In December, Republic Business Credit announced it had further expanded its business finance platform with the acquisitions of Continental Business Credit and Fast A/R Funding.  Republic partnered with CBC’s CEO, Matt Begley, to transfer substantially all of its assets to form Republic’s new West Coast office. Republic is expanding its national platform through a dual strategy of organic growth and complementary acquisitions that add new products, talent and geographic expansion.  Republic represents one of the largest entrepreneurial finance companies in the United States. 

Stewart Chesters continues as the CEO of Republic, with Robert Meyers as President and Matt Begley joining as COO.  TSL sat down with Meyers to discuss the acquisition and Republic’s growth.

Republic Business Credit will remain headquartered in New Orleans, with offices in Los Angeles, Houston, Chicago, Nashville and Minnesota.  Republic is excited to announce that Jason Carmona was promoted to EVP, Western Regional Manager, with the task of building out a new business team that supports its ambitious growth goals.

TSL sat down with Meyers to discuss the acquisition and Republic’s growth.

TSL: Please tell us a bit of Republic’s back story.

Meyers: In January 2011, Stewart Chesters, CEO, launched Republic alongside Allen Frederic with five employees and zero clients.  While they had hoped to do some acquisitions early, they were always going to focus on an organic growth strategy. Allen brought a 40-year career in factoring and banking while Stewart brought over 20 years in M&A, Strategy and Global board experience building on a national platform for an international finance company.  The early team members included Melissa Baines (who was featured in TSL’s 2019 Women in Secured Finance Issue) as risk manager along with 2017 SFNet 40 Under 40 Winner Danika Louis as recourse factoring portfolio manager.  In addition to organic growth, we were able to bolt on some smaller portfolio acquisitions.  While they were not publicly announced, they provided added a solid base of clients and income across strategic geographic regions around the country.

Republic quickly built the business into a consistently profitable enterprise with more than $30m of earning assets during the first five years.  In 2015, a natural inflection point occurred where Stewart, still in his 40s, wanted to continue building the business while, Allen wanted to start preparing for retirement.  Republic started doing the usual capital rounds to fuel the second phase of growth.  During this process, I had just finished my 9^th year with the company that, coincidentally, Stewart had hired at out of college with a Biology degree.  It was their first US graduate trainee manager program and most of us are still in the industry today. To this day, I give Stewart a hard time because he promised me London for six months and it turned out to be a town about an hour outside of London, and it was NOT nearly as cool as London. It was a town called Slough, where the original British version of the show “The Office” was filmed. 

Since I was young, I always wanted to be an entrepreneur and while this was earlier in my career than I would have thought was possible, I reached out to a few similar companies.  It wasn’t an issue with being employed, rather the excitement of finding a factoring company that had the right team and portfolio to grow together. I joined Republic as its national sales manager in 2016 with the intention of a future capital transaction.  Of the companies I spoke with, Republic had the perfect complement of people, systems and a great reputation through the marketplace.  Beyond just the future of Republic, I wanted the chance to work with Stewart Chesters whom I respect, admire and view as amongst the best in the business.  I always wondered what the two of us might be able to create together as we complement and expand on each other’s skills well. 

In April of 2016, we led a management buyout of 70% of the shares of Republic Business Credit.  The new ownership team consisted of Stewart Chesters, me and a long-time family friend that invests in people.  The family friend sold his first business for $88 million in 2006. He had always said: “If you ever need a couple million bucks, give me a call.”  As every entrepreneur will tell you, not all friends or money are created equal and we are very lucky to have his continued support.  Together, we bought out Allen and the rest of the founding minority investors.  Initially, we owned 70% of the company, now proud to say we own 100% of Republic Business Credit.

Where do you currently have offices?

Meyers: We initially opened our office in New Orleans and it proudly remains our headquarters.  One of our first supporters in addition to the employees, was a Louisiana state pension fund.  It was an easy choice to build our team in New Orleans, it provides a source differentiation, and very few factoring companies call Louisiana home.  Several of our staff members were raised in New Orleans and it is wonderful to work to build a company within the  communities we operate.  Being from New Orleans is one of the best icebreakers, as everyone shares with us their fond memories of their first New Orleans experience.  Quickly after launching in New Orleans, we added a team in Houston and in Chicago.  Fast forwarding to the present, we are proud to have an additional full team in Los Angeles along with offices in Minneapolis, Oklahoma City and Nashville.  We have a tremendous team of over 40 staff. Nearly 70 percent of our business is female (our management team is nearly 60% female), and nearly 65 percent of our team is under the age of 40.  We pride ourselves on being on the forefront of hiring with those statistics. 

Republic doesn’t look like a traditional finance company, so we tend not to act that way either.  We are able to spend extra time getting to know our clients, investing in our team and developing our people. It starts with people and, for us, more importantly, Stewart and I, and now Stewart, Matt and I, don’t believe we have all the answers. In fact, we believe that we learn a lot from the generations below us, our own generations and those that have set the industry standards of the last several decades.  Together, our team blends together complementary skills from across the spectrum of backgrounds.

What led you to the acquisition of Continental and Fast A/R?

Meyers: We have always been interested in strategically building our platform.  That will always be a mix of an organic and acquisition strategy.  The exciting thing about Continental, was about adding industry-leading people, products and geography.  We felt like we hit it out of the park with Matt and his team.  About 95 percent of their clients are in California, which is the 7^th largest economy in GDP terms in the world and it is only a state.  While we each do things a bit differently, holistically we each do certain things better than the other prior to coming together.  Our excitement started with their immediate contributions and the unique differences they brought to our business.  We each brought unique backgrounds, experiences, clients and very complementary products.  We are better equipped to provide a range of solutions for borrowers across the lower middle market.  We have a much more robust management team with a much deeper client base, and a much larger business. 

Everyone always asks us, “Which investment banker did you use and why didn’t we see the deal?”  The funny part is that it all started with a slice of key lime pie.  Matt and Stewart were in Key West at an IFA senior leaders meeting when their wives wanted a slice of key lime pie and were recommended a casual restaurant with the best local pie.  So, while they were licking their plates clean of course, they starting asking each other the journey that only founders can understand.  I will always remember when Stewart called me during the conference, “Rob, this is going to be a little out of left field, but I have an idea….” It was a very fun phone call to say the least.  

At Republic, we make sure we maintain our founder and entrepreneurial mindset, we are excited about our continued path together. Factoring will always be our core, but we have broadened that with several solutions to better serve lower-middle-market companies.  We find that products can be better fits for certain industries, where nonrecourse factoring complements consumer packaged goods, whether it’s apparel, textiles, electronics, food or beverage. We find that recourse factoring better serves the asset-light businesses of staffing, energy service, transportation, and consulting.  We find ourselves helping a lot of government contractors, particularly in the defense areas for minority and women-owned enterprises. And then underpinning the bells and whistles, we have several private equity-owned credits. Some chose factoring over asset-based lending for its flexibility, while several are performing companies that fit better into an asset-based lending structure.  For companies that want ABL, but aren’t quite ready, we provide our ledgered line of credit. It could be call factoring, or asset-based lending, but it’s not true ABL.  Often our ledgered lines of credit will have some inventory, equipment, a seasonal overadvance an unbilled receivable advance.  The extra control of a ledgered line of credit allows us to fund more than just receivables, or inventory as a traditional ABL structure.  I think RBC finds that space in the middle to help entrepreneurs.   

In 2020 we will add a few more direct-to-consumer clients that might have a mix of e-commerce, retail and receivable business strategies.  While it would be ideal if they were private-equity owned, it isn’t a requirement.  The requirement is that the capital is being used for growth and not stale inventory.   Assuming it has some benefit and keeps growing as part of our portfolio, I would see us investing more and more in asset-based lending with an inventory-heavy loan type product in the direct to consumer and merchant space. 

How would you describe the culture of your organization?

Meyers: We don’t take ourselves too seriously, but the type of lending we do is very serious.  We are building a very collaborative organization as one of our four key values. We’re excited about what the future holds, it’s hard to differentiate in commercial finance, but we believe that we can differentiate with our people and hopefully that helps us win a few more deals than others.  And the rest of it is about how you make decisions and how you treat risk. We visit every client that plans to borrow more than a half million dollars from us at a time when there are more ways than ever not to have that personal connection.   All clients tend to love their lenders at the beginning. We are proud that most of our clients, if not all of our clients, love us when they leave.  And, in most cases, they leave us for a bank, which is great, because they’ve graduated when the time is right for them.

It’s great to hear that you have some very seasoned people who are open to being innovative and different and not just following the same old formulas. 

Someone once said to me “when you are going to go on a journey, you always need to bring someone with gray hair along as well.” And that same person told me, “Just because I have gray hair doesn’t mean I’m stuck in a certain way of thinking.” And for us it’s not about how old you are or where you come from, or your experiences, it’s about how you think and what you want to become.  None of our team is a finished product, including myself. I learn every day. Sometimes you learn some really painful lessons, of course. For every peak in entrepreneurship, there’s an equal and opposite trough.  And our staff embraces that and we are open to the thought that there could actually be a better way to do things.

Are there certain industries that you see as offering opportunities in 2020?

Meyers: I would say we are pretty agnostic in terms of industry opportunity as our clients come from all over the place, but it is about their similar profiles, whether that is growth or distress. We won’t do construction, we won’t do third-party medical where it’s patient-care related because we believe you need to have expertise in that. We will continue to invest in private-equity led clients, but in addition to that we are doing some industry-specific product launches. We’ve always been huge fans of staffing, temporary services and consulting companies.  

We have also added on a lot of companies in the food industry and, in particular, natural food and beverage. We added five natural-food clients in Q4 and expect to fund three more in Q1.  They are selling into Whole Foods or Sprouts, or they’ve built an initial e-commerce following, kind of like Cliff Bar or Rx Bar used to.  We continue to look at companies in that world, and are really spending some time getting to know them.  We seem to do a lot in the communication industry as well, for example, people upgrading from 4G to 5G is all the chatter, even if we’re 10 years away from our cell phones being able to understand how to best use it. There’s a tremendous amount of infrastructure going on, so that space is interesting to us.  But we still are pretty bullish on consumer-packaged goods. If consumer spending continues to do well, we’re buying clothes, electronics, food, and of course, some alcohol to get through the holiday season with their family. 

I know retail has taken a pounding, but retail is not dead. It’s changing, it’s evolving, absolutely. It was necessary. You don’t need 100,000 square feet to sell five products, but with that we do see some opportunity, particularly for some of the healthy businesses and that’s why we’re also excited about the e-commerce offering where we can do more than just the wholesale products.