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."

Advocacy in Overdrive

The SFNet team mobilized quickly to focus on one of the most urgent challenges facing the industry: the need to give our members a voice in the wake of the various government relief programs.

Chair of SFNet’s Advocacy Committee, Barry L. Bobrow, managing director, Wells Fargo Securities, LLC, said, “The Secured Finance Network’s Advocacy Committee has been actively working to address challenges felt throughout the secured finance industry due to COVID-19. We have tapped the substantial expertise of our members to help us connect with key decision makers to offer valuable insights, as they seek to bring important relief to those impacted by the pandemic.”

Gumbrecht provided details on the process: “On the federal level, our Committee has been working tirelessly, communicating with legislators and meeting directly with Treasury and Fed officials to support the interests of our asset-based lenders, factors and others concerning the Paycheck Protection Program and Main Street Lending. We’ve also been in touch with the regulatory agencies to understand and interpret their actions. We’ve held informative webinars and posted our communications throughout.”

Recognizing the access that professional legislative advocates offer, SFNet engaged a federal lobbyist, Lon Goldstein of GPS, early on.

“SFNet has done a tremendous job of communicating to policymakers and other stakeholders about the importance of our industry. We’ve been able to discuss our perspective with senior Treasury officials, Senate leadership, the Senate Small Business and Banking Committees, and Members of the U.S. House of Representatives.  With nearly every sector of the economy also seeking the same audience, it is important that we’ve had our voice heard, even if it does not always result in the desired policy outcomes. We will continue to fight for the industry,” Goldstein said.

Much of the focus has been on PPP. “We have pushed hard for our nonbank lenders to be eligible to receive PPP relief and called attention to some of the unintended consequences of the program that could impact our industry. Over the summer, SFNet spoke with Chairman Marco Rubio's (R-FL) Small Business Committee staff as well as Senator Chuck Schumer’s (D-NY) office as we continued to champion our positions in proposed Phase 4 programs,” Gumbrecht said. “Our voices have been heard and we have differentiated ourselves from other segments of the loan market.”

Gumbrecht pointed out that SFNet played a part in modifying the rules to make non-banks able to pledge PPP loan notes to the Federal Reserve in exchange for low interest, non-recourse loans under the PPPLF.

“D.C. legislators are now more aware of our industry at large and understand that when liquidity is paramount, we play a crucial role in continuing to deploy capital to the middle market when others may not. On the ABL front it was especially encouraging to receive support from Senator Crapo (R-ID) chairman of the Senate Committee on Banking, Housing and Urban Affairs) in a letter he sent to the Treasury and the Fed last month,” Gumbrecht explained. The letter urged law makers to quickly expand the Main Street Lending Program by setting up an asset-based lending program and expressed support for SFNet’s position that establishing a facility to accommodate asset-based lending could open access to critical resources for several industries that could not otherwise access the MSLP based on earnings or cash flow metrics.

In late July, SFNet submitted a request to the Federal Reserve and Treasury for clarification on how the MSLP and EIDL programs might be used with an asset-based facility. As a result, SFNet was able to engage with Treasury to discuss very specific circumstances where the MSLP could be used by asset-based borrowers.  “We were very pleased that Treasury was so responsive to SFNet’s inquiries about the MSLP. We were able to speak with their senior staff, and have productive conversations about the potential for expanding the borrowers to whom MSLP might be available and the ways that an MSLP loan may be put alongside an ABL without the liens securing the MSLP having to be pari passu so as to avoid a reduction in availability,” said David W. Morse, a member of Otterbourg P.C., who has played a key role in these efforts. 

A key component of SFNet’s efforts is providing members with updates and relevant analysis of the various programs so they are able to make informed business decisions. Staci Rosche of McGuireWoods provided analysis for TSL Express on MSLP and participated in a June webinar as a panelist. She said, “SFNet provided an invaluable platform to advocate for asset-based lenders in the development of the Main Street Loan Program.  The breadth of SFNet’s membership and contacts allowed us to quickly gather a diverse team to review the proposed program and to have direct contact with government decision-makers at key stages of program development. Even though our input resulted in only modest revisions, we at least knew that our concerns were being heard and that key decision-makers were aware of the ways that their proposed structure would impact or exclude a large lender segment serving borrowers who might benefit most from the program.  Recent Congressional testimony about the MSLP indicates that our concerns have been understood and that a separate asset-based program is still under consideration.”

In May, SFNet was able to arrange a call between Yvonne Kizner, senior vice president of ABL with Cambridge Savings Bank, and the Treasury Department: “I was pleased to represent institutions under $20B, and community banks in particular, in conjunction with SFNet’s advocacy committee and their endeavors to ensure legislators heard from many constituents in the finance community.  With SFNet’s contacts, I was able to secure a meeting with seven representatives of the U.S. Treasury department and indicate the concerns the asset-based lending community had with the Main Street lending program as it was being developed.  While the program didn’t substantially change based on our feedback, they did listen and alter a couple items, such as obtaining the commitment of the SPV to fund prior to close.  SFNet was unwavering in their efforts to open up this legislation such that more middle-market borrowers could have access to these programs, and I was proud to be part of this process.”

Jon Helfat, SFNet’s co-general counsel, has played an integral part in SFNet’s federal and state advocacy initiatives: “SFNet, led by Rich Gumbrecht and his staff, has ‘delivered’ for our members in the wake of the pandemic by providing in-depth analysis of the legislative initiatives undertaken by Congress and the Federal Reserve Board. SFNet jumped on the CARES legislation and the Main Street Lending Program even before these initiatives were formally enacted. As a result, our members were not only advised of the ‘how’ , ‘when’ and ‘where’ of applying for these programs, but were frequently advised of any changes to these initiatives and were also advised of the published responses of the regulators to the constant flow of questions sent to the SBA and FRB.”

Mark Fagnani of Clear Thinking Group chaired the MSLP subcommittee and provided an overview of the experience: “Contributing as a member of the Advocacy Committee has been very rewarding.  Our initial meetings to discuss any issue, be it proposed legislation or the various loan programs the Treasury has provided, have allowed for careful consideration of all views and, ultimately, what our response, if any, should be.  Subcommittees formed for the purpose of responding quickly to each identified issue have assisted in crafting careful, well-considered and balanced responses.  Our efforts have resulted in many changes to these programs for the betterment of our members.   Even when we were unable to effectuate real change, SFNet has become recognized by the Fed and Treasury as a collective voice for the entire lending industry.”

SFNet’s Advocacy Committee members have coordinated with like-minded organizations when appropriate, such as the ELFA, AFA, FCI, LSTA, UK Finance and the American Investment Council.  SFNet is also working with the Association of International Certified Professional Accountants. “The AICPA was lobbying for the government to engage in accounts receivable purchasing. We have shifted the conversation to educating AICPA and other aligned trade associations such as the National Retail Federation, National Association of Manufacturers and the Chamber of Commerce on existing SFNet member solutions,” said Gumbrecht.

SFNet is also forging important relationships with credit insurance providers on behalf of our non-recourse factors.  And with prospective borrowers such as those represented by the National Retail Federation (NRF), with whom SFNet is joining forces to bolster its efforts to fix MSLP as a priority solution to the retail crisis.

On the state level, SFNet continues to work with local legislators in NY and NJ to influence pending financial disclosure legislation. In NY, several direct conversations have been held with the sponsoring legislator’s office. The original bill (10118) did not include a deal amount limit, but it has been amended to apply to deals $500,000 and below at SFNet’s urging – although we asked for $100,000. This bill passed in July and SFNet is pursuing safe harbor and other possible amendments with the governor’s office.  SFNet continues to work with State rule makers in California to effect manageable enforcement measures for disclosure legislation passed in 2018.

 “The rapid changes that were occurring on multiple fronts required SFNet’s leadership to come up quickly with decisive strategies,” commented Lin Chua, president & COO of InterNex Capital, who has been involved in advocacy on the state level. “As a Fin Tech lender to small and medium-sized businesses, we are happy to play our part on behalf of our community — in person with legislators in Albany and in Queens, ensuring constructive engagement with legislators and their staff, while all the time building long-lasting relationships with the right constituents. This is ultimately a people business.”

SFNet’s efforts to shape relief programs goes beyond the U.S., as demonstrated by the work done with UK members and SFNet’s European Chapter in engaging the UK government to bolster secured lender rights in a moratorium that would delay forbearance on distressed loans. Richard Hawkins of Atlantic Risk Management said, “I have been working with SFNet on two major issues impacting the industry in the UK. The first is the reintroduction of Crown Preference, which will have the effect of Government Liabilities VAT and PAYE coming before a Floating Charge Holder and, therefore, lending against inventory.  This was to come into effect in June 2020, but was subsequently pushed back until December 1, 2020.  We cannot be certain that it was our actions that caused this small, but important, respite, but adding the voice of SFNet and its members, both in Europe and North America, to the various institutions opposing this measure certainly helped. Secondly, we have also been part of the lobbying effort in respect to the Corporate Insolvency and Governance Act, which introduces significant new bankruptcy legislation. There has been little need for lobbying in the past as the UK has historically provided a friendly secured creditor environment. Sadly, recent events have eroded this position and increased the need for SFNet to coordinate activity with other stakeholders and, particularly, UK Finance, to protect the secured finance community and the customers it serves.”

Zooming in on Webinars

The pandemic brought with it swift and overwhelming changes to the industry, from the challenge of field examinations to borrowers suffering drastic revenue reductions and shifting their focus to manufacturing PPE. SFNet quickly mobilized to launch its Crucial Conversations webinar series to arm members with the information they needed to navigate this tumultuous time. The webinars kicked off on March 31 via Zoom, enabling attendees to see panelists rather than the standard format of listening to faceless voices. With the help of community-minded sponsors who jumped in to assist, the series was made free to employees of SFNet members and SFNet chapter members.

To date, SFNet has hosted 32 webinars with two more planned for September. “Our Crucial Conversations Webinar and Roundtable series have covered a wide range of topics that have affected our community and industry and influenced how we conduct business.  We have attracted over 7,000 registrants from over 500 different companies who have consumed this valuable content and engaged in the conversations.  Through our platform and our members, we will continue to be at the forefront to discuss the changes that are happening in the secured finance industry,” said Morten Kucey, SFNet chief value officer.

In addition to webinars covering critical topics, SFNet’s magazine, The Secured Lender, and its daily e-news bulletin, TSL Express, published “hot off the presses” alerts and content, including articles on managing C&I risk during a pandemic, COVID’s effects on the retail sector and a roundtable featuring field examiners. The June issue of TSL was dedicated to the effects of COVID.

No Mask Required

With restrictions on large gatherings, social distancing and mask mandates, SFNet switched its planned live events to “live online” offerings. The Women in Secured Finance Conference, the first event to utilize the new “SFNet Connect” platform, was held in late July, with a record 350 attendees.  The event offered four panels, two keynotes and two breakout sessions to facilitate networking.

During the August SFNet YoPro Summit, attendees learned how to “Succeed in the New Environment” while networking and sneaking in some fun during the “mixology” breaks.

For those interested in international finance, SFNet’s Cross-Border Lending Conference will also be held virtually on two days, a week apart: September 16 and 23.  

Of course, the decision to convert SFNet’s 76^th Annual Convention to a virtual event was not made easily. “In early June, SFNet and our Management Committee announced the difficult decision to shift our Annual Convention to a live, online event.  While it was disappointing, we are excited about the possibilities of virtual programming and, after introducing the platform we have invested in during the WISF and YoPro events, we are fully confident this will be a dynamic and rewarding experience that can far exceed our community’s expectations,” said Gumbrecht.

The capabilities of SFNet’s new and enhanced digital platform will bolster the attendee experience in a myriad of ways, including: access to higher-profile speakers who won’t be constrained by travel; a more diverse audience, including those from different disciplines and career levels within their organizations who may not have been able to participate before; greater exhibitor and sponsor accessibility; unique opportunities to network utilizing artificial intelligence “matchmaking” and reserved meeting rooms to facilitate deal flow.

“I wrote in one of my early letters in TSL Express, at the start of the pandemic, that I’ve never been more proud to be part of this determined, resilient and dynamic group of organizations and professionals who do the important work of fueling our engines of growth through adversity and prosperity. I continue to get feedback that, in many ways, SFNet feels more relevant and connected today than ever.  That’s very rewarding, knowing we can help make a difference,” said Gumbrecht. “I am confident that we will continue to weather this period together and lead the way forward as we evolve, adapt and thrive in this new world.”