SG Credit Partners provides situational capital ranging from $1-$10 million for the lower middle market with a focus on non-sponsored businesses. Headquartered in Southern California with offices in Atlanta, Boston, Chicago and Portland, the SG Credit Partners team has provided in excess of $250 million to 150-plus borrowers across a variety of industries and continues to expand its national footprint. Here, Marc discusses SG Credit’s efforts in going from a niche lender to a broader platform in order to better work with asset-based lenders and banks and why they are broadening their scope.

Marc, please provide some background on your career and your role as CEO at SG Credit Partners.

Cole:  I came from the private equity investing world and spent 11 years investing for a fund and a family office, so not the typical banking background.  I was involved in an entrepreneurial venture, where I co-founded a payment security company, and that’s what brought me to lending. In that capacity as chairman, I made eight acquisitions and one of those acquisitions introduced me to a niche lending business focused on merchant services. I moved my family from Manhattan to Newport Beach, CA, in 2013 to become the CFO of a niche lending company called Super G Capital.  My job was to institutionalize, capitalize and diversify Super G. In doing so, I ended up starting a cash-flow lending boutique with Charlie Perer, which became the predecessor to SG Credit Partners. In 2018 we formally spun out and re-branded as SG Credit Partners as part of creating a separate entity with which to raise institutional capital. 

What drove the need to expand from being a niche lender?

Cole:  Charlie, who is co-founder and head of originations, and I learned and grew this business at the top of the market. In working with the ABL community, we found the right channel partners for our shorter-term amortizing term loans commonly referred to as “stretch pieces”; however, we knew that the best of times would not continue, as did our lending partners. We concluded it was time to raise fairly significant institutional capital from partners who understood credit. In our opinion, the best way to do that was from patient, institutional family offices. The objective was to raise capital that would not only survive, but thrive, during a downturn.  However, we also wanted to bring in outside expertise to help us launch a platform of credit products and build a national team as opposed to a continuation of the single second lien lending product that we were known for in the market. 

Walk me through the process of raising institutional capital to broaden the platform. 

Cole: We began by talking to balance sheet providers of credit. At that time, we were not interested or looking for a change of control transaction, which is what we ultimately did.  We were very fortunate to have met the right investors that came with a unique combination of credit experience, senior operating executives that they thought would complement our team and significant permanent capital. That process took about a year.  Like all great relationships, it started with an introduction to the right people and it grew organically from there.

What makes MidMark, Cynosure Group, and 4612 ideal institutional backers for SG Credit?

Cole: The investor group is led by Mack McNair, the CEO of Midmark. Mack also had experience with building nine other specialty finance companies into significant platforms. Cynosure and 4612 each has a unique combination of institutional capital bases, credit knowledge and patient family office structures. In the case of Cynosure, they come from a rich banking history.

Why did SG Credit decide to broaden its scope to become a national company?

Cole:  There is a significant market opportunity to partner with both banks and ABLs to provide a platform of non-conforming products up to $10 million in loan size.  We can now truly be a one-stop shop to finance everything from IP to M&E to RE as well as non-business collateral (personal assets) on a stand-alone or as a package. This is in addition to still providing our bread and butter second or split lien cash flow product. There is just so much competition upmarket, which portends well to our model as these funds are too big to focus on smaller or more complicated loans.

The conforming ABL market is so efficient that what it did was create more white spaces across other lending verticals. That’s why we needed more non-conforming products to further complement and partner with banks and ABLs. The economics of a bigger fund make it next to impossible to consistently finance sub-$10 million non-conforming needs. Our uniqueness is our ability to solve most if not all non-conforming issues that ABLs face. We now have the platform, team and capital to do this.

We had the relationships and the deal flow, but we needed additional product to provide to meet their needs for nontraditional, non-sponsored, lower middle-market credit needs.

What has changed since the investment?

Cole:  The most critical change is we bolstered the senior leadership team with Andrew Hettinger from Crystal Financial, and Lon Brown who’s a veteran workout and portfolio management professional. We added an Atlanta office where Andrew, and a former Alostar executive, Carlos Tan, now sit and give us access to the Southeast, and we’ve added a Chicago office where another former Alostar executive, John Todd,  covers the Midwest, which is a huge priority for the company. 

Additionally, we were able to take our check size, which historically had been $1 to $5 million, up to $10 million for select credits and we’re providing more flexible and more patient amortization. The combination of senior leadership, capital, national reach and broader product set has positioned us very well for the future. Our business has transformed into a national credit shop from a focus on just one product.

What are some of SG Credit’s strategies in partnering with ABLs? 

Cole: We’re a senior lender-centric credit provider. So, when we’re working with ABLs, we can help them retain clients that need stretch or any type of non-conforming financing, we can help them exit clients when they’re looking to be taken out, and we can help them win business when there’s a sub-$10 million capital need. We can now do this better than before with Andrew as our CIO as he brings his upmarket sophistication to solving sub-$10 million credit needs.

What are some of the ways SG Credit Partners help senior lenders solve the needs of their borrowers since SG Credit has spun out? 

Cole: We can participate in split-lien funding needs to provide additional borrower liquidity against assets that senior lenders may view as ineligible or out of formula.  In general, we can now provide an entire non-conforming solution and have the flexibility to be senior, second lien or uni-tranche in any given transaction. Most of our transactions are bespoke in nature.

How has COVID-19 impacted your deal flow the past few months?

Cole:  It is clearly a very challenging credit environment and, therefore, new deal environment. Because of the unique nature of our products, we are focusing on recurring revenue software, which has historically been half of our portfolio, and focusing on the highest quality, high net worth business owner-backed opportunities to solve their liquidity needs. This is an excellent market to find wealthy business owners who have newfound liquidity shortfalls where we can get comfortable with their asset mix, including real estate assets, personal and business assets. 

When you’re not at SG Credit Partners, what can you be found doing in your spare time?

Cole: I am, like many, a newfound exercise enthusiast and I am in the quarantined Peloton club and haven’t left my bike when I’m not working. 

Bio: Marc is the Co-Founder and Chief Executive Officer of SG Credit Partners, Inc. (“SGCP”) and a member of the Loan Committee. In 2018, Marc and Charlie Perer led the spin out of Super G Capital’s cash flow, technology, and special situations division to form SGCP.

Marc is a Director and Co-Founder of Bluefin Payment Systems. After completing a roll-up in merchant services, he partnered with payments entrepreneur Darrin Ginsberg, the Founder and CEO of Super G Capital, LLC (“Super G”). As Chief Credit Officer and CFO of Super G, Marc oversaw its diversification into cash flow lending and raised in excess of $100 million of institutional capital.

Prior to Super G, Marc was a Partner in a family office responsible for managing direct equity investments and a mezzanine loan portfolio of more than two dozen positions. Earlier positions include: Vice President of Mellon Ventures, a $1.4BN private equity partnership and Corporate Finance Analyst at Legg Mason.

Marc graduated Magna Cum Laude from the Pennsylvania State University.