Citizens announced today that it is lead left arranger of a $125 million asset-based loan for Virginia Beach, VA-based Franchise Group, Inc. (Nasdaq: FRG).

Franchise Group is an operator of franchised and franchisable businesses that continually looks to grow its portfolio of brands while utilizing its operating and capital allocation philosophy to generate strong cash flow for its shareholders.  This transaction refinances an existing ABL for two of its businesses – American Freight and Buddy’s Home Furnishings.

TSL: Congrats on your 10-year anniversary! Scott, what would you say are the biggest changes Gibraltar Business Capital has undergone over these last 10 years?

Scott Winicour: Thanks! It’s been a wild ride these last ten years, but probably the biggest change is when I bought the company from my father ten years ago with the help of private equity. It was a very small, regional player in the factoring space that did average-sized deals of $50,000 to $250,000. One of the biggest changes today is we don’t really do any factoring anymore, and that’s because we’ve morphed into an asset-based lender as opposed to a more traditional factor.  Another big change is that we now have a nationwide presence.  So, we went from a small, localized factoring-only business to a national brand name that people know, with salespeople all across the country. That is, by far, the biggest change.

FrontWell Capital Partners (“FrontWell”), a private credit fund that provides transitionary senior debt financing to middle-market companies in the United States and Canada, has announced that it has added to its roster three professionals who bring extensive expertise in sourcing, underwriting and portfolio management across many industries and multiple market cycles. Aubrie De Sylva has joined the firm’s deal originations team as Vice President and Kevin Freer and Andrew Isaac have joined the underwriting team as Vice President and Assistant Vice President, respectively. They will be based in FrontWell’s Toronto headquarters.

(Editor's Note: A member of SFNet’s Advocacy Committee, Brett Garver of Moritt Hock & Hamroff LLP, has provided this alert pertaining to CFPB Section 1071, which could prove to be unduly burdensome to the vast majority of small and mid-sized finance companies that provide credit to small businesses. If you have any questions or comments, please contact Michele Ocejo at mocejo@sfnet.com.)

U.S. Bank announced that John Freeman has been added to the Asset-Based Finance (ABF) team to head the group’s Corporate Client West and Southwest Originations.  Based in Los Angeles, Freeman brings more than 25 years of Asset-Based Lending experience with an extensive background in Credit, Restructuring, and Originations.  John will be responsible for providing asset-based solutions to companies, intermediaries and financial sponsors.

FrontWell Capital Partners (“FrontWell”) today announced its launch as a private credit fund focused on providing transitionary senior debt financing to middle-market companies in the United States and Canada. FrontWell will begin operations immediately with committed seed capital of more than USD $350 million from a group of international investors.

Headquartered in Toronto, FrontWell offers creative, value-added financing solutions, including asset-based (ABL) and cash flow loans, to maximize liquidity support for borrowers that are looking beyond traditional sources of capital. 

The annual number of bankruptcies peaked at 60,837 in 2009, but the financial and bankruptcy experts expect the level of bankruptcy filings to explode well over that peak during the next twelve to twenty-four months. During the first six months of 2020, there were 3,604 business bankruptcy filings, which is up 26% from the 2,855 filings during the first six months of 2019 (Epiq/Aacer). June year over year chapter 11 bankruptcy filings increased 43% from 2019 to 2020. The June increase is expected to be the start of a wave of business bankruptcy filings as the economic impact of the Covid-19 virus manifests itself in lost businesses.

This anticipated increase in bankruptcy filings means lenders will be challenged to manage an increasing number of borrower relationships during the bankruptcy process, including developing or evaluating various liquidation scenarios.

Lenders will be challenged to anticipate recovery values under different liquidation strategies – ranging from different bankruptcy proceedings, to receiverships, to ABCs, to out of court wind down processes.

Cadence Bank today announced the rebrand of AloStar Capital Finance, a division of the bank that provides asset-based lending (ABL) and specialty finance solutions, to Cadence Business Finance (CBF). Along with its new name, logo and website, the rebrand introduces new leadership and a realigned business focus to better serve the growth and operational needs of performing middle-market businesses.

Norbert “Norb” Schmidt has been appointed executive vice president and director of capital finance of Cadence Business Finance. 

XL Funding provides floorplan loans to auto dealers in more than a dozen markets, and will use the funding to refinance a previous bank loan and extend capital to more small and medium-sized dealers in populous states including California, Texas and Florida.

Wingspire was attracted to XL Funding’s position of strength as consumers pursue affordable pre-owned automobiles amid the uncertain economy and a desire for “private” transportation during the coronavirus pandemic.

Financial analysis is a cornerstone for any credit administration function.  Each loan officer must know his or her borrowers and thorough financial analysis is the best way to start.

The goal of financial analysis is to link business events to changes in the balance sheet, income statement and cash flow to explain the company’s performance during the period under analysis.  Without this linkage you end up with “elevator analysis” (sales are up, AR is up, EBITDA is down, etc.) and no meaningful understanding of the company’s performance.

Where do you start?  EBITDA is often a starting point for many people.  Why?  It is a standard measure of performance in the banking and finance industry.  EBITDA is a measure of the profitability generated by a business before interest expense, tax expense and depreciation and amortization expense.  While this gives the analyst a place to start and some ability to compare to comparable companies, EBITDA should not be viewed as a proxy for cash generation ability. 

As the Secured Finance Network and its members have examined the Main Street Lending Program, there have been two aspects of the program in particular that have been identified as impacting on the utility of the program for borrowers from asset-based lenders. 

Both points, along with some others, have been raised in letters from the Secured Finance Network to the Department of the Treasury and the Federal Reserve.  And the Secured Finance Network has followed up with specific questions to Treasury arising from the “Main Street Lending Program Frequently Asked Questions” published on July 31, 2020 by the Federal Reserve Bank of Boston (the “FAQs”) in understanding what is permitted under the Program that could significantly impact how it may be used with an asset-based facility.

In March, when the world suddenly and completely switched to “virtual” everything, quick, yet thoughtful, decisions had to be made by SFNet’s leadership and staff to ensure the Association could fulfill its mission of bringing together and representing those who provide the capital that fuels our economies.

“As it became clear that COVID was causing a seismic shift in just about every aspect of our professional and personal lives, the well-being of our staff and the SFNet Community became our priority. We also had to find creative ways to bring critical information to our members, as changes were occurring with head-spinning speed. In addition, it was vital for SFNet to continue to facilitate the connections that are so important now, during this time of social distancing,” said SFNet CEO Rich Gumbrecht. “We recognized the urgency of addressing our members’ most-pressing needs through impactful advocacy, providing crucial conversations through online events and sharing relevant and timely content."

Q3 study highlights improved future outlook tempered by significant near term headwinds

Small business owners have faced unprecedented challenges due to the pandemic and are in the midst of great uncertainty with the upcoming presidential election. However, the Q3 Wells Fargo/Gallup Small Business Index indicates there is a continued spirit of forward-facing optimism among small business owners despite the persistent trials. The overall score rose 12 points from last quarter’s historic low-water mark, driven by a sharp rise in sentiment about future expectations. The overall positive movement in sentiment was contrasted by the third successive quarterly decline in optimism about current business conditions.

SFNet’s fourth annual Women in Secured Finance Conference attracted over 300 attendees for two days of inspiring (virtual) sessions featuring senior executives who shared their perspectives on leadership and communications while heading teams virtually and managing changes wrought by the COVID-19 Pandemic.

The consensus: Workers will not be returning to how it was even after a viable vaccine for the COVID-19 virus becomes available. Many of the speakers – women in top management, who are accustomed to being in the office, travelling, and meeting face-to-face with teams and clients—spoke about remote work challenges. They also offered creative ideas to ensure employees feel embraced during this challenging time.

White Oak Commercial Finance, LLC (“White Oak”), an affiliate of White Oak Global Advisors, LLC, announced it provided a $10 million factoring – inventory finance facility to a consumer electronics wholesaler and distributor serving public and private retailers in the US and international markets.

The funding was provided against the New Jersey-based company’s accounts receivable and inventory, which the firm will use to fund large-volume purchases to grow its business and provide competitive prices for top name-brand products.

The secured finance industry, just like so many others, has demanded that remote work become the “norm.” Will this change better enable the industry to attract and retain top talent?