of originations of SG Credit Partners, Inc. (SGCP). In 2018, Perer and Marc Cole led the spin out of Super G Capital’s cash flow, technology, and special situations division to form SGCP.

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THE SECURED LENDER MARCH 2022

FEATURE STORY

SFNet Foundation Board Members Provide Update

BY MICHELE OCEJO The mission of the SFNet Foundation is to cultivate education, innovation and charitable works for the better of the secured finance community. Despite the challenges posed over the last two year, in 2021 the Foundation raised $386k to fund Foundation supported initiatives (a 10% increase over 2020).

The Foundation also: Expanded education programs accessibility and utility (new on-demand courses, Crucial Conversations webinar series) Enhanced data and information offerings (new Data Committee created, bolstered quarterly surveys with new vendor Keybridge) Engaged our next generation of industry leaders (virtual 40U40 Awards event, virtual guest lectures at three institutions, Hall of Fame/Past Presidents Mentoring Forum added to quarterly Member Forums) Bill Brewer, chair of the Foundation, and co-chair of Winston & Strawn LLP’s global Corporate Lending Practice said, “This year the SFNet Foundation is focused on continuing its historic education mission and on new education programming, including growing our virtual programming, both live and ondemand programming. We also support outreach initiatives designed to expand our message of the importance of secured finance extending credit to America’s small, medium and larger-sized employers. The Foundation is further focused on supporting SFNet’s local chapters with speakers and education initiatives. We have a lot to accomplish in 2022 and are energized about doing so, notwithstanding the ongoing challenges of Covid.”

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Bethani Oppenheimer, the Foundation fundraising chair, and shareholder with Greenberg Traurig, added, “Last year the Foundation, in concert with the SFNet’s Education Committee and local chapters around the country, conducted a record number of guest lecture programs at local universities.

This important programming provides an opportunity to introduce young people to asset-based lending and to career opportunities that were previously unknown to them. We’re looking forward to expanding this programming even more this year to help ensure that our industry has access to a diverse pool of top talent coming out of university finance and accounting programs. We’re also incredibly excited about new opportunities to expand our outreach to serve community

finance organizations, including a focus on women- and minorityowned businesses.

Oppenheimer explained her reasons for becoming involved with the Foundation and encouraged others to do so as well. “I would not be where I am without incredible training, development opportunities, and the best mentors that anyone could have hoped for. I feel so fortunate for the opportunities I’ve had, and I feel a sense of duty to help foster the education and development of people starting out in the industry. Involvement in the Foundation has been an immensely fulfilling experience for me and has helped me develop incredible relationships with people across the industry.”

BILL BREWER Winston & Strawn LLP

Brewer shared Oppenheimer’s BETHANI OPPENHEIMER sentiments: “I am involved Greenberg Traurig simply put to ‘pay it forward’.

It’s my way of giving back to the finance industry, which is at the heart of my legal career. Meeting new people, expanding relationships, learning from others (and sharing what I have learned), and bringing newcomers to our industry … all have been a joy. In saying all that, I would emphasize that it has enabled me to advance the education and career networks of an inordinately talented and diverse group of our peers. I encourage others to get involved and donate their time, treasure and talent. For me, the rewards have been more than worth it.”

Why I Give…

We asked some of the Foundation’s individual contributors why they support the Foundation. Please visit www.sffound.org to make a contribution.

I give to the Foundation because the SFNet community has provided me with many business opportunities which have returned invaluable professional and personal dividends.

John DePledge, Head of Asset-Based Lending, Bank Leumi USA

I give to the Foundation because it’s the right thing for every secured lending professional to do.

Charlie Johnson

I give to the Foundation because educating our community, supporting the next generation of our industry’s leaders, helping those in our neighborhoods, and supporting underserved communities – especially minority and women-owned businesses – makes us all stronger.” Jennifer Palmer, CEO, Gerber Finance

I give to the Foundation because helping educate our industry helps my business.

Jeff Goldrich, SLR Business Credit

I support the Foundation as my “pay forward” for the future of our Industry.

John Fox, Chief Credit Officer, Capital Foundry LLC

I give to the Foundation because it supports issues that I’m passionate about including promoting Diversity, Equity and Inclusiveness in our industry, Women in SFNet events, educational programs, advocacy and the list goes on and on.

Betty Hernandez, EVP-Chief Credit Officer, SLR Business Credit

I give to the Foundation to support the industry and our community through the best and worst of times.

Andrea Petro, Consultant, Waterfall Asset Management LLC

I contribute to the Foundation as part of our duty as stewards of the industry; to foster, promote and develop our next generation of leaders and managers. I am proud to support such a dynamic association that focuses its investments into Diversity, Equity and Inclusion.

Robert Meyers, President, Republic Business Credit

I give to the Foundation because I believe that those who have been successful in the industry have an obligation to give back, to support, and to invest in the education and empowerment of future finance leaders. Loren Shifrin, CEO, Revolution Capital

In my view the secured lending industry help me exceed my financial goals now it’s my turn though a contribution to SFNet Foundation to provide future secured lending leaders the education and skills to succeed. Lawrence Marsiello

I contribute to The Foundation as my give back for all the value received and the good it does for The Commercial Finance Community. Howie Rein, Board Member, SFNet Foundation

I give to the Foundation as a small measure of appreciation for and support to the industry that has given and continues to give so much to me and others in a way seldom replicated in a competitive world. Marshall C. Stoddard, Jr., Partner, Morgan, Lewis & Bockius

I give to the Foundation in order to support our education programs. SFN has the only compilation of classes focused solely on our industry which is vital to the training of our young professionals.

Michael Sharkey, SFNet Past Chairman

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>> PARTNERING WITH FACTORS >> FACTORING TRENDS >>

PARTNERSHIPS

BUSINESS INSIGHTS

Drive Financial Recovery Through a Factoring Alliance

BY KYLE WILSON, CPA, CMA In the current climate, a partnership between banks and factors could be the perfect solution for many clients.

In today’s economic instability caused by pandemic-related disruptions, rising inflation, an overburdened supply chain, and more, small and mid-size businesses are facing severe challenges. In contrast to experiencing a year of significant GDP growth in 2021, this year’s first quarter shows little growth. Economists are adjusting their forecasts to reflect an economy that shows signs of a progressive slow down. SMBs across all industries are seeing rapidly declining financial performance, leaving them with challenges, including how best to finance their company in the future.

Banks have been highly tolerant of underperforming companies over the past two years. The federal stimulus programs that pumped significant dollars into companies propped them up and kept the utilization of borrowing facilities lower than historical levels. This slowed the rate of moving troubled accounts to workout departments.

However, this trend is expected to end, and increased workouts to begin due to a softer economy. Portfolio managers, workout teams, and financial advisors will be challenged to balance credit risk management with maintaining long-standing and historically profitable relationships in this current environment. Moving a relationship to a workout department does not have to mean the end of the relationship or loss of profits for the bank if handled in a consultative and forwardthinking manner. In fact, if handled correctly, it could present an opportunity for a stronger relationship down the line.

The Opportunity

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I’ve seen a fair share of challenging accounts evolve into problematic accounts throughout my career. In my experience, the power of cooperative alliances and creative thinking best manage these situations to produce positive outcomes. Partnering with an invoice factoring company can create remarkable business relationships capable of funding companies in financial distress while preserving goodwill with underperforming borrowers. Coaching a client through refinancing with a factoring company allows the bank to remove themselves from credit risk yet help them retain their client’s favor.

This also enables financial managers to maintain profitable services with the client, such as treasury management and other products while garnishing future business opportunities and goodwill.

These partnerships leverage creative and flexible funding products to produce the financing needed to navigate today’s challenging

>> SUPPLY CHAIN INSIGHTS >>

economic climate. It’s a win-win-win scenario. Banks are relieved of the burden of under-performing loans, borrowers are provided with an alternative and creative lending solution, and factoring companies service more clients.

Navigating Workout Sessions Moving a client to the bank’s workout department may be necessary, but it doesn’t have to be a relationship killer. It’s a matter of managing perception and communicating throughout the process. Borrowers are naturally inclined to view transitioning their business loan to workout status as a blow to their company’s viability and a loss of confidence in the funding relationship. However, imagine the easing of tension if an alternative working capital solution is presented to the borrower at the same time as being informed of the transition to workout status.

While still concerning to the borrower, it will quickly turn what could be a negative interaction into one in which the borrower sees a solution to what otherwise could be a very difficult situation.

The fundamental difference between how banks and invoice factoring companies assess the credit strength of borrowers provides the opportunity for successful results. Banks determine creditworthiness based on the borrowing company’s historical and current financial performance - invoice factoring companies focus credit decisions based on the quality of the borrowing company’s account debtors and the associated accounts receivable assets. This difference is the basis for a synergistic relationship between bankers and alternative lenders to service borrowers’ need for continued funding.

It’s best if the relationship between the bank and the invoice factoring company starts with a meeting to discuss potential areas of opportunity and review problem accounts. These will include turndowns, workouts, deals with special assets, and underperforming loans. Once an opportunity is mutually identified, the factoring company should then be introduced to the prospective client to understand better the borrowing company’s exact needs, business processes, prospective debtors, growth plans, etc. This interaction provides the key information needed to determine the financing structure that best suits the prospective client’s needs.

Once a proper structure is determined, a proposal will be drafted and presented to the client with all relevant data such as the interest rate, advance rate, contract length, and any other relevant terms and conditions of the factoring facility to be engaged. A meeting with the client to discuss the proposal and answer any questions is followed by the client’s application submission if the proposal is accepted. During this phase, the referral partner will be advised of progress, and if the client consents, the proposal details and estimated closing dates are shared. Once signed, the deal goes to underwriting, who works directly with the client to conduct due diligence, a process that generally takes two to three weeks to complete. Legal documents are then issued and sent to the client for review. An efficient factoring company will complete the application process shortly thereafter.

By providing customers with a viable lending solution rather than simply exiting from the credit relationship, it is more likely that the bank will maintain deposit and other revenue-generating services. Bankers

and advisors that embrace invoice factoring as a financing strategy to facilitate the successful conclusion of a workout session position themselves as credit heroes to their institution and clients.

financing firms will not consider their application for funding. Most invoice factoring companies have extensive experience in this area and can assist with back-tax issues to provide solutions while other lenders turn their backs.

Managing Bankruptcy

An experienced factoring company will have access to up-to-date information on IRS liens, levies, tax compliance history, business name discrepancies, accrued tax liabilities, and IRS installment agreements.

These resources allow the factoring company to help resolve wrongful seizures, negotiate a payment deal with the IRS and arrange a factoring facility to fulfill back-tax obligations. These high-value capabilities can save clients the time-consuming experience and avoid the financial drain of dealing with the IRS.

It may be surprising to many that bankruptcy filings dropped significantly throughout 2021 following an explosion of Chapter 11 cases in 2020. However, experts predict this declining trend will be short-lived as the favorable conditions that allowed businesses to avoid bankruptcy won’t last much longer. The cessation of government-sponsored COVID relief packages and the closing window for companies to implement cost-cutting, under-the-radar structural changes such as mass layoffs, will soon turn the trend upward again.

For trustees seeking financial solutions, or company’s recovering from insolvency, invoice factoring is a proven and effective strategy to obtain funding and recapitalization during the Chapter 11 bankruptcy process.

Companies in financial distress typically find that lenders are most difficult to attract just when they need new funding sources the most.

Debtor-in-possession (DIP) financing provides a strong opportunity for financial restructuring and to help turn around a company that has filed for Chapter 11 bankruptcy protection. Under bankruptcy law, DIP creditors receive priority security on debtor assets. This provides the needed incentive for lenders to extend credit to financially distressed businesses that possess a credible chance and a viable plan to turn around.

Companies in bankruptcy are under severe financial stress. They need the most capital available quickly to ward off creditors and pay immediate financial obligations. Due to its flexibility, invoice factoring is a common financing tool used in DIP financing. Despite poor credit, the borrower receives needed funding based on the strength of its account debtors and the related account receivables. This provides life-saving financial resources to restore supplier support with instant payment settlement and bolster creditor confidence with greater access to working capital. With effective guidance from registered trustees, uninterrupted cash flow, and greater financial flexibility, companies in Chapter 11 bankruptcy protection are equipped to manage their way to financial recovery.

How to Manage IRS Tax Payoffs Although not as severe as bankruptcy, unresolved back-tax issues with the IRS can jeopardize a company. If your client owes the government money and has not arranged to make payment on that obligation, the IRS has the authority to issue a lien against the client’s assets.

Government tax collectors can be very aggressive at his stage. They may take action, including issuing a lien or even going straight to the “intent to levy stage,” seizing assets if payment is not made or an appeal is not filed within 30 days. Furthermore, in its efforts to recover past-due taxes, the IRS may bypass a lien search and make a “wrongful levy” on assets already pledged as collateral. Even if the IRS has no legal rights to these seizures, it can be complicated, timeconsuming, and costly to get the assets back from the government.

If your client is experiencing back-tax-related problems, many

Fast Funding When working with an invoice factoring company, the time frame from first applying for a factoring facility to receiving first funding is measured in weeks, not months. Once the client signs to formalize the deal, the factoring company arranges an onboarding session to introduce the work practices and procedures to manage the facility.

The client is now ready for first funding. From this point, ongoing funding is as immediate as invoices can be generated and submitted for financing. It’s a simple, fast process designed to facilitate easy access to working capital for the client with little to no effort by the referring partner.

In Summary Working with clients in financial distress is not only difficult, but it can also put a strain on your business relationships. Partnering with a factoring company to support your clients through to financial recovery is a solid strategy to minimize credit risk and retain client goodwill.

Factors can provide the experience and resources to manage the complex issues of a business in financial distress, take the credit risk off your shoulders, and work with you to maintain your client’s loyalty.

Kyle Wilson is senior vice president, sales director, business development eCapital. He oversees the business development team for eCapital in the United States and Canada, supporting eCapital’s mission to empower companies by accelerating their access to capital. With 14 years of expertise in commercial financing, Wilson has held business development management positions at Hitachi Capital Canada, Bibby Financial Services, i-Cubed Industry Innovators, BDC and Bank of Montreal. He is a Chartered Professional Accountant and Certified Management Accountant and holds a bachelor’s degree in business administration, commerce and finance from Brock University.

He can be reached at kyle.wilson@ecapital.com.

>> PARTNERING WITH FACTORS >> FACTORING TRENDS >>

FACTORING TRENDS

FACTORING INSIGHTS

Factoring Trends for 2022

BY GEN MERRITT-PARIKH What’s in fashion for factoring this coming spring? Quite a bit. This year’s trends show what we’ve all been keeping under wraps for the last two years, and we’ll be seeing some definite changes.

First up, a cascade of activity with more traditional bank lenders that retained customers during the pandemic based on regulatory allowances and readily available government funding may start pushing out underperforming loans. In fact, our lending partners have already started seeing increased deal flow this year, albeit with more credit challenges to solve or with a higher need for aggressive structuring. However, this new cascade of deal flow is expected to increase moving into spring. Fitting then that one of the newest pantone colors this year happens to also be cascade.

For us, that also means increased activity with new participation opportunities, or a need for factors and lenders to increase their senior lines of credit or required junior capital to support their growth. We are really excited and eagerly looking forward to the approaching cascade this season.

Second, acquisitions. With portfolio balances climbing again combined with the amount of capital available in the marketplace, we anticipate seeing more acquisitions and buyouts. These could be the result of growth, or conversely, the result of stretchiness that has occurred over the last few years that unfortunately will now be unwrapped and revealed. Eeek!

Next, global hiring and outsourcing. For a few factors, this is already in play, especially in certain niche industries such as transportation.

However, more and more the factors and lenders we speak with are hiring abroad to contend with the labor and skillset shortages while identifying ways to become more efficient. With so many other industries that have gone global extending into a remote workforce, some factors are not missing out on this new trend, which is not going away anytime soon and is anticipated to become a staple for their business model.

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And, speaking of efficiency and costs, technology is a required accessory this year. As the cost of developing tech continues to decrease, more integration options have become available. And with labor continuing to be a challenge, efficiency will be top of mind, especially when combined with continued price compression throughout the industry. Many factors and lenders are now hyper focused on implementing technology. The larger shops can create their own; the small and mid-sized groups will work to find new resources and partners to fill the gap and will start dedicating part of their budgets to this void.

Even more, with technology and global expansion, cybersecurity will continue to be on the forefront of trends this year. Areas to watch - ransomware, IoT and third-party partnerships. Here are some

>> SUPPLY CHAIN INSIGHTS >>

examples since this can be a murky topic: (i) ransomware, with a focus on the Cloud as a bigger target as many organizations moved to this option during the pandemic, but still need to figure out how to ensure that the proper security and data controls are in place, (ii) IoT (Internet of Things), with more devices connected to the Internet, a major concern is the amount of vulnerabilities in access GEN MERRITT-PARIKH points for companies in Haversine Funding general especially with remote workers (i.e., think Ring, Nest, and other origination entry points where networks branch out to computers where data is then stored), and (iii) Third-party partnerships where a company can be put at risk because of a vendor relationship and their security protocols. This makes qualifying vendors and their security more critical especially when it comes to data.

Finally, potential for fraud will be back in fashion (sigh), which goes in line with embellishments that are being added to the fashion mix this season. Through the pandemic, the number of factoring frauds appeared to decline, more than likely due to the sheer amount of government funds available. But now, we’re already seeing an uptick in this area. So, with the expected growth, now is the time for additional vigilance and paranoia in underwriting new transactions and managing portfolios. Like fashion this year, getting back to the nostalgia of factoring is where to focus - the foundation of debtor and client credit, controls and managing risk.

As you can see, these six factoring fashion trends cover a lot of ground. Overall, I’d say this should be a year of growth, adventure, efficiency, and tech with a reminder to remember the basics - because the classics never go out of style.

Gen Merritt-Parikh is the president of Haversine Funding, a leading financing provider to specialty finance companies, including asset-based lenders, factors, purchase order, equipment, real estate and inventory lenders. With more than 25 years of experience in commercial finance, she joined Haversine Funding in August 2020, responsible for growth and risk management, overseeing originations, underwriting, portfolio investment analysis and management, along with asset allocation strategy for the company.

Gen currently serves on the factoring committee for SFNet and is a speaker and designated subject matter expert for the International Factoring Association. She holds a bachelor of arts degree in business and economics from the University of Texas at Dallas.

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>> PARTNERING WITH FACTORS >> FACTORING TRENDS >>

SUPPLY CHAIN

SUPPLY TRENDS

November.

How Does a Business Deal with Supply Chain Issues in 2022?

Supplier Deliveries Index was 64.9%, down when compared to 72.2% in November.

BY JUANITA SCHWARTZKOPF As companies and lenders evaluate performance risk and expectations for 2022, the trends previously considered to be emerging need to be considered a permanent part of the 2022 business environment. At this point, it is unrealistic to expect supply chain stresses to disappear in 2022.

Businesses will need to develop tools to plan for and manage through supply chain issues. This article reviews supply chain indicators as well as approaches business management can take to survive and thrive in this environment.

The Institute for Supply Management (“ISM”) reported the December 2021 Manufacturing ISM at 58.7%, which is the 19th consecutive month of growth. While the rate of growth slowed from the 61.1% reported in November, economic activity continues to show growth with survey respondents saying they have a positive outlook for 2022.

The December 2021 Services ISM also reported the 19th consecutive month of growth at 62.0%. This brings the Services ISM down to the September 2021 level of 61.9%, after experiencing a spike to 74.8% in November. The Services ISM reported five record growth months in 2021.

Further analysis of the data reported in the December 2021 Manufacturing ISM shows the following:

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>> SUPPLY CHAIN INSIGHTS >>

Inventory Index as 54.7%, down when compared to 56.8% in November.

New Export Orders Index was 53.6%, down when compared to 54.0% in November.

Imports Index was 53.8%, up when compared to 52.6% in November.

Fifteen manufacturing industries reported growth in December.

These included Apparel, Furniture, Textile Mills, Plastics & Rubber, Machinery, Nonmetallic Mineral Products, Misc. Manufacturing, Chemical Products, Electrical Equipment, Appliances, Fabricated Metal Products, Computer & Electronic Products, Food, Transportation Equipment, Primary Metals and Petroleum & Coal.

Three manufacturing industries reported decreased activity in December. Those were Wood Products, Printing, and Paper Products.

The December 2021 capital expenditure lead time days was 161 days, which is a steady increase from 154 days in September 2021. The December 2021 production materials lead time days was 91 days, which is a decrease from the 96 days reported in October and November 2021. The December wait time for supplies used for maintenance, repairs, and operations (“MRO”) increased to 48 days from 44 days in November. The MRO lead time in days has been varying between 44 / 45 days and 48 / 49 days since September.

ISM completed its Semiannual Economic Forecast survey and released the information in December. The Semiannual Economic Forecast reports demand will expand, based on growth in the New Orders Index and New Export Orders Index, Customers Inventory Index at low levels, and Backlog of Orders Index at high levels.

Consumption will also increase as indicated by the Production Index and the Employment Index.

The ISM survey expectations for 2022 show the following:

New Orders Index was 60.4%, down when compared to 61.1% in November.

Manufacturing Growth:

Production Index was 59.2%, down when compared to 61.5% in November.

- Capital Expenditures up 7.7%.

Prices Index was 68.2%, down when compared to 82.4% in November.

Services Growth:

Backlog of Orders Index was 62.8%, up when compared to 61.9% in November.

Employment Index as 54.2%, up when compared to 53.3% in

JUANITA SCHWARTZKOPF Focus Management Group

- Revenue up 6.5%.

- Capacity Utilization is at 88.7%.

- Revenue up 4.3%.

- Capital Expenditures up 10.3%.

- Capacity Utilization is at 89.4%.

Expectations are for revenue growth in 15 of the 18 manufacturing sectors and for revenue growth in 17 or the 18 service sectors. The manufacturing employment base is expected to grow 1.0% in 2022.

The December 2021 comments from industry executives and the comments in the 2022 forecast survey report a lessening of labor issues in terms of finding staff; however, the executives are concerned about retaining existing employees and backfilling for employee turnover. This economy is an employee’s market, rather than an employer’s market.

Supply Chain: Freight Indicators Marine Transport Indicators: The Freightos Global Container Index as of January 21, 2022, reports an index value of $9,680 compared to the high of $11,109 on September 10, 2021 and the $4,400 to $4,700 reported from February to April 2021.

Clearly the marine transport costs are off the peak values hit in September of 2021; however, the marine transport costs are increased over both the prior year and run rate historic levels. This indicates the increased marine transportation cost levels should be expected to continue, though the costs may be off their highest points.

Trucking Indicators: DAT Freight and Analytics reports trucking industry activity and costs.

In the Resources section of their website, DAT.com, DAT publishes trendline data for rates and fuel costs. This shows that January 2022 over January 2021 rates increased as high as 64.6% for Reefer Loadto-Truck, with most year over year rate increases in the 25% to 35% range. Fuel prices increased 40.9% year over year.

Looking at the Freightos China to North America West Coast index, the January 21, 2021 value is $15,145 per container, compared to the November 5, 2021 value of $18,730.

Typically, spot rates decline in January, but according to DAT that did not occur in 2022, with van, flatbed and reefer spot rates all increasing in January 2022.

39

The year over year index value for the November to January period shows that last year container costs from China to the Western US were in the $3,843 to $5,205 range compared to 300% higher this year for the same period.

THE SECURED LENDER MARCH 2022

Industry participants continue to cite labor shortages and rising labor rates as issues they are working to overcome. As with supply chain discussions, the labor retention rates and the labor backfill costs are driving increased stress for companies that are involved in the

SUPPLY CHAIN

transportation of goods via truck.

A business that operates its own fleet or relies on outsourcing for trucking needs should expect transportation costs to continue at least at the current level throughout 2022, though the trends are suggesting costs may continue to increase in the short term.

Air Freight Indicators: The Baltic Air Freight Index shows that air freight rates have continued their steep climb and are highest for the Hong Kong to North America rates. These rates have increased from $4.00 per kg to over $12.00 per kg.

evaluated for transportation related requirements and impacts.

For example, if trucks are not available to ship product to customers, is that the company’s problem or the customer’s problem? How will the company be impacted by product manufactured to purchase order that is remaining in inventory?

Transportation contracts will need to be evaluated for potential cost increases, specifics regarding FOB terms, capacity requirements and limitations, and potential damages if terms are not met by either party to the contract.

Cost Sensitivity: The income statement impact of supply chain costs may contribute to inflationary cost changes in multiple line items of the incomes statement. In addition to reviewing and planning for changes in transportation line items it will be important to consider the impact of changing transportation costs on each expense line.

A thorough review of the income statement will be necessary to identify financial performance risks.

Working Capital: While supply chain costs will certainly impact the income statement, many businesses will overlook the impact on working capital and, therefore, will be surprised by the cash needs and the impact on financing costs and credit availability.

A business that relies on air freight will need to expect continued high costs, with the strong possibility that trend has not yet leveled off.

What Does This Mean for a Business?

These statistics show that businesses should expect their supply chain cost stresses to continue throughout 2022. The labor issues coupled with transportation costs will contribute to financial stress and to timeline planning and delivery issues.

The financial impacts of the supply chain cost increases will stress the financial performance of the company.

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There will be a tendency to move toward increased inventory levels for both raw materials and finished goods. It will be important to evaluate items such as packaging materials that may be customer specific. If the contract with the customer does not have the ability to push the increased packaging inventory needs back to the customer, making that contractual change should be evaluated. If the customer provides purchase orders and then is unable to provide trucks to pick up inventory, will the customer or the company producing the product be responsible for carrying the inventory?

Suppliers may ask for faster terms to support their own working capital needs. Customers may ask for slower terms to support their needs.

The timeline issues will also result in working capital stress as businesses struggle with the tradeoff between costs to carry raw materials and finished goods versus the risk of being unable to meet order demand. In contrast to just in time inventory methods, businesses are now feeling the need to Increase levels of raw materials and finished goods to ensure the ability to produce and ship orders on time.

All these changes and stresses need to be evaluated for their impact on the operating cycle and on cash flow. If a company has a few key customers, developing an operating cycle for each customer will be important as the company evaluates costing and working capital needs. For example, if a customer has an operating cycle of 60 days, the carrying cost of the working capital for that customer should be considered when pricing the product the customer purchases.

What Tools Should a Business Use?

The line of credit structure will also need to be evaluated in conjunction with these supply chain issues. There may be changes required in certain areas of the line of credit structure, such as:

Dealing with supply chain issues means the business will need to address both financial performance risks and working capital needs. Senior management will need to engage a team consisting of logistics, inventory management, operations, and sales to evaluate how best to respond to the supply chain stresses. This will involve developing creative methods of dealing with customers, vendors, and material suppliers.

Contract Evaluation: Customer contracts will need to be

Relationship limits between accounts receivable and inventory.

Concentration limits within accounts receivable.

Sub limits for inventory components.

Cross aging exclusions.

Next Steps Weekly cash flow and working capital modeling is key. This weekly performance tracking also helps identify problems quickly, as weekly budget to actual reporting will show changes before the income statement or balance sheet for the month end are reported. Weekly tracking would immediately show cash flow and working capital changes that would be early indicators of: Sales changes, to allow drill down by customer.

Collections changes for terms and discounts.

Inventory increases or decreases, to allow drill down by inventory category and by customer.

Juanita Schwartzkopf, senior managing director at Focus Management Group, has over 30 years of experience in commercial banking, and business management. She has dealt with asset recovery situations involving court and non-court approaches, as well as turnaround management. Schwartzkopf ’s extensive background provides her clients with creative methods of solving complex recovery problems. She has worked with nearly all major financial institutions in the evaluation of credit risk of borrowers in a variety of industries, including all aspects of agriculture.

Accounts payable changes for terms and discounts.

The supply chain stresses make working capital management a key component of successful business operations in 2022.

This will be a challenging year. Many controllers and CFOs, as well as their accounts receivable, inventory and accounts payable staff have not been through this level of stress and may not know what early indicators to look for.

The timeline issues will also result in working capital stress as businesses struggle with the tradeoff between costs to carry raw materials and finished goods versus the risk of being unable to meet order demand. In contrast to just in time inventory methods, businesses are now feeling the need to Increase levels of raw materials and finished goods to ensure the ability to produce and ship orders on time.

When supply chain issues are combined with the level of inflation, commodity price changes, and labor issues, most company managers have not experienced this stress during their working career. For example, with inflation at a 40year high, the number of managers that have experienced these business dynamics is low, and a specific manager’s understanding and skills have not been tested in this economic environment.

Planning and analysis are ways to reduce performance risk and identify areas for possible improvement or change before a company drops into unsustainable performance levels.

Senior management of a company needs to be considering, evaluating, and planning for these trends to continue.

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SFNET MEMBER PROFILE

FrontWell Capital Partners: Well-Positioned for Growth and Opportunity

FrontWell Capital Partners, a private credit fund focused on providing transitionary senior debt financing to middle-market companies in the United States and Canada, officially launched in September 2020.

Headquartered in Toronto, Canada, the company is led by Patrick Dalton as CEO, a credit industry veteran who previously served as founder and CEO of Gordon Brothers Finance Company, and John Ho, CFO, and a finance executive with a proven 15-year track record.

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BY EILEEN WUBBE

JOHN HO Frontwell Capital Partners

PATRICK DALTON Frontwell Capital Partners FrontWell Capital Partners’ plan on when to launch was a strategic one, from the timing to the product and its geographic location.

Like other companies who started during the pandemic, FrontWell faced the challenges that came with building the best possible team remotely. It took some time, but eventually a core team was established and ready for potential deal flow.

In addition to hiring virtually, FrontWell relied on the help of third-party field examiners and appraisal firms as well as doing its own virtual tours as part of its due diligence to help them understand the true value of what they were lending against.

“We received patient capital and expected deal flow to come in,” Dalton said.

“We needed to be patient to find the right opportunities and the right people and put the right processes in place.”

Just weeks after their launch, Toronto went

into another COVID-related lockdown, and all employees were forced to work from home for the next nine months. For Dalton, it was even longer since he was based in Connecticut and couldn’t cross the border into Canada until July 2021. When the Canadian border re-opened for travelers, Dalton returned and FrontWell went through somewhat of a relaunch.

“Deal flow wasn’t as we expected,” Dalton said. “We saw a lot of opportunity that we didn’t like anyway, but we got back into the office.

Since then, the pipeline has picked up extremely well for us. We’ve got great opportunities in front of us and term sheets have been signed back. They may or may not close, but we’re finding much better opportunities.”

The Drivers Behind Deciding to Launch FrontWell Dalton and Ho first crossed paths when Dalton was asked to do strategic review for a challenged alternative lender in Canada, while also serving as its interim CEO, four years ago. Ho was part of the team Dalton regularly met with during a six-month period.

“He was the most forthright. His work product was completely accurate, and he was extremely timely. He was a young, ambitious guy,” Dalton recalled. “When I left that opportunity, some of the investors who were part of that group were really interested in hearing my thoughts on relaunching a business in a different way, kind of like I did at Gordon Brothers. I only agreed to think about that opportunity if I could bring John on as a partner with me to help because it’s always better when you’ve got someone who has his background. I wanted a partner who can handle what he does on a day-to-day and a long-term basis, and what I could handle. I couldn’t do it all myself.”

prudent that FrontWell have a policy in place to make us more attractive to such opportunities,” Ho explained.

The core principles of FrontWell’s ESG policies are simple, and centers around responsible investing, promoting a diverse workplace, and working with vendors that share similar ESG values. Firstly, FrontWell is committed to avoiding investing in traditional non-carbon conscious oil and gas and coal extraction companies, as well as investing in traditional tobacco and firearm companies. In addition, FrontWell promotes workplace diversity in gender and ethnicity.

“More than 50 percent of our team is either comprised of women or visible minorities, which we’re really proud of in building the team from scratch,” Ho said. “This wasn’t intentional - we found the right people for those roles - and they just happened to be a diverse group of people.”

As part of the company’s procurement approach, they have a goal to have 75 percent of its total business expenses come from vendors that have an ESG policy in place.

Poised for Growth With deal flow having slowed due to the pandemic, FrontWell Capital Partners spent that time building relationships with its primary sources of deal flow—banks.

“When banks happen to have a borrower who they want to move off their balance sheet that doesn’t fit their risk profile, they usually move into the alternative lending market,” Dalton said. “Banks have not done any of that over the last year because the government didn’t force them to do so. Banks weren’t asking for re-appraisals of their borrowers so there weren’t penalties for not cleaning up their balance sheets.

“The U.S. market is completely overrun with alternative asset-based lenders today,” Dalton added. “So, FrontWell is a successful business platform, but I didn’t want to do this in the U.S. Even though we do deal flow in the U.S., I saw that there was a vacuum, having spent six months in Canada, for someone coming in and building an institutionalized alternative asset-based lender here because there was a real market leadership opportunity and you couldn’t really see that in the U.S.”

“So, there was other competition, banks and the government, who were providing companies with the liquidity and tremendous amounts of free capital that they needed to get through. Unfortunately, many of these companies should have come to our market. Now that the government assistance is beginning to stop, and hopefully it will stop completely, borrowers now need to be in a position where they can find alternative sources of capital. Banks and the conversations we build with their special loans groups and originations teams, are starting to think about us as a partner. Our product is to be with the bank in a partnership or instead of a bank. We can’t compete with banks on price, but we do compete on structure and creativity, and we’re very intimate with our borrowers. We’re starting to see that happen already with banks in Canada. We expect to see activity pick up in a tremendous way. That’s why we staffed up our team to be in place and ready for that.

We need to be very selective, but we think that we’re going to see some really attractive opportunities for 2022 and beyond for the next few years until the market goes back to a robust credit cycle again, but that should be good for us.”

FrontWell’s ESG Policy

Eileen Wubbe is senior editor of The Secured Lender.

Dalton says he is focused more on front-end originations, vision, and strategy, while Ho focuses more on the middle and back office, while also having a strategy and visionary mindset.

“At the time, my answer on the relaunch was a no,” Dalton said. “The last thing you want to be is the last guy to enter the market at the at the end of a cycle. The credit cycle is so competitive, and there are people doing crazy things, but when the pandemic happened, that’s when we got back together and started talking to our investors about how the pandemic would play out and if this was a good time for us to be in business. I asked John to be a co-founder with me.

As part of FrontWell Capital Partners’ responsibility to act in the best interest of its investors, certain environmental, social and governance (ESG) considerations are integral to the Company’s mandate.

“As more institutional investors look for firms that have an ESG policy before they even think about investing in them, we thought it was

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SFNET BACK TO BASICS

Rain or Shine: Factoring Delivers Critical Working Capital

Age-old financing solution has evolved to help modern businesses avoid disruptions and stay competitive regardless of economic conditions

BY THE SFNET FACTORING COMMITTEE

(Editor’s Note: This article is the first of a new column aimed at relative newcomers to the industry.)

Access to ready working capital is critical to the success of a business, whether it is for maintaining ongoing operations or investing in future growth. And yet, short-term liquidity constraints are far too common. In the United States alone, over 30% of small businesses experience, or expect to experience, late or unpaid invoices, according to a recent survey1 (see sidebar). These financial disruptions can have a devastating impact on company investments, supplier payments, seasonable production rampups and payroll obligations.

With current market uncertainties fueling anxiety across the economy, there is an age-old financing solution that continues to provide a reliable source of working capital for businesses to avoid hardships – factoring.

Factoring is the original form of asset-based lending (ABL). As is the case with ABL clients, the short-term debts of factoring clients sometimes exceed their cash on hand. Therefore, they need to sell accounts receivable to a factor in order to collect cash immediately to make their short-term debt payments and boost cash flow to purchase supplies, restock inventory or fund growth. Factors not only provide funding, but they can also help companies streamline operations, discretely control collections and maintain their client relationships.

How Factoring Began

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The origins of factoring can be traced back to the world’s earliest civilizations in North Africa and the Middle East. In Ancient Rome, factors helped businessmen conduct financial transactions in distant lands. Factoring was also a prominent method of doing business in Elizabethan England, as the British Empire sought to colonize the New World.

In the U.S., factoring has remained

a popular form of financing since colonization. During the Second Industrial Revolution of the late-19th and early-20th century, the U.S. saw the mechanization of agriculture and textile manufacturing and an evolution in power, including steamships and railroads, which was fertile ground for the factoring we know today. This funding system, which is based on the outstanding balance of accounts receivables, has allowed companies to sustain growth by having immediate and unlimited cashflow.

Factoring in the 21st Century While the concept of factoring has survived the test of time, it has not stopped evolving. In the 21st century, factoring has continued to adapt to new realities, including many trends that were underway well before the COVID-19 pandemic turned the worldwide economy on its head.

Let’s take a closer look at some of these changes, which fall into three main categories.

Consolidation – Over the past two decades, factoring has experienced a great deal of consolidation. Today’s factors must be able to readily adapt to current market requirements, including technology, digital marketing strategies, business development techniques and virtual meeting formats, as well as redefine their product offerings to meet client needs.

“Consolidation is definitely something at the forefront at this point. We are seeing smaller players being acquired by larger players. The market in the next two or three years will be dominated by a handful of much larger specialty lenders,” said Marius Silvasan, CEO of eCapital Corp.

Technology – Financial technology, or FinTech, has found traction in this space and is proving to be a boon to both lenders and their clients. In fast-moving markets, factoring firms are now able to tap improved technology solutions to streamline activities and make even faster decisions to meet clients’ immediate financing needs.

This includes processing UCCs and credit checks, pre-approving funding at certain dollar amounts, and increasing accounting efficiencies throughout the process. The use of technology is also allowing factoring firms to serve clients across international borders, where it may have been impractical and burdensome to do so in the past.

“The biggest opportunities I see in factoring will come from solving leverage issues for companies that face longer working capital cycles related to carrying longer-dated receivables and higher inventory levels. This is especially important for companies that have seen suppliers tighten trade credit terms.” — Bob Grbic, president and CEO of White Oak Commercial Finance and chair of SFNet’s Factoring Committee.

Competition – Historically, larger banking institutions have kept their factoring divisions separate from the rest of their operation, but that is changing. Today, we are seeing many major banks active in factoring, lowering their requirements to accommodate companies they would not historically serve. This reflects a shifting perception of factoring as an effective financing option in many market scenarios.

As lender interest in factoring grows, we are seeing different terminology being used to make the product more palatable for clients, while also creating some potential confusion. Some firms call their offering ABL, while it is actually non-notification factoring or a non-notification/ABL hybrid. Other terms include full-service, recourse/non-recourse, invoice factoring and sort factoring.

Regardless of the product name used, the model of “true sales” (in which a receivable is sold by the owner to another entity), has proven to be an effective tool to address supply chain disruptions.

Factoring is now married to inventory, equipment, IP, and off-thebalance-sheet financing that can supply an entire business.

“I think being able to embrace technology and provide a variety of payment solutions to businesses is something that is on the cusp of expanding and all kinds of new technologies are going to be available to provide a much broader option set to small- and medium-sized businesses,” said Charles Sheppard, chief operating officer at eCapital Corp.

The New Factoring Landscape All of these changes within the factoring industry have resulted in reduced rates (due to market pressures and cheaper capital structures), as well as a demand by clients for additional services and products. It is no longer enough for factoring firms to simply provide financing. For example, we are now seeing some

1 Sage. “Late Payments: Why Your Invoices Are Delayed and How to Get Them Paid Faster” 2 Factor Finders. Invoice Factoring: A History

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PUTTING CAPITAL TO WORK

The Need for Factoring A recent survey of more than 3,000 SMBs across 11 countries found: • Over 30% of SMBs in the U.S. are currently experiencing, or expect to experience, negative impacts of late payments that will affect company investments, supplier and payroll obligations • 13% of invoice payments to SMBs are made late • 10% of late payments are never paid or are written off as bad debt • An average of 15 days each year are spent chasing late payments SOURCE: Sage. “Late Payments: Why Your Invoices Are Delayed and How to Get Them Paid Faster” https://www.sage.com/en-us/blog/ late-payments-get-paid-faster/ companies offering benefits like commercial Visa cards, fuel discount cards, unlimited credit checks or revolving lines of credit to their factoring clients. These components add value to the factoring program and provide clients with even greater control of their finances.

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Today’s factoring clients are more educated than ever before, thanks to the Internet. They have already done extensive online research before making funding inquiries and are looking for factors that can offer more robust services. Factoring now requires more than a salesperson pushing product, but a knowledgeable consultant who can also help the company streamline operations and increase efficiencies to help them stay competitive. Some factoring companies are now seeing a need for specialization by industry and geographic region to meet client demand.

It is worth noting that banks have a longer pre-approval period for new customers. By contrast, factoring companies are able to do same-day pre-approvals, as well as 48-hours fundings. This reduced timeline can sometimes mean the difference between a client meeting payroll or having to dissolve the company. Because factoring is based on underwriting the account on the payers, not necessarily on the client, this speeds the approval process tremendously.

“The biggest opportunities I see in factoring will come from solving leverage issues for companies that face longer working capital cycles related to carrying longer-dated receivables and higher inventory levels. This is especially important for companies that have seen suppliers tighten trade credit terms.” Bob Grbic, president and CEO of White Oak Commercial Finance and chair of SFNet’s Factoring Committee.

Who Uses Factoring and Why Businesses across a range of industries continue to utilize factoring to secure timely cash flow and increased operational efficiency, to take advantage of growth and acquisition opportunities, or to fund bankruptcy or exit strategies.

For decades, factoring has been commonly used in the textiles/ apparel industry, driven by the need to access cash quickly to stay liquid and competitive in a highly seasonal business. We are now seeing companies in a more diverse range of industries turning to factoring as a short-term financing solution, ranging from startups to long-established SMBs. Because factoring can benefit any business that sells products on terms, this funding option is becoming increasingly common in all types of manufacturing, furniture and home goods, food and beverage, electronics, transportation, staffing and even healthcare. Additionally, we are seeing the life of accounts being extended to years, not just months, due to robust factoring programs designed to address the needs of these types of clients.

Impact of Pandemic There have been far fewer bankruptcies and insolvencies than many expected at the outset of the pandemic. Some of this may be the result of government interventions easing or delaying the financial impact on businesses. We are beginning to see some upward movement in this area, but it remains to be seen if this is related to typical January/February market trends or due to the pandemic itself.

Overall, the factoring market has remained strong throughout the pandemic, as businesses continue to face longer payment terms from their customers, ongoing supply chain disruptions and increased due diligence requirements from lenders. Vital funding is also needed for traditional brick-and-mortar business as they shift towards e-commerce. Factoring companies that specialize in industries and services deemed “essential” during the pandemic, such as staffing, trucking and healthcare, have experienced tremendous growth during this time.

Members of the SFNet Factoring Committee Robert Grbic, Committee Chair, White Oak Commercial Finance, president/CEO Carol Apicella, Bank Financial, senior vice president, government finance Tina Capobianco, J D Factors, senior vice president David Cervantes, White Oak Commercial Finance, marketing consultant Neal Harm, CIT Commercial Services

“I think being able to embrace technology and provide a variety of payment solutions to businesses is something that is on the cusp of expanding and all kinds of new technologies are going to be available to provide a much broader option set to small- and medium-sized businesses,” — Charles Sheppard, Chief Operating Officer at eCapital Corp.

What’s Ahead Making predictions in the COVID era may be a fool’s errand, but given factoring’s long history, we do know this: It serves businesses well in tough economic environments, as well as when markets are strong.

There continues to be a lot of capital out there, along with a strong desire to get it on the street. Interest rates are rising, but it does not appear to be enough to dramatically impact the market.

We anticipate competition will remain intense within the factoring industry and that we will see greater consolidation as firms seek competitive advantages. Smaller factors will find it difficult to complete with larger firms when it comes to keeping up with the latest market challenges, including technology upgrades, proper cybersecurity, digital marketing, social media, and more.

As businesses become more aware of the various financing options that are available to them, we believe factoring will gain further momentum and a strong position as a core, rather than alternative, financing strategy. We will also see factoring companies joining forces with service providers in specific industries, such as accounting software or trucking services, to further enhance their factoring program offerings.

Lastly, critical to the success of factoring firms, will be an even greater move towards technology, which will allow them to serve their clients more effectively, as well as attract the next generation of workers, including Millennials and other digital natives that will drive the future of the industry.

CIT – A Division of First Citizens Bank, managing director of strategy, Rochelle Hilson, SLR Business Credit, senior vice president, IBF Division Dan Karas, Allied Affiliated Funding, executive vice president Kevin Laborde, Cashflow Resources, LLC, president Sarah LeBlanc, LSQ Funding, regional vice president – sales (Northeast) Genevieve Merritt-Parikh, Haversine Funding, LLC, president Tabitha Miller, Triumph Commercial Finance, vice president, business development Oscar Rombola, eCapital Corp., managing director Paul Schuldiner, Rosenthal & Rosenthal, chief lending officer Max Toledo, Bridgeport Capital, executive vice president, national sales director

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SUPPLY CHAIN

A Geopolitical View of Complex Global Supply Chain Issues: Ukraine, China, the Pandemic, Nationalism and the Perfect Storm

BY SUSAN CAROL At SFNet’s Asset-Based Capital Conference in Las Vegas last month, geopolitical analyst David Chmiel addressed how a Russian invasion of Ukraine could set off far-reaching geopolitical impacts and further accelerate China’s aggressive geopolitical plans.

FIn a virtual fireside chat recorded Jan. 30 with questions posed by Business Editor Stuart Rock, founder of Devonia Road, Chmiel said China is certainly watching closely to see how unified the response to Russia’s escalation has been from Ukraine’s allies in Europe and North America.

“We’ll probably have an issue where energy gets weaponized,” he said, if Russia is cut off financially and politically from nations that depend on Russian energy. He also said port closures could affect food supply lines, and Russian cyberattacks are likely to disrupt critical European communication and financial systems.

While facing that dangerous situation, along with the ongoing pandemic, and burgeoning economic nationalism around the world, the effect of Brexit is hard to tease out, Chmiel said.

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He also pointed to an expansive new national security and investment act in the UK aimed at monitoring foreign investments and covering 17 national sectors. While Brexit was supposed to open the UK to trade globally, the UK government estimates that between 70 and 90 inbound investment acquisitions will get reviewed annually compared to a total of only 16 in the past 18 years before the new law was implemented. It is not just happening in the UK, either, Chmiel says.

“This legislation is symptomatic of the world we are in right now.”

“Has the pandemic led to reshoring manufacturing and protecting borders?” Rock asked.

According to Chmiel, in 2020 when the Pandemic hit, Americans immediately saw the impact of their reliance on global supply chains when they were unable to access

necessary personal protective equipment.

“It’s going to be a harder issue for politicians to advocate for open investment since the Pandemic,” he added.

In the shifting economic and geopolitical sands, he sees alliance structures developing with countries such as India, Japan and Indonesia. Combined, these countries will likely have a larger population, SUSAN CAROL GDP and defense budget Susan Carol Creative than China by 2040. The new buzzword for this shift, he said, is “Indo-Pacific” rather than “Asia-Pacific.”

Chmiel also said we could see the emergence of some sort of investment block of trusted nations receiving clearance based on acceptable trade behaviors, but he said the picture is quite complicated in this area.

According to Chmiel, the “elephant in the room” is China-but that the world also needs to pay more attention to the economic impact of rising nationalism in Latin America.

When asked what he thought would be a perfect storm from a geopolitical perspective, Chmiel said a disruption of shipping in the Persian Gulf, or the Indo-Pacific would have major implications for supply chains. To this point, Rock noted how ironic it is that the Pandemic stimulated more digitization of markets, yet the biggest threat to commerce may be in centuries-old maritime transportation lanes.

In such a perfect storm, insurers would withdraw, raising risks for shippers and thereby creating major implications for supply chains, and that would feed into political discord and further nationalistic responses, Chmiel explained.

Susan Carol leads Susan Carol Creative, a full-service communications firm she founded in 1989 that has specialized in commercial finance, healthcare and technology for 30 years.

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