TSL April 2019 by Secured Finance Network

Representing the Asset-Based Financing, Factoring & Supply Chain Finance Industries Worldwide April 19

THE

IN THIS ISSUE

FACTORING ISSUE

DESPITE COMPETITION, N, FACTORS STILL GROWING ING P8

FACTORING: AN OLD-WORLD TOOL FOR A MODERN AGE P12 TSL INTERVIEW

TSL INTERVIEW

ALLEN FREDERIC

CO-FOUNDER OF REPUBLIC BUSINESS CREDIT P39

MARC HELLER

WHOSE CASH IS THAT CASH? P18

PRESIDENT, COMMERCIAL SERVICES, CIT GROUP P28

GLOBAL OUTLOOK: COULD 2019 HERALD THE NEXT GLOBAL RECESSION? P24

FACTORING EXTRACT FROM FIRST-OF-ITSKIND MARKET SIZING & IMPACT STUDY P16

NEGOTIATION TIPS AND STRATEGIES P30 FURNITURE RETAIL OFFERS POCKETS OF OPPORTUNITY P34 DEPARTMENTS

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The 2019 Secured Finance Market Sizing & Impact Study The Authoritative Tool for the Secured Finance Industry to Plan, Benchmark, & Raise Capital The CFA Education Foundation, in conjunction with Ernst & Young, has conducted the first of its kind Secured Finance Industry Market Sizing and Impact Study for the purpose of benchmarking, strategic planning, attracting capital and assisting in advocacy efforts on behalf of the industry. Through primary and secondary research, the study dimensions the size and scope of the commercial marketplace for secured lending and its related products and services. Part primer, part data compilation and part analytical assessment, the study provides the reader with a detailed view into the highly interconnected segments of this network and their collective impact on capital deployment and economic development. The findings dimension an industry that is far-reaching, influential, thriving and presenting significant growth opportunities for its participants to expand their served and available markets.

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Representing the Asset-Based Financing, Factoring & Supply Chain Finance Industries Worldwide

Volume 75, Issue 3

April 19

FEATURES

Despite Competition, Factors Still Growing

Global Outlook: Could 2019 Herald the Next Global Recession?

8 8 Despite Competition, Factors Still Growing

For factors, 2018 was a very solid year for business, with many in the industry experiencing growth across all regions and specialties, whether organically or through acquisition. Despite the good news, industry leaders do note that competition remained fierce, and they predict more of the same for the year ahead. Banks continue to be highly liquid, and independent factors are likely to see additional pressure from regional and community banks. By Myra Thomas

18 Whose Cash Is That Cash? Avoiding Constructive Trust Claims in Trucking Finance Transactions

12 Factoring: An Old-World Tool for a Modern Age Paul Schuldiner of Rosenthal & Rosenthal discusses the future of factoring, including how traditional factoring has adapted to address new challenges in the current retail environment. By Paul Schuldiner

16 Factoring Extract from First-of-Its-Kind Market Sizing & Impact Study In March, the Commercial Finance Association Education Foundation released the most comprehensive assessment to date of the secured finance ecosystem and its impact on the U.S. economy. Here, we present the factoring section of the extract report.

Whose Cash Is That Cash? Avoiding Constructive Trust Claims in Trucking Finance Transactions

A storm of uncertainty can arise around the distinction between transportation brokers, carriers and third-party logistics providers and the potential for constructive trust claims by unpaid carriage contractors. Navigating the risk these claims present has become a pressing issue for lenders in the trucking industry, particularly when financing traditional carriers that also have brokered operations. By Wade M. Kennedy

24 Global Outlook: Could 2019 Herald the Next Global Recession?

Global economic activity is slowing down. After peaking in 2017 at a post-crisis high of about 3.8% at an annual rate (measured in purchasing power, so adjusted to take account of inflation differences between countries), the pace of growth in 2019 looks like it will ease back to 3.5%. Such an outcome will equal the post-recession low seen in 2012 and may also be sending a signal of the start of a cyclical downturn that could extend into 2020. By Trevor Williams

28 The TSL Interview: Marc Heller, President, Commercial Services, CIT Group

Marc Heller is president of CIT Commercial Services, one of the nationâ&#x20AC;&#x2122;s leading providers of factoring and lending services to the apparel, textiles, furniture, home furnishings, housewares, consumer electronics and consumer products industries. By Michele Ocejo

30 Negotiation Tips and Strategies Moshe Cohen, president and founder of The Negotiating Table, Inc., provides negotiations strategy advice that can be used in all aspects of life. By Moshe Cohen

34 Furniture Retail Offers Pockets Of Opportunity—But Due Diligence Is Key Disruption seems to be affecting every sector and the furniture industry is no exception. Mark Bannon of Tiger Group explains why lenders should consider furniture retailing borrowers. By Mark Bannon

38 Interview with Entrepreneurial Factor Allen Frederic, Republic Business Credit Allen Frederic is a co-founder of Republic Business Credit with over 45 years of commercial banking, asset-based lending, and factoring experience. He previously founded another New Orleans-based factoring company after serving as president of a New Orleans bank. By Michele Ocejo

DEPARTMENTS 6

Letter From Richard D. Gumbrecht, CEO of the Commercial Finance Association, discusses TSL’s factoring issue.

TSL Profi le Mitsubishi UFJ Financial Group, Inc. (MUFG) Asset-Based Finance (ABF) business has experienced tremendous growth with its revenues growing by 36 percent this year. Here, managing director Edward Gately discusses the top-level talent team he’s built since joining in 2017 and plans moving forward. By Eileen Wubbe

The CFA Brief 42 52

Among CFA Members CFA Chapter News

Advertisers Index

Revolver Joe Accardi of People’s United Bank talks about training to win the gold medal.

STAFF & OFFICES Michele Ocejo Editor-in-Chief and CFA Communications Director Eileen Wubbe Senior Editor Aydan Savaser Art Director

Editorial Offices 370 Seventh Avenue Suite 1801 New York, NY 10001 (212) 792 -9390 Fax: (212) 564-6053 Email: tsl@cfa.com Website: www.cfa.com

Advertising Contact: James Kravitz Business Development Director T: 646-839-6080 jkravitz@cfa.com

The Commercial Finance Association 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 assetbased financial services industry (ISSN 0888255X), is published 8 times per year (Jan/Feb, March, April, May, June, September, October and November) $65 per year non-member rate, and $100 for two years non-member rate, CFA members are complimentary, by Commercial Finance Association, 370 Seventh Avenue, New York, NY 10001. Periodicals postage paid at New York, NY, and at additional mailing offices. Postmaster, send address changes to The Secured Lender, c/o Commercial Finance Association, 370 Seventh Avenue, New York, NY 10001.

letter from

THOUGHTS FROM CFA AND TSL STAFF

elcome to TSL’s Factoring Issue. It is clear, from the content in this issue, that factoring remains vibrant, despite increased competition. In fact, according to the 2019 Secured Finance Market Sizing & Impact Study, conducted by the Commercial Finance Association Education Foundation, total volume of factored receivables in 2018 was $101 billion. This number is expected to grow in the lowsingle-digit range in 2019. The landmark study is the most comprehensive assessment to date of the secured finance ecosystem and its impact on the U.S. economy and it confirms that secured financing is critical to the day-to-day operations of U.S. businesses of all sizes and demonstrates the interrelationships of these asset classes based on borrower’s needs and economic cycles. The findings dimension an industry that is far-reaching, influential and thriving, and one that presents significant growth opportunities for its participants to expand their served and available markets. Turn to page 16 to read the factoring section of the Study’s companion extract report. If you’re interested in accessing the full report, please reach out to Aydan

Savaser at asavaser@cfa.com. The factoring focus of this issue depicts a vital sector of our community, one with a long and storied history. In reading the following pages, it’s clear that factors have continued to do what has made them successful, such as spending a lot of time with their clients face-to-face, while utilizing technology to improve efficiency and transparency. Above, I said factoring is vibrant despite competition, but perhaps competition has actually enhanced the industry. Demonstrating the resiliency and “can do” attitude of this sector, several of the factors say they welcome competition as it “makes everyone better.” You can read more about what is on the minds of factors on page 8 in Despite Competition, Factors Still Growing, by Myra Thomas. On page 12, in Factoring: An Old-World Tool for a Modern Age, Paul Schuldiner of Rosenthal & Rosenthal discusses the future of factoring, including how traditional factoring has adapted to address new challenges in the current retail environment. On page 28, don’t miss the interview with Marc Heller, president of CIT Commercial Services, who has been a driving force in the financial services industry since 1970. TSL’s editor-in-chief interviews industry icon Allen Frederic, a cofounder of Republic Business Credit with over 45 years of commercial banking, asset-based lending, and factoring experience, on page 38. We’ve all heard the warnings about the next recession. Trevor Williams, former Chief Economist at Lloyds Bank Commercial Banking, offers an expert’s

view on page 24 in Global Outlook: Could 2019 Herald the Next Global Recession? On page 18, Wade Kennedy of McGuireWoods discusses the storm of uncertainty that can arise around the distinction between transportation brokers, carriers and third-party logistics providers and the potential for constructive trust claims by unpaid carriage contractors. Navigating the risk these claims present has become a pressing issue for lenders in the trucking industry, particularly when financing traditional carriers that also have brokered operations. In Negotiation Tips and Strategies on page 30, Moshe Cohen, president and founder of The Negotiating Table, Inc., provides negotiations strategy advice that can be used in all aspects of life. Disruption seems to be affecting every sector and the furniture industry is no exception. On page 34, Mark Bannon of Tiger Group explains why lenders should consider such forces related to furniture retailing borrowers. Finally, I’d like to take this opportunity to remind you that the Commercial Finance Association is becoming the Secured Finance Network this summer. Our new name, visual identity and offerings respect our heritage, while at the same time, better reflecting the dynamic and diverse community we are today. We will be redesigning www.cfa.com in order to fit with our rebrand and to enhance your experience. Please be on the lookout for additional details as the launch date nears. I look forward to hearing your feedback once you’ve had a chance to “try out” the new site.

“The landmark study is the most comprehensive assessment to date of the secured finance ecosystem and its impact on the U.S. economy and it confirms that secured financing is critical to the day-to-day operations of U.S. businesses of all sizes and demonstrates the interrelationships of these asset classes based on borrower’s needs and economic cycles. ”

DON’T MISS CFA’S INTERNATIONAL LENDING CONFERENCE MAY 21-23, 2019 TO REGISTER VISIT WWW.CFA.COM

Warm regards, Richard D. Gumbrecht CFA CEO

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Despite Competition, Factors Still Growing BY MYRA THOMAS For factors, 2018 was a very solid year for business, with many in the industry experiencing growth across all regions and specialties, whether organically or through acquisition. Despite the good news, industry leaders do note that competition remained fierce, and they predict more of the same for the year ahead. Banks continue to be highly liquid, and independent factors are likely to see additional pressure from regional and community banks.

DON’T MISS CFA’S INTERNATIONAL LENDING CONFERENCE MAY 21-23, 2019 TO REGISTER VISIT WWW.CFA.COM

TSL PARTICIPANTS

Julie Acuff

Robyn Barrett

Mark Bienstock

Wells Fargo Capital Finance

FSW Funding &

Express Trade Capital

FSW Trade Finance

Bo Kelly

Stuart Rosenthal

J. Michael Stanley

J D Factors

Prestige Capital

Rosenthal & Rosenthal

arge and small factors indicate strong deal flow, helping to head off some of the competition and pressure on yields. But an expected uptick in bank mergers will also likely change the dynamics of factoring once again in 2019 and beyond. Jelena McWilliams, FDIC Chairman, indicated her concerns about bank consolidation at the Wisconsin Bankers Association’s annual Bank Executives Conference in February.

Factors are Hard at Work For now, competition continues to increase and prices drop, and clients are coming to expect numerous quote sheets on the table. For the smart secured lenders, proper underwriting and due diligence, as well as a customer-driven approach, are the best ways to head off competition and gain and retain business. Factors say they are preparing themselves for continued downward pressures on pricing, as well as a further chipping away at structure. It takes heightened customer service and attention to the nuances of each and every client to succeed in this sort of environment. “One of the most unique parts of our business is our capability of providing credit facilities ranging from $2MM to over $100MMplus, which allow us to grow with our clients,” says Julie Acuff, senior vice president and Northeast Regional Manager for the Commercial Services Group at Wells Fargo Capital Finance. She notes that new business generation is strong. However, as deals become larger with more complex structures, the time from a signed term sheet to closing continues to lengthen. “It’s something that I believe we will continue to see in 2019,”

THE SECURED LENDER APRIL 2019 9

she says. With the continued pressures on pricing, it takes efficient operations and expense control to help make up the difference to the bottom line. Acuff adds, “The only way I know how to respond is to constantly evaluate how things are done, and why, to see if there is a more efficient way to get the same or better results. Technology has helped to increase efficiencies, resulting in a much improved client experience and enabling us to improve the time it takes to close new relationships and react to existing client needs.”

T 10

day,” says Kelly. A hands-on approach and good old customer service are keeping J D Factors ahead of the prior year. “This has been the best year for new business,” he says. At least half of J D Factors’ business is in the transportation sector, which, historically, has been very good for the industry. However, he predicts rates and yields will be under pressure in the transportation arena in 2019. Plus, Kelly notes that every client that the organization keeps, if there is competition involved, there is likely a rate cut. Today, he says, 99% of deals are done on a term basis. “It’s strictly a

he business still requires face-to-face meetings with current and prospective clients. Despite the influence of technology, the old-fashioned handshake is still a big part of the factoring world. Bo Kelly, executive vice president at J D Factors, notes that his organization has people out in the marketplace, making sure to speak directly with business owners. “We have BDOs out in the field, meeting clients,” he says.

The Tech Advantage Certainly, technology has changed the way factors do business, helping them to be more efficient and effective in their day-to-day operations. It’s also changed how they communicate and exchange information with clients. Clients want to be able to access their account at a touch of a button, so factors need to constantly invest in improvements and innovations to systems to provide customers with what they want. J. Michael Stanley, managing director of Rosenthal and Rosenthal, notes that customers are demanding “convenience and a heightened level of service,” and technology is one of the ways to help facilitate that. Stanley notes that Rosenthal and Rosenthal’s online platform gives clients what they want— transparency and information at their fingertips. The right technology also allows factors to have the ability to do more with less, which translates into a direct increase in the bottom line. On the

client-facing side, platforms can serve as a business and marketing tool. “We are always looking to make our platform faster, more transparent and user-friendly for the client,” he says. Technology can certainly help factors to compete in a crowded field, especially with the largest bank players with many more resources at the ready. According to Robyn Barrett, managing member of FSW Funding & FSW Trade Finance, the larger factors and banks have deep pockets, buying or building enterprise-grade software to increase efficiency from origina-

tion to operations. “The good news is there are plenty of tech companies who are building great products that are finally affordable for the small-tomid-sized factor,” she adds. Now, the smaller factors can be in on the same tech as the big guys. The Old-Fashioned Face-to-Face The business still requires face-to-face meetings with current and prospective clients. Despite the influence of technology, the old-fashioned handshake is still a big part of the factoring world. Bo Kelly, executive vice president at J D Factors, notes that his organization has people out in the marketplace, making sure to speak directly with business owners. “We have BDOs out in the field, meeting clients,” he says. Banks are offering low, flat rates, benefitting from a lower cost of funds than that of independent factors. “That’s probably the biggest challenge that we deal with day-to-

reaction to the competition, and it serves as leverage for us,” he adds. That doesn’t mean Kelly isn’t willing to negotiate to keep the right client. The Value-Added Approach Stuart J. Rosenthal, president of Prestige Capital, notes that 2018 was a banner year for his organization as well. “What sets us apart is our speed and ability to structure and fund complicated deals,” he remarks. Prestige Capital not only evaluated more deals, but saw larger transactions than the year before. But the main ingredient in the organization’s success, he notes, is “our attempt to react and close without delay.” Prestige Capital is also “industry agnostic,” as some people like to call it. And at a time when competition is intense, the approach seems to make sense. Rosenthal is predicting that 2019 will be more of the same. “I think competition will continue to be tense, and there will be more and more pressure on rates,” he notes. “I am hopeful that the traditional lenders will tighten

DON’T MISS CFA’S INTERNATIONAL LENDING CONFERENCE MAY 21-23, 2019 TO REGISTER VISIT WWW.CFA.COM

their credit requirements and that interest rates rise in order to narrow the gap between factoring and more traditional forms of borrowing.” Mark Bienstock, managing director at Express Trade Capital, agrees “service and speed to market” are two of the defining characteristics of a successful factor. Express Trade Capital has also diversified the types of clients and companies they deal

“value-added” for small and mid-sized companies. Tariffs are a very challenging and complex matter, but a company with a specialty in trade finance, as well as shipping and logistics, can serve as a valuable advisor to a client. “We have significant contacts in many industries and in sourcing and across all continents,” he adds. “This is a side and tangible benefit of working with Express Trade Capital.”

A Look Ahead What 2019 holds in the way of additional tariffs or the recession remains to be seen, of course. Barrett believes 2019 will continue to be robust to start. “The economy is still going strong, and the Fed has backed off from the previously expected interest increases,” she says. “I think factors will continue to thrive. Cash advance loans will be the main

t pays for a factor to be flexible and knowledgeable when dealing with clients, especially when they might hit the proverbial bump in the road. The recent U.S. trade tariffs have certainly impacted certain industries quite hard. But Bienstock notes, “We will never sacrifice credit to get the deal done.” In turn, his organization brings “value-added” for small and mid-sized companies.

with to further expand the business. “That diversification is a key part of our growth,” says Bienstock. And, despite the competition, he notes that 2018 was a very strong year for business. “We embrace and love competition because it makes everyone better.” Today, factors are not only filling niches, they are also becoming a much more accepted and mainstream form of financing, he says. But he cautions that factors need to stay ahead of the curve and be dynamic in their approach. For instance, Express Trade Capital has a division devoted to Eco-Financing. “We are finding significant opportunities in markets focused on sustainability and eco-friendly practices, particularly in the food and beverage space,” he says. “The monitoring can be complicated, but we are very much hands-on.” Tariffs and the Economy It pays for a factor to be flexible and knowledgeable when dealing with clients, especially when they might hit the proverbial bump in the road. The recent U.S. trade tariffs have certainly impacted certain industries quite hard. But Bienstock notes, “We will never sacrifice credit to get the deal done.” In turn, his organization brings

Of course, that sort of expertise will prove particularly handy if and when the recession hits. But today, more of the business owners that factors deal with appear to be less concerned with the recession than with tariffs. According to Acuff, “Wells Fargo Capital Finance’s clients are concerned about what will directly impact them, such as tariff increases. I think we will see some issues for businesses importing from overseas and the client’s ability to raise prices to offset the increased cost.” Prices are staying somewhat stable, she notes and, for now, the buyers are willing to pick up a part of the tariff increase. This helps since many manufacturers have already locked in prices with buyers before knowing the impact of the tariffs. But Acuff and other factors do note that the impact of tariffs has been a discussion at almost every client meeting since early last summer and continues to be a major discussion point. “While some clients have been impacted more so than others, the uncertainty seems to be the biggest pain point, as clients continue to dedicate a considerable amount of time and money evaluating alternate sourcing options and developing their overall strategy,” says Acuff.

competition in the small-ticket factoring world.” She also predicts that increased scrutiny will at least start to turn the tide on cash advance loans, which will mean small businesses will have to look beyond these high-interest loans to factoring, which is much more sustainable. After one of the longest periods of economic growth, the inevitable swing of the economic pendulum is likely drawing nearer. An economic downturn, when combined with the rising costs of imports, can certainly make business owners more hesitant about expansion and capital investment. That certainly impacts how factors do business. However, Kelly says that factors shouldn’t obsess over possible changes to come. “We see what happens in the economy and react accordingly,” he adds. “The good thing is that factoring is a unique product. No matter the conditions, companies will need factors, whether they’re expanding or money is tight.” Fortunately, for the industry, factoring is somewhat recessionproof. TSL Myra Thomas is an award-winning editor and journalist with 19 years’ experience covering the banking and finance sector.

THE SECURED LENDER APRIL 2019 11

Factoring:

An Old-World Tool for a Modern Age BY PAUL SCHULDINER

Paul Schuldiner of Rosenthal & Rosenthal discusses the future of factoring, including how traditional factoring has adapted to address new challenges in the current retail environment.

DON’T MISS CFA’S INTERNATIONAL LENDING CONFERENCE MAY 21-23, 2019 TO REGISTER VISIT WWW.CFA.COM

Factoring has been around for generations, but the current landscape isn’t what it used to be. Today, many independent factors have cropped up and are specializing in factoring to more service-oriented businesses, such as staffing or transportation companies. But only a handful of the more traditional factors – many of whom benefit from having expertise in managing every conceivable marketplace condition, business or credit circumstance – still specialize in servicing clients that sell consumer goods into retail on terms. When one looks closely at the state of retail today, it can be difficult to recognize any semblance of what that sector once was, even just a generation ago. Only a fraction of the once-profitable, well-known retailers are still in business, and even then, only a few of those stalwarts still remain profitable today. The businesses that continue to be financially healthy are those that had the foresight to make investments in innovation early on and commit to adapting their business models to the new reality of retail. Although dwindling brick-and-mortar locations has been one unfortunate consequence of the volatility that has gripped the retail sector in recent years, not every outcome has been negative. In fact, according to the National Retail Federation, for every retailer that closed its doors in 2018, there were two that were actually opening stores last year. That particular indicator, while perhaps unexpected, can be linked at least in part to the rapid rise of digitally native companies. Likewise, the overall trend of businesses embracing e-commerce alongside their brick-and-mortar operations has helped to bring the transformation of the retail sector full circle. Each of these unique circumstances has contributed in significant ways to how businesses are funded and financed today. But one thing that has not changed, when it comes to financing businesses, is the role that factoring can play in the ongoing success of a business. Occasionally characterized in the past as “last-chance finance,” factoring is no longer the lender of last resort. In fact, thanks to the myriad of new pressures facing businesses operating in the current

retail market – from more complex supply chains to the hurdles of selling into online retail giants like Amazon and Walmart – today’s modern factor has now become more relevant than ever before. Companies have become more and more sophisticated in the ways they run their businesses, as they seek out unique collaborations and partnerships, pursue innovative sales programs and explore new e-commerce platforms and channels to reach more and more customers. As these companies become savvier, they require more sophisticated financing tools that not only help to address problems before they arise, but also give them the funding they need to take advantage of these new opportunities. The successful factor today looks very different than it may have looked a decade ago, let alone a generation ago. The factor of the future must have a strong grasp of the many challenges – and opportunities – that businesses face today, be nimble and adept enough to help clients address them head-on and commit to being more than just a lender. Stay Two Steps Ahead Most lenders regularly reassure their clients that they understand the ups and downs of their businesses. But, in reality, when it comes to the pain points that consistently crop up for a business, it’s clear many lenders do not appreciate how certain challenges can affect – sometimes significantly – the overall financial health of a company. A good factor takes the time to understand how seasonality might affect a business’ cash flow or how the unpredictability of a large, unexpected order could potentially put a strain on a company’s finances. Many businesses struggle with complex supply chains that require adjustments to advance rates, deposits or other cash outlays that are not necessarily considered in their initial financial plans. For these businesses, they need a factor that is more than just flexible and understanding, but also responsive to the business’ unique circumstances. Simply put, a factor today should know what a business needs well before the

business even knows they need it. Nowhere is that sentiment more relevant than in the battle over brick-andmortar and e-commerce that continues to unfold across multiple sectors from apparel and consumer products to furniture and home goods. As the push-and-pull between brick-and-mortar and e-commerce has heated up in recent years, the businesses that have ultimately been successful have learned how to sell into traditional retailers, while simultaneously building their own effective e-commerce platforms. For most businesses, the margins online have been much higher than in brick-and-mortar, but that additional profitability comes at a higher cost. Simply put, building up a reputable brand online is not an inexpensive proposition. Likewise, on the production and fulfillment side, the old paradigm followed a “pallet-in, pallet-out” model which, while not as profitable, was certainly more predictable. Digital native e-commerce platforms are just the opposite. What they make up for in profitability, they lose out on in increased labor costs, a breakneck sales and production cycle and a painfully small margin of error. One mistake – an inventory mishap or a delayed shipment – and that loyal customer is already out the door and on to the next retailer selling a similar product. A business that can effectively blend brick-and-mortar with e-commerce requires more and more inventory stocked up in the warehouse, more complex contracts with overseas suppliers and manufacturers and, of course, higher operational costs. But when the costs go up, the margin must be there for the company to make it all work seamlessly. Someone has to pay for the inventory to sit in the warehouse waiting to be shipped to a customer. And the depth and variety of that inventory is more important than ever because you never know what a fickle customer might want that season – or even that particular day. Someone has to pay the overseas suppliers, the logistics fees and freight charges. Someone has to manage the account receivables and keep the cash flow in check. And, someone has to carefully vet the credit of a company’s THE SECURED LENDER APRIL 2019 13

retail customers so there are no surprises along the way. Factors today must address all of these considerations and also be the eyes and ears for a business into what a retailer might be thinking and planning. Today’s factor must have a strong grasp of the retail sell-through analysis and a familiarity with what the retailer’s merchandising plans are and what impact it will have on a client’s business. Factors must understand various licensing income streams so they can help their clients monetize their brands to create additional liquidity. Factors today must also maintain a strong grasp on the constantly shifting credit environment. When a business gets a once-in-a-lifetime mega order from a big-box retailer, it is only worth pursuing if the retailer’s credit is sound. But most busy entrepreneurs and business owners don’t have the time, expertise or judgment to evaluate a retailer’s credit worthiness, at least enough to avoid bad debt and other related financial pitfalls. An effective factor should flag bad debt and help clients navigate these complicated retail relationships. This all requires a very different kind of financing than what businesses have needed – or even sought out – in the past. The increased complexity of the supply chain, the lightning-fast pace of the sales cycle and the added pressures of operating on all platforms, in all channels, all the time, demands it. In short, the successful factor today must be well positioned to not only provide the kind of flexible, sound financing solutions that companies need, but anticipate those needs even before the client realizes it. Be Nimble These days, the factor of the future must be as nimble as its clients are. Understanding the ebbs and flows that companies face as they maneuver their businesses through this dynamic environment is critical, but really only half the battle. A successful factor today must be able to handle virtually everything – and anything. Factoring’s broader appeal and applicability are no longer only limited to fashion

and apparel companies, the industries that have historically been factoring’s biggest beneficiaries. As the retail environment has changed, the factor of the future now has the opportunity to support nearly every industry, from furniture and beauty to consumer products and food and beverage companies. While the products, customers and sales channels may differ, the financial challenges these companies must overcome are often quite similar. Adapting to meet the current needs of today’s entrepreneurs is essential. That often involves learning how to tackle challenges that businesses may face before they arise, and before troublesome problems become permanent ones. Being nimble also means being creative. Traditional banks rely on formulas and balance sheets, but many businesses don’t always fall squarely within a traditional model. More often than not, these businesses benefit from financial partners that have the ability and expertise to adapt quickly to problem-solve and find solutions. Large public banks and lenders are often slow to react – and lend – when businesses need overadvances for seasonal lows or funding for the build-up of inventory for the holidays or other big moments. Factors that are not restricted by stringent banking regulations or lengthy committee reviews are often more flexible and able to help a business ride out a rough patch without a hit to their bottom line. Forward-thinking factors must work harder to make it possible to finance a company’s entire supply chain. By providing a mix of products like purchase order financing and inventory financing, factors can help companies that sell to retailers on terms that also have stand-alone e-commerce platforms with no receivables. The challenge here for the modern factor is understanding the right combination of SKUs that a client’s e-commerce platform should have, knowing what the right velocity should be and turnover, all of which allows the factor to create an appropriate advance rate on the inventory being sold directly to consumers. Having access to the right financial solutions, an understanding of international trade finance, and logistics and sourcing

issues can make all the difference for a business. The factor of the future should be able to finance both the brick-and-mortar side of businesses as well as manage inventory and production financing for e-commerce operations. For a company looking for a competitive advantage in a crowded market, that is an incredibly powerful combination. Be More Than Just a Factor Any effective financial partner should always be looking out for a company’s best interests. That means providing guidance when a company needs it, especially when they don’t even know they do. It means reviewing business plans, evaluating potential retail strategies, making introductions and being a sounding board for big ideas. It’s about looking beyond the numbers to find an untapped opportunity, a great story or an extraordinary entrepreneur. For businesses looking to grow or expand, having the right financial partner in place is critical, both to smooth a path for growth and help manage the peaks and valleys that all too often wreak havoc on a company’s bottom line. A true partner in every sense of the word, today’s factor should be fully invested in a client’s business and their ultimate success, anticipating their every move. A tandem approach with tailored solutions will always prove more successful. TSL Paul Schuldiner is executive vice president and division head at Rosenthal & Rosenthal, the leading independent factoring, assetbased lending and purchase order financing firm in the United States.

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Factoring Extract from First-of-Its-Kind Market Sizing & Impact Study In March, the Commercial Finance Association Education Foundation released the most comprehensive assessment to date of the secured finance ecosystem and its impact on the US economy. In commissioning the Secured Finance Market Sizing and Impact Study (Study), the Foundation sought to dimension the size and scope of the U.S. marketplace for secured lending and its related products for the purpose of attracting capital, strategic planning and assisting in advocacy efforts on

behalf of the industry. Part primer, part data compilation and part analytical assessment, the full version of the Study provides the reader with a view into the highly interconnected components of this network and their collective impact on capital deployment and economic development. The findings dimension an industry that is far-reaching, influential and thriving, and one that presents significant growth opportunities for its participants to expand their served and available markets.

Here, we present the factoring section of the extract report. For further details on how to obtain the full report, which is free to national CFA members as well as Education Foundation supporters, please visit www.cfa.com or contact Aydan Savaser at asavaser@cfa.com.

Factoring volume Total volume of factored receivables was about $101 billion in 2018 and is expected to grow in the low single-digit range in 2019.

US factoring transaction volume The volume of receivables financed in factoring arrangements by US factors (companies that provide factoring services) was about $101 billion in 2018 and is expected to grow in the low single-digit range in 2019. Based on a 22.5-day average turn cycle, the $101 billion of transaction volume translates to about $6.2 billion in net funds outstanding for the period. The Study believes the number of US firms providing some form of factoring is in the range of 700-900 firms. Our analysis is based on evaluating US firms designated under the NAICS code that specifically covers factoring account receivables.

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“There is a need for alternative sources of financing for smaller players. With the rise in consumer confidence and a favorable economy, you’re seeing a lot of demand from these businesses.” - Factoring survey participant

The US factoring market is fragmented not only by the large number of US ﬁrms that oﬀer factoring, but also by factoring’s usage among tens of thousands of small and medium enterprises. Segmenting the market by size Understanding the US factoring market requires a good appreciation for how a majority of the market is dominated by several leading firms competing with hundreds of smaller firms to reach micro, small and medium-sized businesses spread throughout the country.

The Study subdivided the estimate of the total number of US factors into three categories below by total annual factoring volume: greater than $5 billion, $1 billion–$5 billion and less than $1 billion. By the numbers, factoring is largely a business pursued by non-depository

institutions. A typical factored volume per client by large factors exceeds $10 million annually. Large factors’ scale gives them modest pricing advantages over smaller factors.

Sizing methodology The analysis of survey data conducted for this report covers 16 factors representing about 90% of the US market on a dollar basis, but only about 2% of the total count of firms offering factoring. Our sources for characterizing the market include the CFA’s annual factoring survey conducted by Westat, the Study survey, the FCI annual report, analysis of reported NAICS codes and other data sources.

THE SECURED LENDER APRIL 2019 17

Whose Cash Is That Cash? Avoiding Constructive Trust Claims in Trucking Finance Transactions By Wade M. Kennedy

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Hurricane Florence hit the mid-Atlantic last year, causing terrible damage, sweeping debris inland and, in one instance, landing a large yacht in the yard of an unsuspecting homeowner. At least one famous observer noted the apparent “windfall” to the couple, asking if they were the owners of the boat. Similarly, in the commercial transportation context, the storm of bankruptcy can sweep over a company and transform cash that is apparently safely moored in the company’s deposit accounts into an asset beached in the front yard of unpaid carriers, causing courts and claimants to ask, “Whose cash is that cash?” Secured lenders often provide financing to commercial trucking or other transportation companies secured by accounts receivable and cash arising from the transportation services those carriers provide. Part of the typical security package lenders rely on is a perfected lien on both the receivables themselves as well as the deposit accounts in which proceeds of receivables are held. When the winds of a bankruptcy filing stop blowing and cash remains in the accounts of a borrower, a lender might understandably assume it is the borrower’s cash, subject to the lender’s lien and right of setoff. It would be a rude awakening for such a lender if, in the aftermath of a bankruptcy filing, the lender found that this cash was not the borrower’s cash at all, but actually cash of third parties, held in trust and deemed outside the estate of the borrower. If this cash is found to be held in trust for another party, not only would it not be the borrower’s cash, but it would be free of the lender’s lien and right of setoff and amounts previously swept by the lender and applied to loan balances might have to be returned. Not a good outcome for the lender. This unpleasant scenario is precisely the circumstance that could arise when a trucking company contracts with thirdparty carriers to transport goods of its customers or otherwise engages in what may appear to be brokerage services, thus giving rise to the claim that the company is acting merely as an intermediary or conduit between shipper and carrier and payments to the company are actually received in trust on behalf of carriers (a

“constructive trust” claim). When a trucking company conducts part of its business in this manner (contracting with thirdparty carriers), it steps into a gray zone in which it might be characterized as a transportation broker or third-party logistic provider (“3PL”) against which these claims of “constructive trust” can be more readily made by unpaid carriers. These claims have become more common recently and can have material consequences for secured lenders, but the risks of such claims can be mitigated by taking certain simple precautions in diligence and drafting of documentation governing commercial trucking and similar finance transactions. The Problem When any commercial carrier, broker or 3PL files for bankruptcy, it is likely there are outside carriers who have performed services for the debtor, yet remain unpaid. In a typical commercial context, such unpaid carriers would simply be like any other unpaid trade creditor, holding unsecured claims against the bankruptcy estate, likely to see little or no payment on their claims. However, asserting a constructive trust claim creates the potential for these unsecured carriers to get paid from funds held by or paid to the bankruptcy estate. If successful, payments received by the bankrupt company can be deemed held in trust for carriers and not part of the estate at all (“That cash is not your cash.”) and, consequently, not subject to prior claims of secured parties, other unsecured trade creditors or superpriority administrative expenses claims.1 When a constructive trust arises, unpaid carriers can seek to be paid from cash remaining in the company or the return of amounts paid to other creditors, including secured lenders, deemed held in trust for carriers. Most disturbing for secured lenders, a bank who may have set off or otherwise swept and applied cash collateral can be subject to a claim of conversion and required to pay over such funds to the unpaid carriers. This can be a material issue for a secured lender. Lenders to trucking companies that have “brokered” customer accounts (accounts arising from contracts in which

THE SECURED LENDER APRIL 2019 19

it engages third parties for carriage) are faced with two approaches to potential constructive trust claims. The lender can either (1) assume a constructive trust exists, reserve against receivables for carrier charges and accept that swept funds may be subject to disgorgement (or segregation by the company) or (2) require contract terms and operational performance by the company that will minimize the potential for a constructive trust being found. Assuming the first approach will be untenable for borrowers seeking working capital based on receivables, the second approach is the most practically relevant for secured lenders. The Interline Trust Doctrine Constructive trust claims rely on a determination that the parties intended that a fiduciary relationship between the parties be formed and that funds paid to the company be held in trust for the benefit of other carriers, even absent express agreement. As background, the concept of a constructive trust arose directly out of a Federal common law doctrine relating to rail carriers who relied on a single bill of lading to cover the transport of freight along rail lines owned by different rail carriers. This “interline trust doctrine” provided that payment to one of the carriers in the interline arrangement was held in trust for the benefit of all the other carriers moving the goods and was not merely an unsecured business debt owed by the carrier receiving payment. The doctrine was first applied to motor carriers (as opposed to rail carriers) in Parker Motor Freight, Inc., 116 F.3d 1137 (6th Cir. 1997) and has been adopted by various courts presented with constructive trust claims of carriers.2 The court in Parker applied the interline trust doctrine to motor carriers who formed an interconnected motor carrier arrangement (similar to rail lines) for the carriage of goods over the national highway system. In the Parker decision, the court concluded that “the common law trust principles embraced in the interline trust doctrine apply equally to a joint network of . . . motor carriers . . . [and] freight charges, when collected by one motor carrier on behalf of another for services that

the latter has performed, are held in trust for the latter carrier.” Citing Penn Central Transportation Co., 486 F.2d 519 (3d Cir. 1973). Cases applying this “interline trust doctrine” have summarized the criteria to establish an interline trust as follows: (1) no provision for the payment of interest by the collecting party; (2) segregation of monies due to carriers from collecting party’s general funds; (3) collecting party agrees to apportion payments collected; (4) the amount the collecting party owes the carrier directly relates to and depends upon the overall charge to the shipper; (5) collecting party must pay the carrier only if the customer has paid it; and (6) collecting party pays the other carrier immediately upon settlement of the account, so that there is no “credit accommodation” for untimely payments. This doctrine arose in the context of “interline” agreements that were part of a custom and practice among rail carriers at the time. It became a doctrine of federal common law applicable to other circumstances outside the rail carrier context where a broker/arranger receives payment on behalf of third-party carriers, whether part of an agreed interline arrangement or not.3 The federal common law rule has been stated that “a trust is imposed when any entity acts as conduit, collecting money from one source and forwarding it to its intended recipient.”4 Beyond situations in which an express trust is created or an interline trust arrangement is clearly intended, the elements of the federal common law rule have been considered along with state law and applied to arrangements between transportation brokers/arranger, freight forwarders and carriers who contract with third parties for carriage services. In particular, when applied to a non-broker motor carrier who contracts with third parties for part of its carrier services, a gray area arises where a lender may not suspect a trust relationship exists, yet just such a trust may be claimed by

unpaid carriers. Today, the issue of whether a constructive trust exists breaks down along essentially two lines of inquiry (although not bright lines): • Is the arrangement one in which the borrower is acting as a broker/arranger, merely providing a service and earning a commission for connecting shippers with carriers (thus a mere conduit for payments to the carrier); or • Is the arrangement one of a carrier or freight forwarder who is obligated to the shipper to transport goods but who may contract with third parties for some or all of the carriage services on a basis wholly independent of the contract with the shipper and outside a traditional “interline” arrangement. The answer to these two questions will depend upon the terms of the contracts under which the parties perform and the practice of the parties in such performance. As an initial matter, it is helpful to identify whether the company is a traditional transportation broker or not.5 Although titles are not determinative, designation as a broker can implicitly support a view that the company is a mere intermediary or conduit for payments from shipper to carrier and may give rise to regulatory requirements that in themselves support finding an intent to form a constructive trust. Brokers are subject to certain registration and bonding requirements and are required to keep detailed records of customers, carriers, commission received and payments made to carriers6 as well as being required to maintain accounts such that payments and receipts from the brokerage business are segregated from other activities.7 Compliance with these regulations can support elements of a constructive trust claim described below. Note, however, that motor carriers who perform brokerage services as part of their business are not necessarily “brokers” for the purposes of statute and regulations8, but may still be subject to claims that they are acting in a similar capacity and thus subject to a constructive trust claim.

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Various cases have set forth the factors that support a finding that a constructive trust was intended by the parties (i.e., that the company acted as a mere conduit for payments from shipper to carrier and therefor was intended to hold funds in trust for the carrier).9 As a general matter, in determining whether a constructive trust exists, courts have considered the intent of the parties, not only in terms of written agreements, but also in conduct of the parties.10 In absence of express intent to form a trust, the court looked to the facts and circumstances surrounding the transaction and the relationship of the parties, noting that no single factor is determinative and that industry custom as well as agreements between the parties determine whether a trust arrangement was intended.11 These factors can be summarized as follows: a. Did the company make payments to the carrier from segregated funds (as opposed to payment from its general operating accounts)? b. Was the company obligated to make payments only if it received payment from the shipper? c. Did the company remit funds received from shippers immediately to carriers, less its applicable fee or commission? d. Did the carrier have any direct rights against or privity with the shipper? To the extent some or all of these questions that are answered in the affirmative, the more likely a constructive trust claim will be successful. If these questions can be answered in the negative, the risk that a constructive trust claim would be successful can be greatly reduced.12 The main determinative factor, where the intent is not otherwise clear, is whether or not the risk of payment from the shipper was born by the company or the carrier. If the company paid the carrier prior to or irrespective of payment by the shipper from its general funds, a constructive trust is much less likely to be found to have been intended. The Solution The most effective approach for lenders to avoid constructive trust claims is to ensure that, if the company has brokered customer contracts (contracts in which it

engages third parties for carriage), these brokered contracts are documented and performed so as to minimize the possibility that a constructive trust claim will be successful. From the diligence and documentation standpoint, lenders should do the following: 1. Conduct due diligence with respect to a borrower’s agreements with shippers and carriers and ensure that no language is included creating an express trust or fiduciary relationship and that no interline arrangement is contemplated among the company and carriers. 2. Confirm terms of all contracts with third-party carriers contain the following provisions: a. Acknowledgment that no trust or interline arrangement is contemplated and no fiduciary or trust relationship exists between the company and carrier; b. Acknowledgment that the company is solely responsible for payment of fees and charges and other obligations under the applicable carrier contract irrespective of payment by shipper and carrier agrees to look only to the company for such payment; and c. Carrier shall not have any ability to direct the method or handling by company of payments from shippers and shall not contact the shipper for any reason, including nonpayment, payment disputes, indemnity, insurance or other matters 3. Confirm that (i) all funds received from customers (shippers) in connection with any brokered customer contracts are deposited to a general operating account and held as general funds of the company and not otherwise segregated or identified to a particular carrier contract and (ii) all payments made to carriers are made from general funds. 4. Loan documentation should include an agreement from the company that the company will not: a. Enter any express trust or interline arrangement with carriers or hold or be required to hold in trust any portion of amounts collected in connection with brokered customer contracts, or have any express trust or fiduciary relationship or fiduciary duty to, any carrier;

b. Segregate from its general funds any amounts collected in respect of brokered customer contracts or make payments to carriers other than from its general funds; and c. Enter into or amend any existing agreement with carriers that fails to contain the provisions required under item 2 above.

The Last Line of Defense If control over contractual terms and operational protections fail and a constructive trust is nonetheless found to exist, there are additional lines of defense for lenders based on contesting the equitable foundation of the claim itself or the requirement that funds be turned over. There has been commentary that constructive trusts in general are disfavored in bankruptcy as “fundamentally at odds with basic principles incorporated in the Bankruptcy Code, such as equality of distribution to creditors”13 A constructive trust found in common law equities may not be found applying the equities of a bankruptcy case. The establishment of the interline trust doctrine may make a general equitable defense less effective, but the equities of a constructive trust claim are always legitimate points of contention. A similar argument focuses on the general equitable requirement that there be some element of unjust enrichment in order to establish a constructive trust. This may include a defense that (i) the recipient bank made additional funds available to the estate in reliance on payments received from the company’s accounts, (ii) trust claims are subordinate to claims of secured creditors and/or (iii) that the lender was a bona fide purchaser without notice of the beneficial claim.14 If the lender who is being asked to disgorge “constructive trust” funds took those funds as a bona fide purchaser without notice, as a general matter of trust law, the trust claims are defeated and no recovery from the lenders will occur.15 Courts have held lenders to a standard of knowledge of the trust arrangement itself or knowledge sufficient to warrant inquiry.16 The forgoing notwithstanding, constructive trust claims are highly fact-

THE SECURED LENDER APRIL 2019 21

specific and subject to interpretation of federal common law and applicable state law that can vary from jurisdiction to jurisdiction. Given the uncertainty of a fact-specific analysis and the general knowledge that may be imputed to a lender given customary due diligence, reliance on equitable defenses or bona fide purchaser status is little comfort for most lenders. The best means of assuring a constructive trust claim fails (and everyone agrees “That cash is your cash”) is to ensure that documentation terms and business practices are in place that (i) prohibit express trust relationships or traditional interline arrangements and (ii) prevent the company from operating as a “mere-conduit” for payments, but instead ensure the company takes on the primary and exclusive obligation to pay its carriers from its own funds. TSL Wade M. Kennedy is a partner in McGuireWoods LLP and the head of the firm’s Asset Based Lending Group. He focuses his practice on representing lead financial institutions in complex syndicated credits to asset-based and leveraged borrowers. He has significant experience documenting asset-based credit facilities in the context of sponsor acquisitions, unitranche facilities and first lien/second lien transactions. In addition, his practice encompasses representing national financial institutions in single and multicurrency credit facilities, cross-border financings and other leveraged finance and cash flow transactions. Kennedy is also an instructor for the McGuireWoods Banking and Finance department’s Associate Training Program. He is a regular presenter at various firm and client educational programs, including, most recently, “Current Developments in First Lien/Second Lien Intercreditor Agreements” and “Bankruptcy and Restructuring Issues in Asset Based Credit Facilities and Intercreditor Arrangements”. Kennedy also provides pro bono representation of various educational and environmental organizations in formation and financing matters and application for tax-exempt status. Kennedy is serving as chair of the CFA

Education Foundation Governing Board Development Committee. Matter of Kennedy & Cohen, Inc. 612 F.2d 963 1980; Bankruptcy Code §541(d)

Co., 486 F.2d 519 (3d Cir. 1973), Transportation Revenue Management v. Freight Peddlers, Inc. 2000 WL 33399885 p. 6.

Third and the Sixth Circuits have held that the interline trust doctrine exists as a matter of federal common law. See Parker Motor Freight, Inc. v. Fifth Third Bank, 116 F.3d 1137 (6th Cir. 1997); Ann Arbor R.R. Co. v. Comm. of Interline R.R. (In re: Ann Arbor R.R. Co.), 623 F.2d 480 (6th Cir. 1980); In re: Penn Central Trans. Co., 486 F.2d 519 (3d Cir. 1973). The Seventh and Ninth Circuits have rejected the doctrine as a matter of federal common law, Union Pac. R.R. Co. v. Moritz (In re Iowa Railroad Co.), 840 F.2d 535, 538 (7th Cir. 1988); In re Consolidated Freightways, 443 F.3d 1160 (9th Cir. 2006), however, claims in those jurisdictions have relied on applicable state law and traditional common law trust doctrines to find constructive trusts.

Penn Central Transportation Co., 486 F.2d 519 (3d Cir. 1973) 10

Transportation Revenue Management v. Freight Peddlers, Inc. 2000 WL 33399885; In re Columbia Gas Systems, Inc., 997 F.2d 1039 (3rd Cir. 1993)

Transportation Revenue Management v. Freight Peddlers, Inc. 2000 WL 33399885 p.4

The term “broker” in the transportation regulatory context is defined in 49 U.S.C. §13102(2): (2) Broker. – The term “broker” means a person, other than a motor carrier [emphasis added] or an employee or agent of a motor carrier, that as a principal or agent sells, offers for sale, negotiates for, or holds itself out by solicitation, advertisement, or otherwise as selling, providing, or arranging for, transportation by motor carrier for compensation. 6 See 49 C.F.R. §371.3 5

See 49 C.F.R. §371.13

See 49 C.F.R. §370.1

In Re Muma, 322 B.R. 541, 556-557 (Bankr. D. Del. 2005) 11

See Delta Pride Catfish, Inc. v. Marine Midland Business Loans, 767 F.Supp. 951 (E.D. Ark. 1991) which found funds not held in trust where (i) company was not found to be a statutory “broker”, (ii) did not segregate funds, (iii) paid the carrier prior to receipt of payment from shipper or (iv) otherwise bore the risk that the shipper would fail to pay. Note this case was based on an agency claim rather than a claim under federal common law constructive trust theory. 12

XL/Datacomp, Inc. v. Wilson (In re Omegas Group Inc.), 16 F.3d 1443 (6th Cir. 1994). “The equities of bankruptcy are not the equities of the common law,” concluding that property subject to a claim of constructive trust is excluded from the bankruptcy estate only if such a trust has been imposed by a court “in a separate proceeding prepetition.” Constructive trusts, “are anathema to the equities of bankruptcy since they take from the estate, and thus directly from competing creditors, not from the offending debtor.” 13

Delta Pride, 767 F.Supp. at 963

Delta Pride, 767 F.Supp. at 963 Parker, p. 1141-1142

Parker Motor Freight, Inc., 116 F.3d 1137 (6th Cir. 1997), Penn Central Transportation

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Global Outlook:

Could 2019 herald the next global recession? BY TREVOR WILLIAMS Global economic activity is slowing down. After peaking in 2017 at a post-crisis high of about 3.8% at an annual rate (measured in purchasing power, so adjusted to take account of inflation differences between countries), the pace of growth in 2019 looks like it will ease back to 3.5%. Such an outcome will equal the post-recession low seen in 2012 and may also be sending a signal of the start of a cyclical downturn that could extend into 2020.

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Analysing global growth over the last 40 years (see chart 1), shows that a sharp deceleration in activity takes place every decade or so. On that basis, a sharper downturn than the one being forecast by most commentators at present seems a statistically likely outcome. We are due a sharp downturn that takes global growth well below its long average and not simply one that leaves it marginally lower than a year earlier, which is what the consensus forecast is currently showing. Indeed, probability would suggest that it is odds-on that a sharp downturn will occur at the world level sometime in the next three years. Worryingly, the global slowdown has intensified since the second half of 2018. Output growth has slowed in the euro area. After averaging 0.7% per quarter in 2017, Euro area economic growth was just 0.2% in Q4 2018, reflecting a sharp deceleration in Germany as its auto sector sales drop sharply. Growth in China eased back, from 1.7% a quarter in 2017 to 1.5% in Q4 2018. Recent data shows that US growth in the last few months has been decelerating.

For Japan, economic output contracted by 0.6% in Q3 2018, while the pace of expansion eased in India and Russia over the course of 2018. UK economic activity was recorded at 0.6% in Q3 2018, but preliminary figures show that its pace dropped to just 0.2% in Q4. In its latest report, the Bank of England forecasts an expansion of just 0.1% or so in GDP in the first quarter of 2019 and 1.2% for the full year, down from a prediction of 1.7% as recently as November 2018 and the weakest annual rise since the recession ended in 2010. But the excellent news shown in chart 1 is that the world economy has not experienced an outright fall in growth at any time over the last 40 years. Even during the severe financial and economic crisis nine years ago, growth in China and India averaged over 6% a year, as their share of the world economy continued to rise. In short, their potential for catch up with living standards in the advanced economies is immense, as they are populous countries but poor. Nevertheless, the reasons for the slow-

down currently underway in the world economy are clear, as is the reality that most regions and sectors are affected and hence the downside risks to activity and asset prices should be acknowledged. Growth in world trade has decelerated sharply (see chart 2). Partly driven by the trade dispute between the US and China and higher tariffs, but also, to a lesser extent, the US dispute with Mexico and Canada, the pace of global trade has fallen to 2.8% a year in the quarter to November 2018 from a rate of 5% a year ago. Slower global growth also reflects a tighter policy stance in the US, with a reduction in the size of the Federal Reserveâ&#x20AC;&#x2122;s balance sheet and a rise in short and long-term interest rates compared with the year earlier. Monetary policy was also tightened in China, as it reduced liquidity and targeted loose credit conditions in its financial sector. As signs of weaker global growth have emerged, financial market sentiment and asset prices have been adversely affected. It is also the case that, in some instances, asset prices had reached levels that seemed inconsistent with the perfor-

CHART 1: A GLOBAL SLOWDOWN IS UNDERWAY

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CHART 2: WORLD TRADE IN GOODS SLIDES

mance of the underlying economy; so, even without the economic slowdown that has emerged, a correction might have been forthcoming. Most of this overvaluation seems to have been in equity prices in advanced economies, but bond yields have also been at lows that only exceptionally loose monetary policy could justify. Equity prices fell back sharply in advanced countries at the end of 2018 (see chart 3). In early 2019 though, some rebound has occurred as policymakers have retreated from the harsher rhetoric about policy used late last year, especially in the US. By contrast, equity prices in emerging economies have held up rather better, and some countries have even shown increased asset rises compared with a year ago. Expectations about increases in central bank policy rates have eased back in line with weaker economic growth, and long-term interest rates have also dropped back. Weak economic data are translating into weaker price inflation, which in turn means that the likelihood of the Bank of England leaving interest rates on hold has

increased. It has also been the case that oil prices have responded to signs of a weaker economic expansion by dropping back sharply, by around 25% since the middle of last year. There has been an easing of industrial metals prices, reflecting the slowing trend of global demand. Both of these commodity prices trends will be reflected in lower inflation pressure. In the UK, consumer price inflation for January 2019 has dropped to 1.8%, the lowest for two years but also falling below the 2% target, something that the Bank of England had said in its November 2018 Quarterly Bulletin would not occur for the entire twoyear period of its forecast. It is therefore no surprise that in its February 2019 report, the Bank has rowed back from its earlier take on the extent of its monetary tightening this year and next. Negative supply factors in Russia and Libya may keep the price of oil higher than otherwise as they pump out as much as possible to raise tax revenues, but it is still likely to remain lower than expected a year earlier. Corporate-bond spreads have widened,

reflecting the risk to the balance sheets of over-geared companies in the face of slower growth for their products. It may also be the case that some asset sectors – particularity those that had high yields – were overbought, so now may be oversold, reflecting a correction to perceptions and that they are indeed riskier. In that case, some widening of spreads may have occurred in any event. Throughout the year ahead, issues of trade uncertainty, and in the case of the UK Brexit uncertainty, allied with variable policy outcomes, are likely to keep the pressure on asset prices, weigh on economic sentiment and so on investment trends. For the UK, the Bank of England is assuming a smooth transition to a new relationship with the EU. But should that not materialise, then risk to the currency and to short-term financial asset prices are to the downside. That said, if the outcome is positive for financial markets, the central bank may have to tighten more than is currently expected, which may in turn offset some of the upside for asset prices. From the US to the euro area, to the UK

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CHART 3: GLOBAL EQUITY PRICES ARE MORE VOLATILE

and the emerging markets, financial markets will have plenty to ponder on over the year ahead. On the one hand, trade issues, the end of the fiscal loosening in the US and further quantitative easing in the US, a tighter monetary policy stance by the Bank of England and credit tightening in China and India, will likely keep financial markets on edge in 2019. On the other hand, outcomes which are interpreted as orderly and or predictable could see rallies in asset prices, especially if policy tightening is reversed. Such may be the extent of current financial market pessimism. Indeed, events can move so fast that central banks may be cutting rates and loosening policy by the end of the year as economic weakness spreads. Whatever the outcome, there is an economic slowdown taking place, though its intensity is as yet uncertain. As a result, there are many policy risks in a range of countries as policy makers wait to see how events unfold and respond to it. Hence, the conclusion is that the world financial landscape faces many uncertainties that may lead to higher levels of volatility than seen

in recent years. With higher risk and volatility, however, may come more opportunity to achieve outsize returns for those willing to take big-market positions. TSL Trevor Williams was the Chief Economist at Lloyds Bank â&#x20AC;&#x201C; Commercial Banking for over 20 years. He now runs his own economic consultancy. Williams is a visiting professor at Derby University, rotating chairman of the Institute of Economic Affairs Shadow Monetary Policy Committee (SMPC) and author of Trading Economics: A Guide to Economic Statistics for Practitioners. He is on the editorial board of Economia and the Journal of Corporate Treasury Management. He regularly writes articles for publications and appears in the financial press and on television to represent economic views.

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Marc Heller The TSL Interview

President, Commercial Services, CIT Group

BY MICHELE OCEJO Marc Heller is president of CIT Commercial Services, one of the nation’s leading providers of factoring and lending services to the apparel, textiles, furniture, home furnishings, housewares, consumer electronics and consumer products industries.

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Marc Heller President CIT Commercial Services Heller joined CIT in January 2004 when CIT acquired the factoring portfolio of HSBC. He has previously held the position of executive vice president and New York regional manager of HSBC Business Credit (USA) Inc. Heller was with HSBC and its predecessor, Republic Business Credit Corporation, since 1991 and has been in the financial services industry since 1970. A recipient of a number of industry awards, Heller received the Financial Services Industries Award from the American Jewish Congress in 1996. He received the Leadership in Education Award from the New York Institute of Credit in 1998. Heller received the Community Achievement Award from ORT in 2002 and received the Top Hat Award in 2004. In 2015, Sephardic Bikur Holim awarded him with the “Partner in Kindness Award.” Heller continues to be very active in supporting many organizations and is a founding member and Executive Board member of Delivering Good. He is a board member of the Father’s Day Council and is also active in raising money for National Jewish Hospital, the UJA, Bnai Brith and Big Brothers and Sisters. Here, he discusses what we can expect from CIT Commercial Services this year, the evolution of retail and the challenge of getting new industries to recognize the benefits of factoring.

How did you get your start in factoring? Tell us a bit about your career path. My career started working for a textile company, learning credit from the ground up. In 1977, I saw the light and joined Chase Manhattan Bank’s factoring division. As the factoring industry began its consolidation, Republic National Bank was my next stop, becoming the regional manager, until the bank was acquired by HSBC, where I had the opportunity to grow my factoring background internationally in Europe and Asia. In 2004, CIT acquired the U.S. factoring business from HSBC and, utilizing everything I learned from the industry leaders over the many years, I rose to the position of president of a leading factoring company in the U.S. What are your main goals for Commercial Services in the coming year? We look to grow the volume, revenue and profits through our existing client base, while reaching record-breaking new business signings across all regions. With our high-quality client base, we work diligently to help them grow through acquisition funding and act as a “good matchmaker” and their “trusted advisor” – strong relationships is our key distinction. As we look to grow our core markets, we are adding industry and product diversification to support our 2019 plan and plant seeds for future years’ growth. How is the tumultuous retail industry affecting factoring? How is CIT facing the challenges of this volatility? Are there other big concerns for factoring in the coming year? We have seen the best of times and almost the worst of times and yet we are still here. We pride ourselves on our diligent customer research and customer contact. We stay close to our clients, listening to them and their customers, while gaining servicing and industry knowledge, making us a bit smarter. The economy is always a challenge. The evolution in the retail market is another challenge, including issues such as major retailers closing some stores, some looking to make major investments in e-commerce, potential consolidations and, on top of all that, we have a consumer that has changed their buying model. We don’t think that brick and mortar will go away, but we do believe that the retailer is going

through a complete evolution and has to adapt to it. As they adapt, we will have to adapt to those changes to provide servicing and financing in this new model. In July, CIT announced it had hired Joerg Obermueller as the managing director of the Supply Chain Finance business, as part of your overall plan to pursue growth opportunities. Where do you expect to see growth in 2019, either as an organization or for the industry in general? In 2018, we introduced SCF to support clients outside our core factoring market. The SCF product helps the buyers and sellers while expanding CIT’s industry knowledge and product diversification. We are excited about the significant upside SCF will have on our profitability as well as its potential to introduce CIT’s products to a new and diverse customer base, enabling our new clients to see the value of all of CIT’s businesses and diversification. What other industries could benefit from use of receivables management and financing services? Why aren’t they currently taking advantage of those opportunities and what can be done to raise their awareness? Factoring has been established in the fashion, footwear and home furniture industries for decades and everybody there gets it. But people in other industries can be somewhat skeptical about new ways of doing business. In most cases, the real challenge is in getting these folks to give it a try. Once they do, they quickly see the benefits of improving cash flow, and protecting themselves from customer credit losses. At that point, they’re pretty happy to let someone else worry about managing credit risk and collecting on invoices while they go back to what they do best: making products that consumers want to buy. Beyond the known benefits of the factoring product, reducing leverage through securitization and bulk purchases has become a very popular offshoot of factoring, especially with private equity investments. TSL Michele Ocejo is director of communications for CFA and editor-in-chief of The Secured Lender.

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Moshe Cohen, president and founder of The Negotiating Table, Inc., provides negotiations strategy advice that can be used in all aspects of life.

NEGOTIATION TIPS AND STRATEGIES BY MOSHE COHEN

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People negotiate all day every day — even people who don’t think of themselves as negotiators negotiate all the time. This is because negotiations occur any time you and another person need to make a decision and you don’t start off in the same place. Thus, some negotiations are formal, but most are informal; some are about money, but most are about the routine decisions of work and life;’ and some are external with clients and vendors, but most are internal with coworkers, acquaintances, and family members. Despite this, negotiations are often difficult for people and make them anxious. All negotiations involve conflict, at least in the sense of disagreement, and many people don’t like conflict. All negotiations also involve risk. If you push too hard, you might damage relationships or end up with nothing; but, if you don’t push hard enough, you might give up too much value. Negotiations take time, require preparation, and involve dealing with other people, and all of these aspects make them challenging. To address these challenges and increase your chances of success, there are a few things you can do. Prepare For Your Negotiations Many negotiations fail before they begin because people enter into them insufficiently prepared. Before you negotiate, you want to know as much as you can about the subject matter of the negotiation and the context in which it takes place. Research the relevant facts and data pertaining to the negotiation and bring your preparation with you to the table. Find out as much as you can about the decision-makers on both sides, as well as other stakeholders who influence the decision-makers or are impacted by the consequences of the negotiation. Before you approach the other party, get a sense for the way negotiations are conducted in the setting that awaits you, understand the process and its norms, and study precedents from similar negotiations.

Define Your Success Once you have completed your research, you need to define your objectives for the negotiation. Very often people define their success in negotiations based on very concrete, positional goals. You decide you want a seven percent raise, or to be promoted to a senior analyst by July. The problem with these goals is that they don’t actually mean anything. Why seven percent? Why July? Instead of focusing on these very specific positions, try to understand why you want them – what motivations, needs, and fears you are trying to satisfy through the negotiation? What does the promotion or the raise mean to you? Are you looking to satisfy a financial need, to be rewarded for your hard work, to feel like you’re moving forward in your career, to do more interesting work, or to achieve some other objective? By focusing on your underlying interests rather than on particular positions, you are more likely to negotiate satisfactory outcomes for yourself. Understand Your No-Agreement Alternatives An important part of your preparation involves understanding what you will do if you can’t come to an agreement with the other party. In every negotiation, there is always the possibility that you and the other party won’t reach an agreement and, in that case, you will have to try to meet your interests through alternative means. In the workplace context, that might mean biding your time, transferring to another position internally, or looking for another job. Regardless of the circumstance, you need to know the alternatives available to you, decide which alternative you are most likely to pursue if you don’t reach an agreement, and understand the benefits and costs of going to it. Then, at every point in the negotiation, you can compare any offers made to you by the other party with your alternatives away from the table, and decide what offers to accept and

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which ones you need to walk away from. Keep in mind that the other party also has alternatives, and try to understand both what those are and how the other person views them. Some of the ways that you can gain leverage in a negotiation include improving your own alternatives, negatively impacting the other person’s, or simply influencing how the other person thinks about your alternatives or their own.

matter at hand, the amount of time you have available, and the importance of the relationship. By understanding your own style and the characteristics of the situation you are negotiating, you can approach your negotiations more effectively. Manage Your Emotions As You Negotiate As you approach the other party and begin your negotiation, you will run into the fact that negotiation is

up, or you might become speechless. If you notice that your emotions have gotten the better of you, slow down the negotiation by breathing, asking questions, or taking a break so as to avoid being reactive. You don’t want to make any concessions, commitments, or important decisions in your negotiations under conditions of emotional pressure.

Ask for a lot - don’t self-limit In order to maximize the value you attain from your negotiations, you also need to be able to ask for a lot. Many people self-limit in their negotiations because they are afraid of offending the other party and damaging the relationship. They worry that the other party will shut down and simply get up and walk away. They don’t want to be perceived as unreasonable, greedy, or cheap. Identify Your Negotiating Style One of the things that you bring into every negotiation is yourself, and you need to understand your negotiating style. You might be very competitive in your approach to negotiations, defining your success by the outcomes you achieve in this particular negotiation with little regard for longer term or the relationship with the other party. Alternatively, you might be so focused on preserving relationships that you are willing to sacrifice some of your own interests for the sake of those relationships. You might try to optimize your negotiations and create value for you and the other party, satisfying both relationships and outcomes, or you might be simply focused on closure – getting the deal done efficiently and quickly, with less concern about the value you create in the process. Finally, you might just not like to negotiate at all and try to avoid your negotiations by any means possible. Whatever your approach, the important thing is that you recognize what you are doing and make deliberate choices. Different negotiations call for different approaches based on the importance of the

inherently an emotional process. Any situation you walk into, anything anyone says or does, impacts you first on the emotional level. You are going into your boss’s office to discuss your promotion and, as you walk in, find not only your boss, but also the senior vice president for your group, and you might have an emotional reaction to the surprise of having her there. It is important to manage your emotions as you negotiate so that you can respond to situations and avoid being reactive. To manage your emotions, try to identify ahead of time the kind of situations that trigger strong reactions in you. For some people it might be authority figures, for others it’s time pressure. Some people might get triggered by certain behaviors or personalities while others might get rattled when unable to answer a question. By knowing your triggers, you make them less triggering. You also need to catch yourself when you do become emotionally overwhelmed. Different people experience emotional overload differently - your muscles might tense, your heart rate might go

Ask For A Lot - Don’t Self-Limit In order to maximize the value you attain from your negotiations, you also need to be able to ask for a lot. Many people self-limit in their negotiations because they are afraid of offending the other party and damaging the relationship. They worry that the other party will shut down and simply get up and walk away. They don’t want to be perceived as unreasonable, greedy, or cheap. The problem is that you often have no idea what the other person’s limits might be. While asking for a lot increases the risk of no agreement, if you allow yourself to self-limit, you are very likely to attain poor-to-mediocre outcomes in your negotiations. You want to ask your supplier for a discount, but also don’t want to offend, so while you want 15 percent off, you only ask for ten. Unbeknownst to you, the supplier routinely gives large customers 20 percent discounts on order of this size. Making bold asks is terrifying for a lot of people and, the more personal the situation, the more difficult. You might have an easier time asking for a ten percent raise for

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one of your direct reports than you might for your own raise. The only way to get over this is to practice – to put yourself in situations where you force yourself to ask and endure the stress of possible rejection. By doing so, you can learn to ask for more and obtain more favorable outcomes in your negotiations. Listen As you negotiate, try to spend most of your time asking questions and listening to the other party. Just as you are trying to satisfy certain interests through the negotiation process, so is the other person. By identifying the other person’s interests, you can often find solutions that meet both of your interests while giving you the greatest amount of benefit and costing you as little as possible. Ask the other person open-ended questions to uncover their interests, stay silent as long as it takes for them to start talking, listen carefully, trying to uncover the meaning behind their words, and confirm your understanding by reflecting back what you heard. Success in negotiations comes from understanding the other person’s interests and then finding creative ways to meet those interests. Once you have uncovered what each of you is trying to achieve through the negotiation process, you can begin to construct resolutions that achieve those objectives. Prepare a few ideas for resolution in advance of the negotiation, listen to their ideas whether you like those ideas or not, think out of the box in coming up with new options for resolution, and move slowly toward the other party. It is often a mistake to rush toward agreement because of time pressure, anxiety, or impatience. Come To Wise Agreements, But Be Prepared To Walk Away As you approach the end of your negotiations, make sure that you make decisions as to what offers to accept based on objective rather than subjective criteria. Use the facts and

data that you collected prior to the negotiation to validate your decisions. Make sure you and the other party understand your agreement the same way, and that your agreements are detailed enough to survive implementation. Finally, nothing gives you more power in a negotiation than the ability and willingness to walk away, so always keep your alternatives in mind and don’t be afraid to go to them if the other party’s offers don’t meet your interests. TSL

first book. Cohen’s undergraduate degree was in physics from Cornell University, followed by a master degree in electrical engineering from McGill University, specializing in robotics. After working in robotics for over a dozen years, he earned an MBA from Boston University and then founded The Negotiating Table, Inc.

Moshe Cohen is the president and founder of The Negotiating Table, Inc., a training, mediation, and consulting firm in Boston, Massachusetts. Since 1995, Moshe has been teaching, mediating, coaching, writing, and speaking on the topics of negotiation, leadership, change management, influence, conflict resolution, mediation, facilitation, and communication. Cohen is also a senior lecturer at Boston University’s Questrom School of Business, where he teaches Negotiation and Leadership in the MBA and MSMS programs. He has also previously taught at Bentley College and Cambridge College, and is frequently asked to present at business functions and conferences. Cohen has conducted negotiation, leadership, and other training programs for numerous corporations, government agencies, nonprofit organizations, and individuals. He has worked with salespeople, buyers, attorneys, consultants, purchasing professionals, line managers, and executives at all levels within organizations and in industries including technology, health care, financial services, consulting, legal services, biotechnology, insurance, consumer goods, retail, and others. He specializes in providing experiential, relevant, engaging programs that people can apply immediately in their work. Cohen also writes extensively, having written numerous role-plays, cases, and articles, and is currently working on his

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FURNITURE RETAIL OFFERS POCKETS OF OPPORTUNITY BUT DUE DILIGENCE IS KEY

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Disruption seems to be affecting every sector and the furniture industry is no exception. Mark Bannon of Tiger Group explains why lenders should consider furniture retailing borrowers.

BY MARK BANNON

The big-picture analysis of independent furniture retailing tends to focus on a phenomenon that is all too common in today’s economy—disruption. Independents across North America face profound challenges arising from the growing power of national and multiregion chains, the rise of ecommerce, and shifting shopping patterns among younger generations. But even with these formidable headwinds, it would be a mistake to assume that lending opportunities in furniture retailing are dead. At least among a certain type of niche operator, these changes are translating into an increased need for capital. With the proper due diligence, providing that capital might not be as risky as you would think. Viable furniture chains are scattered across the country. The composite picture looks something like this: With eight or ten stores in a one-or two-state region, the business was founded early in the 20th century. Generations of customers grew up knowing the chain through ads in the papers and on AM radio, UHF TV and local cable. This local furniture retailer earned a strong reputation for customer service and for carrying a full range of brands. Successive owners purchased their real estate and sank lots of money into targeted inventory. They learned lessons as their products and customers evolved over the years – allowing the company to maintain a relatively solid balance sheet. Operators like this have every intention of continuing, but cash flow can be challenging. While they want to adapt to the changing times, they need standard asset-based lending—17 to 20 percent interest is simply not viable for them. Secondtier lenders have an opportunity to serve this end of the marketplace, but they must be selective in doing so. These retailers represent the best of the independent furniture business and are distinguished by the strength of their operations relative to those of their more lethargic competitors.

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They are defined by their willingness to make productive, adaptive changes in business strategy aimed at capturing new, younger market share. To accomplish these aims, they need an accurate analysis of their business, a plan for the future and the capital required to execute the new strategy.

fective branding, marketing and advertising campaigns that include digital and social media? What is it doing to take a competitive—but realistic and balanced—approach to operational matters such as warehousing, delivery logistics and customer service policies? Viable lending candidates need to understand their place in the market as well as the precise value of their

ability—so carrying more of this type of merchandise is one way to continue serving these customers. In evaluating a potential borrower in this sector, a key question is whether the operator has taken note of this major demographic shift and its implications for the business. Independents should also think carefully about how to appeal to Generation X. Anywhere from 35 to 55

In considering whether to lend to an independent furniture retailer, it is important to gauge the degree to which it has taken stock of itself. Furniture stores often sit in the same locations for decades while customers around them change. Given the current state of disruption in furniture retailing, a true analysis will reach well beyond the typical appraisal of the company’s hard assets. To truly understand the value of the brand—and subsequently the assets—valuation experts start with a deep dive into the retailer’s marketplace and demographic base for quantifiable information about shopper ages, incomes and interests.

Targeting the Right Borrowers In considering whether to lend to an independent furniture retailer, it is important to gauge the degree to which it has taken stock of itself. Furniture stores often sit in the same locations for decades while customers around them change. Given the current state of disruption in furniture retailing, a true analysis will reach well beyond the typical appraisal of the company’s hard assets. To truly understand the value of the brand—and subsequently the assets—valuation experts start with a deep dive into the retailer’s marketplace and demographic base for quantifiable information about shopper ages, incomes and interests. A careful revaluation of the merchandising strategy, including pricing, mix, and turns, is also needed to ensure merchandise mixes that neither overemphasize nor underrepresent certain categories. These days, it is unwise to carry slowmoving items, even if they do add to the ambiance of the store. Does the retailer strive to maximize productivity down to the last square foot? Further, how does the chain’s staffing compare to standard industry parameters? Is the retailer running ef-

major assets. A brand update or new merchandise/pricing strategy may be necessary. In partnership with valuation and disposition experts, they are willing to squeeze actionable information from their POS and customer data to determine which strategies should be pursued. Hunches are no longer good enough. Embracing Generational Change When it comes to gaining this fresh perspective, the importance of objectively reassessing customer preferences and buying behavior cannot be overstated. For independent furniture retailers, the trajectory of one generation in particular—the Baby Boomers—is crucial. At its peak in 1999, this massive generation was comprised of 78.8 million Americans. By 2050, according to the Pew Research Center, its ranks are projected to shrink to 16.6 million. Even the youngest Boomers’ children have largely left home. As a result, this generation is downsizing, moving into smaller homes and discarding larger, nonessential furniture. These lifestyle changes are accompanied by the need for smaller-scale pieces that offer mobility, comfort and afford-

years old today, Gen Xers often lead growing families with substantial economic resources. These tech-savvy buyers stand to inherit billions of dollars from their parents in the years to come. Per Pew Research, there will be 64.6 million Gen Xers in 2028—a significant demo that will still be purchasing goods long after the Boomers. These shoppers have a sense of brand loyalty and are wary of disposable furniture. Although they are sophisticated online shoppers, their focus on brands and shopping experiences makes them good potential customers for well-run independent furniture stores. How should independent furniture retailers interact with even younger shoppers—the elusive Millennials? These shoppers will likely overtake the Boomers in 2019, according to Pew, as their ranks grow to 73 million, (versus 72 million Boomers). And yet for independent furniture retailers, there are good reasons to be cautious about shifting the business model to focus mostly on the youngest members of the Millennial generation. For starters, they often have bud-

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gets limited by student debt and an economic environment in which the cost of living often outpaces real wage growth. Additionally, they tend to move frequently and are more open to purchasing ready-to-assemble items. Thus, to target the youngest of these shoppers is to go head-to-head with those Internet and discount retailers that are already stealing market share. Fortunately, with time, older Millen-

services, furniture retailers can measure the effectiveness of different media. Lenders may also want to consider whether the potential borrower is taking full advantage of “force multipliers” like buying groups, which offer savings on shared infrastructure such as Website design and maintenance, or special pricing from preferred vendors for inventory-management systems or payroll programs. The

for lenders? Proactive and adaptive furniture operators—and there are plenty of them—truly do have bright prospects with the right strategic partners. Just as the “retail apocalypse” in the U.S. apparel sector does not mean that all brickand-mortar apparel shops are doomed, even decades-old furniture chains can survive by finding the best sites, targeting the right customers and executing on customer service, tech and mer-

Reevaluation of real estate, too, can have a significant effect on the viability of the strategy. Naturally, the lender will assess the net orderly liquidation value of the prospective borrower’s owned real estate and/or any low-cost, long-term leases that could potentially be sold in connection with strategic store closings or a full GOB. As an aside, if the retailer does aim to close underperforming stores as part of a strategic realignment, it must guard against creating the impression of a chain-wide failure. Smart operators and consultants know how to protect the brand.

nials will increasingly seek betterquality furniture and show a greater willingness to wait for the delivery of goods. Efforts to cater to Gen X should eventually gain traction with the leading edge of the Millennial generation as well. Updating Key Processes—A Critical Step As mentioned, older furniture stores that have spent years or decades serving Baby Boomers often rely on print, radio and TV-based media buys. But today’s furniture retailers need a fresh perspective on branding, social media (direct interaction with the shopper), content marketing, Website development, and search engine optimization. Marketing today must be a multi-channel effort. Has the retailer approaching you for funding conducted a comprehensive audit of budgets, media sources and the functionality and demographic appeal of its Website? Savvier retailers know that digital advertising must be in the mix regardless of the age of their targets, but at what investment? By introducing more promotions against which a transaction can be measured, such as a redeemable coupon for discounts or

better buying groups offer access to private-label credit programs with various payment options, including no-interest or fixed low-interest financing for extended periods. Reevaluation of real estate, too, can have a significant effect on the viability of the strategy. Naturally, the lender will assess the net orderly liquidation value of the prospective borrower’s owned real estate and/or any low-cost, long-term leases that could potentially be sold in connection with strategic store closings or a full GOB. As an aside, if the retailer does aim to close underperforming stores as part of a strategic realignment, it must guard against creating the impression of a chain-wide failure. Smart operators and consultants know how to protect the brand.

chandising. In an industry that is ripe for growth and repositioning, standing still is not an option. To move forward, independent retailers need resources. That makes them a niche opportunity for second-tier lenders who ask the right questions, use data wisely and conduct thorough due diligence. TSL Mark Bannon, a 30-year veteran of the furniture industry, is director of Furniture Solutions for Tiger Group. He can be contacted at mbannon@tigergroup.com.

Outfoxing the “Apocalypse” Given the shifts in play in the furniture business, it is simply a fact that more independents are headed toward the end of their lifecycle. In some cases, this is due to disruption; in others, the owner is just ready to retire and doesn’t have a viable succession plan. The key takeaway

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Interview with Entrepreneurial Factor

Allen Frederic Republic Business Credit BY MICHELE OCEJO

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It was a true factoring company and I helped install an ABL platform in 1995. Then, in the year 2000, I started a factoring company in partnership with a bank, Gulf Coast Business Credit. In 2010 I founded Republic Business Credit with Stewart Chesters, who is now the CEO.

Allen Frederic Co-Founder Republic Business Credit Allen Frederic is a co-founder of Republic Business Credit with over 45 years of commercial banking, asset-based lending, and factoring experience. He previously founded another New Orleans-based factoring company after serving as president of a New Orleans bank. Frederic is currently the president of the American Factoring Association, a past Director and Executive Committee Member of the Commercial Finance Association, past Advisory Director of the International Factoring Association and an instructor for both the CFA and IFA.

You’ve been in the factoring and ABL industries for over 45 years. How did you get your start in the business? I got my start in commercial banking. I had worked for a bank during college and graduate school and started my career at the largest Louisiana bank, mainly calling on Fortune 1000 companies. Then I worked for the 20th largest bank in the U.S., a Texas bank. Later I was chief credit officer of a community bank and then CEO of a community bank. It was at that position that I was introduced to factoring because I gave lots of referrals to a factor. I ended up joining that company, which was a public company located in Ft. Worth.

Factoring has experienced a lot of changes over the course of your career. What would you say are the most significant changes? First, it’s significantly more competitive. You now have more bank-owned factors and factors that are sponsored by private equity companies. When I started in factoring in the Dallas-Ft. Worth area, for example, you had six or seven factors, today you have more than 30. Second, you have a great deal of liquidity in the system today. You also have the advent of the MCAs, which take the lower part of the market. They have a significant share. It used to be that the MCAs would play in the $250-500,000 range, but now they’re going up as high as $2 million. The last change, and perhaps the most significant, is technology. Technology advances help in the operations, processing and underwriting areas. Would you say increased competition is a good change? Well, competition is certainly a good thing for the customers. For existing companies in the business more competition means that you have to be innovative, you have to be a leader and you have to formulate evolving strategies for your company to excel in a more competitive environment. If you could go back and give your 30-year-old self some advice, what would it be? First would be stick to your credit standards and be consistent no matter what kind of market you’re in. Second, don’t follow the herd, but be a leader and an innovator. Embrace technol-

ogy. Trust people and empower them to make decisions. I would say that’s the best advice that I could give young people. Do you have any favorite moments during your career or any special deals that stand out? I would say my favorite moment was when I sold my equity interest and deposited the check in the bank. Nonetheless, there are many, many favorite moments. Certainly one that stands out was a startup we financed which went on to bring in $100 million in revenue. It’s a satisfying feeling to think that you helped create numerous jobs. Another highlight was honoring three of our employees in successive years at the 40 Under 40 Awards that the CFA presented. First was Rob Meyers, who is our president/chief operating officer, then Danika Louis, portfolio manager, and then last year, Candice Hubert, senior vice president, business development officer in our Houston office. I think it was in 2016 that Republic was awarded fastest growing company in the New Orleans area by the ACG and then this year in Houston the ACG nominated Republic for two awards, the Deal of the Year and the Restructuring Deal of the Year. Last, I would say what’s been very satisfying is the leadership positions that I’ve been fortunate to have in the Commercial Finance Association, the International Factoring Association and the American Factoring Association. In the CFA, sitting on the Executive Committee, chairing the Convention Committee, and chairing the Entrepreneurial and Factoring Committee. In the other organizations, as well; I’m president of the AFA and on the advisory board of the IFA. All of these gave me an opportunity to develop strong and lasting relationships with leaders and colleagues in the industry, not to mention the advantage it gives you networking. So that’s been extremely satisfying.

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Over the past year, Republic has expanded its presence in Houston and the Upper Midwest. Could you tell us what’s in store for Republic in the coming year? I think if we look to the future, we’ve got extraordinary young, yet seasoned, leadership with Stewart Chesters and Rob Meyers. The first thing they did was to restructure our balance sheet and bring in some more equity. That positions us to be able to take advantage of a controlled growth strategy that may include new products, new markets or acquisitions. As such, we can nimbly evaluate these options as they become available, determining what really makes sense for Republic in terms of a controlled longterm growth strategy that includes growth, profitability and high credit quality. What do you think are the biggest challenges and opportunities for factoring right now, especially given the retail industry’s struggles? In terms of challenges, first would be proposed legislation. There is a new law in California (CA SB1235), which is a disclosure bill. There is one in New Jersey also. These bills and regulations may have unintended consequences and that is certainly a risk that we see, or definitely a challenge. I know both the CFA and IFA are working to protect their members’ interests on this front. Another challenge certainly is competition, especially with bank- owned factors and community banks that have cheaper money and the MCAs. But you also have tremendous opportunities with a consistent strategic planning strategy. And, new technology gives us an opportunity to both cut and manage our cost structure by improving efficiency. Competition has forced us to be creative in our deal sourcing. For example, when I first started in factoring, 80 percent of our referrals came from banks. Today we’re getting referrals from turnaround managers, boutique

investment banks and private equity companies. I mentioned the two ACG awards that we’ve been nominated for in Houston. That was a particularly interesting transaction. It totaled $19 million. We were brought in by Chiron Investment Bank in Houston. The company at the time was being led by a turnaround group, Stout, which had restructured the balance sheet, was dealing with the bank, had cut costs putting the company on the road to profitability and they were dealing with the bank that was going to exit. Republic proposed a $10-million revolving credit. We brought in Utica Equipment Leasing out of Michigan. Chiron brought in Super G as a mezzanine lender. We put together a total $19 million facility which kept the company from having to go into bankruptcy. It has been a success story in that the company has returned to profitability and they’re growing. It was just an overall win-win situation. But I think what this story illustrates best is that we got this referral from a nontraditional source. Second, we partnered with other folks in the industry that had complementary products, i.e., mezzanine and equipment loans. I expect more of that in the future. I see larger transactions, sort of multi- tranche, where either as a factor you have to have in your arsenal more products or partner with friends in the industry that have those products. I do see that as both an opportunity and a trend. Does factoring still have a stigma attached to it? Do you still have to overcome the perception that factoring is only for “troubled” companies? I don’t think there is nearly as much of a stigma as there was at one time. First of all, the potential clients that we’re talking to are much more sophisticated in their understanding of financial products. I believe that, if presented the correct way, factoring companies can show that they are offering a product that helps companies that are either

in a turnaround situation or a growth situation to stabilize, take advantage of opportunities and position themselves for traditional bank financing down the line. Certainly, there was a stigma at one point, but I think today that, with all the financial products available, potential clients really understand the benefit of this product and the fact that it helps position them to take advantage of potential opportunities. I met representatives of a company last week who told me they had to walk away from a potential $10-million contract because they couldn’t get bank financing. The profit margin associated with the contract was significant. So, for them, taking advantage of factoring when their balance sheet doesn’t allow them to get traditional bank financing, is absolutely the right answer. Moreover, the profits derived from that contract will be retained, and in 12 to 18 months they will be a bankable client. Are you seeing a different type of client? Do you think this added sophistication is due to the research they can do on the Internet? Certainly, the Internet is huge. I have customers with minimal business education asking me now about float days. They can enter the word ‘factoring’ on Google and do a little research and they can access most of what they want to know and obtain answers to questions. Potential clients today are much, much more educated about all the financial products, thanks to the internet. TSL Michele Ocejo is director of communications for CFA and editor-in-chief of The Secured Lender.

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tsl profile

MITSUBISHI UFJ FINANCIAL GROUP, INC.

itsubishi UFJ Financial Group, Inc. (MUFG) AssetBased Finance (ABF) business has experienced tremendous growth, with its revenues growing by 35 percent this year. Here, managing director Edward Gately discusses the toplevel talent team he has built since joining in 2017 and plans moving forward.

MUFG took a significant step in enhancing its Asset-Based Finance (ABF) business with the hiring of Edward Gately as a managing director to lead the group in February 2017. With 35 years of experience in asset-based lending, one of the first steps Gately took was changing the ABF group’s go-to-market model. MUFG’s ABF business now has underwriting portfolio management and originations support on each coast, imbedded in the teams of MUFG’s regional bank and wholesale bank. “There are two things that I’m really proud of,” Gately said. “First, the team that I inherited on the West Coast was very talented and, with them, we were able to recruit and hire seven more people on the East Coast, also with senior-level backgrounds, to build one of the strongest teams that I have ever been involved with. Each of my leaders has 15- to 25-plus years’ experience in asset-based finance. I not only have senior leaders, but team leaders also, on each coast from all three segments of the business (originations, under-

writing and portfolio management) to connect with clients.” “The second, but arguably the most important point, is how quickly the team came together and embraced the new strategy of being a pure product partner while being aggressive in the market, looking to grow, and take leadership positions. The velocity of the ABL team’s growth has been ‘outstanding’,” Gately said. In the last 11 months, they’ve added 21 new customers and $1.2 billion in commitments. “Our pipeline of new deals also remains very strong”, said Gately. “The number of deals that we’re looking at has probably doubled since 2014. We now have more customers, higher hold levels, more total commitments, and a group that has 10 less people than at its peak. I’m proud at how quickly we were able to turn this business around, from one that wasn’t growing, to one with our revenues growing by 35 percent this year, when the market is growing by single digit.” The ABF leadership team at MUFG consists of Greg Miller-Jones, national head of originations and director on CFA’s Board of Directors; John Eissele, national head of underwriting; and Rich Seufert, national head of portfolio management. Miller-Jones and Eissele are located on the West Coast and Seufert is located in MUFG’s Boston office, with leaders underneath them on both coasts. Having built MUFG’s ABF team, Gately stressed the importance of getting as much experience as possible in every facet of the business for those starting out in the industry. “My advice to anyone junior looking to get into asset-based finance is to understand what can go wrong,” Gately explained. “We typically work out our own deals. If we have a problem loan, we’re involved in it heavily because we’re the experts in collateral. So

understanding what the collateral will be worth in a distressed scenario, how field exams can help assess true risks, and the pitfalls in documentation that are market-driven that can lead to losses. Everyone should experience the challenges of a deal gone bad before ever attempting to underwrite a new deal.” Looking ahead, MUFG is planning to double its business from a commitment size, loans outstanding, and revenues within the next three years. “We’re positioned to do that with the team we’ve put together. The bank is very supportive from a capital perspective. We’re able to underwrite and hold large commitments for both wholesale and regional bank deals, which is an advantage today, given the capital constraints in the industry. We’re also looking to lead more deals. We tend to lead 30 percent of the deals that we’re involved in, either a single bank or a small bank group, and we want to increase that number,” Gately said. The ABF group also plans to take advantage of its global footprint during the next three years. According to Gately: “We are known more globally than we are in the United States, and we want to take advantage of the fact that we have partners right now in the UK and certain parts of Europe that would be interested in providing asset-based financing. This is something we hope to accomplish over the next 12-18 months. We have already started an initiative to assist our partners in Canada and hope to be up and running within the next six to nine months.” Eileen Wubbe is senior editor of The Secured Lender.

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CFA NEWS IN PRINT

Axiom Bank N.A.: Jennifer Waddell was hired as vice president, area manager in Orlando, and Dwayne Haugabrook was promoted as vice president, area manager in Tampa. In their new roles, Waddell and Haugabrook will oversee day-to-day operations and sales at each branch in their region. Waddell has nearly two decades of banking experience, most recently working at the State Office of Financial Regulations in Orlando. As an area financial manager, she evaluated state chartered financial institutions to make sure they were compliant. Haugabrook has been with Axiom Bank for a decade, providing leadership, developing a customer-centric culture, and cultivating robust community relationships with small business owners. “Jennifer and Dwayne’s backgrounds, industry experience and institutional knowledge will allow them to actively lead Axiom Bank’s retail division through customer outreach and engagement,” said Urjit Patel, executive vice president, Consumer Banking, at Axiom Bank. Waddell graduated from Winthrop University in Rock Hill, SC, and Haugabrook graduated from Florida A&M University in Tallahassee. Jack A. Martinez was promoted to vice president, senior credit officer at Axiom Bank, N.A. In this role, Martinez will oversee the management and direction of commercial loan and credit risk portfolios for Axiom Bank.

Martinez has three decades of financial industry experience, including commercial real estate loan origination, underwriting, and asset management and disposition. He joined Axiom Bank in 2017 as a senior commercial underwriter, where he evaluated and underwrote commercial real estate transactions ranging from $1 million to $10 million. “Jack has a great appreciation for asset quality while making sure the customer experience is at the forefront of the underwriting process,” said Perry Barbee, senior vice president, chief credit officer of Axiom Bank. Martinez graduated from the University of Central Florida with a bachelor degree in accounting. Austin Financial Services, Inc. (AFS) strengthened its portfolio and operations team with the hiring of three new employees: Trevor Longsworth joins as vice president, auditor and Esther Nuevas and Marilyn Barnes joined as senior collateral analysts in the Los Angeles office. Jason Anish, president & CEO, said, “We are very excited to have Trevor, Esther and Marilyn join our team. As Austin Financial continues to grow its portfolio and expand our presence across the country, these people will add strength and experience to our portfolio management and operations departments.” Headquartered in Los Angeles and with a nationwide lending focus, Austin Financial Services (AFS) is a privately held middle-market lender which has been providing alternative funding in the form of fast and flexible lines of credit to small and medium-sized businesses for over 35 years. Austin specializes in asset-based lending solutions which includes; revolving lines of credit and term loans secured by AR, inventory, and equipment for businesses in a growth or turnaround mode with revenues from $5MM to $120MM and borrowing needs up to $12MM.

BBVA Compass: José Luis Elechiguerra was named head of business development, where he will oversee the BBVA Group’s U.S. efforts around the ongoing digital transformation of its products and services. A member of the bank’s management committee, Elechiguerra will have overall responsibility for the bank’s efforts and initiatives related to multichannel development, consumer finance, customer intelligence, customer experience, marketing and digital engagement. Elechiguerra was previously the global head of Data Governance for the BBVA Group, based in Madrid, which BBVA Compass president and CEO Javier Rodríguez Soler called an important consideration in his appointment. “José Luis’ previous role is a key reason he was named head of business development for BBVA Compass,” said Rodríguez Soler. “Data — the understanding and use of it for customer benefit — is playing an increasingly important role in our digital transformation locally and globally. As the creator of the bank’s global data governance strategy, he has keen insight into how BBVA Compass can better leverage data to benefit the bank and its customers.” Elechiguerra has been with BBVA for more than a decade, with roles of increasing strategic responsibility. In addition to his role as global head of Data Governance, Elechiguerra was also BBVA’s global head of organization and business process engineering, where he managed the global functions of organization and business process engineering in more than 30 countries. He has also worked across multiple business lines in the organization, as business transformation senior director, retail financial senior director and mortgage strategic planning and business development director. Prior to his tenure with BBVA, Elechiguerra was a partner at McKinsey & Co. and a R&D manager at Procter & Gamble Co. in Mexico City, Mexico.

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Elechiguerra graduated with highest honors from Universidad Nacional Autónoma de México with a bachelor of science in chemical engineering. He received his MSE and PhD in chemical engineering from The University of Texas at Austin. He was also a Fulbright Scholar. Previous head of business development, Pepe Olalla is now head of strategy and global businesses for BBVA Compass, where he works alongside Rodríguez Soler to define the U.S. strategy. He is also the BBVA Compass lead for key businesses, including BBVA Transfer Services and Simple, and oversees the bank’s Single Development Agenda and Data team. He will also have oversight on certain global projects. Olalla continues to be a member of the bank’s management committee. www. bbvacompass.com

Bibby Financial Services US (BFS): David Ciccolo has joined as the new managing director for BFA’s US factoring and asset-based lending (ABL) business based in Atlanta. Ciccolo brings over 30 years of experience in commercial banking, factoring and asset-based lending. He previously held executive-level positions at Wells Fargo Capital Finance in Denver, CO, most recently as the executive vice president/ national sales manager of commercial services. Prior to that role he held the title of executive vice president/national manager of accounts receivable and purchase order financing. His earlier career experience included positions in business development and portfolio management, as well as commercial banking. Ian Watson, president of Bibby Financial Services North America, said: “We are delighted to have David join BFS and look

forward to him leading the company’s initiatives to enhance its product offerings and service capabilities. With his 30 years of commercial finance expertise and background in portfolio management in factoring and ABL, he will provide fresh insights and perspectives to our strategy. David will be instrumental in growing the business and expanding our client base.” Speaking of his appointment, Ciccolo said, “I am honored and excited to work with such a dynamic team. BFS has already established itself as a global leader in providing factoring and ABL services to SMBs. Our cross-border finance offering enables SMBs to trade internationally. The flexibility of our funding makes it possible for SMBs to reach their business goals, especially in times of challenge and expansion. I’m genuinely looking forward to getting involved with BFS at this period

The liquidity you need. Assistance you appreciate. You have big goals for your business. At Webster, you also have your own go-to team of asset-based lending specialists and direct access to senior decision-makers who can help you move forward faster. It’s this higher level of assistance that’s made us one of the largest banking organizations in the Northeast*… one relationship at a time. One of the Top 25 Asset-Based Lenders in the United States.** locations: Atlanta, Baltimore, Boston, Charlotte, Chicago, Dallas, New Milford, New York, Philadelphia call: Warren Mino at (212) 806.4501 email: wmino@websterbcc.com *Source: National Information Center. All credit facilities are subject to the normal credit approval process. **Source: Commercial Finance Association. Webster Business Credit Corporation is a wholly owned subsidiary of Webster Bank, N.A. Member FDIC. The Webster symbol is a registered trademark in the U.S. ©2019 All Rights Reserved, Webster Financial Corporation Equal Housing Lender

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of growth for the company.” Ciccolo graduated from Regis University in Denver, CO with a double major in business administration and economics. He is a member of the Turnaround Management Association and the Commercial Finance Association. He has relocated from Denver, CO to Atlanta, GA to take up his position. Breakout Capital Finance announced the expansion of its Board of Directors by appointing Firoze Lafeer, company CTO, and Neil Gurvitch as an independent director. In making the appointments, Carl Fairbank, Breakout’s founder and CEO, said, “We continue to see rapid growth in our lendingand technology-focused endeavors. Adding more seasoned leadership continues our expansion and growth plans.” Gurvitch is a co-founder and senior partner of the law firm of Selzer Gurvitch, Attorneys at Law, located in Bethesda, MD. He co-chairs the Firm’s Corporate/Business Transactions practice group and chairs the Firm’s Tax, Estate Planning and Estate/ Trust Administration practice groups. He practices primarily in corporate, tax and succession/estate planning with an emphasis on family wealth preservation and the representation of a broad spectrum of businesses in their corporate and tax planning matters. He has extensive experience structuring and negotiating investment and business transactions including mergers, acquisitions and joint ventures. From 2003-2010, Gurvitch served on the Board of Directors of Congressional Bank, a community bank with branches in Maryland, Virginia and the District of Columbia, where he chaired the Bank’s Asset & Liability Committee (ALCO). Since 2015, he has served on the Board of Directors of Klas Telecom and its affiliates, a government contractor with a primary emphasis on technology sales to the military. An active participant in community organizations, Gurvitch served as General Counsel of the Jewish Community Center of Greater Washington, currently serves

on the Executive Committee of the Jewish Federation of Greater Washington and as a Trustee of the United Jewish Endowment Fund and the Jewish Federations of North America. Gurvitch said, “I’m excited to be joining the Board of Breakout Capital Finance. Carl has a compelling vision for growing this company at the intersection of lending and technology, and has demonstrated a commitment to building a seasoned, first-rate management team.” Lafeer currently serves as the firm’s chief technology officer. Since joining Breakout in 2017, he has focused on building the technology platforms and applications of advanced technology, including artificial intelligence, machine learning, and blockchain. Prior to joining Breakout, Lafeer was the CTO of Capital One Labs and the Head of the Capital One Tech Fellows Program. Earlier in his career, he led technology for a number of leadingedge programs in the US Federal government, and a few successful startups going back to Outpost.com in the early days of e-commerce. “Our company is at a critical growth stage,” said Lafeer. “We are proving the value of how advanced technology can dramatically impact the results for lenders, and have continued our commitment to innovation in lending and beyond.” Capital One: Isabella Miller has joined its Commercial Bank as a vice president and treasury management consultant. She will oversee strategy and management for Government Banking customers on Long Island from Capital One’s Melville office, reporting to Frank J. Leone, senior vice president, head of government banking “We are thrilled to have Isabella join our team,” said Leone. “Her expertise and background in government banking will enable her to successfully connect our client’s strategic needs with Capital One’s resources.” Miller brings a great deal of experience

in government banking on Long Island, most recently as the vice president of government banking at Flushing Bank, where she served as a relationship manager supporting municipalities and government entities across Long Island. Miller is completing her M.S. in school district business leadership from LIU Post, and has a bachelor of business administration in finance from Hofstra University. She is also an active member of the NY Association of School Business Officials (ASBO New York), Nassau & Suffolk ASBO Chapters, Government Finance Officers Association (GFOA), Long Island Village Clerk and Treasurer Association (LIVCTA), Suffolk County Village Officials Association (SCVOA), and Nassau County Village Officials Association (NCVOA). Capital One Commercial Banking is committed to delivering a superior client experience, with dedicated teams of government banking consultants and government banking service officers. The group is investing heavily in digital transformation to help to keep clients ahead of the changing digital landscape, while bringing industry-leading commercial banking capabilities to market. City National Bank: Ginny Heine was hired to lead its Commercial Banking team in the Greater Washington, DC. area. Heine will manage the current Commercial Banking team and also initiate City National’s efforts to serve the local government contracting industry, a focus of hers for many years. In February 2018, City National opened its first Washington, DC Regional Center. It has more than a dozen financial experts who advise entrepreneurs, their businesses and their families on all aspects of growing, protecting and transferring wealth. The team now has five experienced commercial bankers, including new hire Maria Josephs, a senior vice president. This team will deliver City National’s full complement of credit products, treasury

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management and investment services to middle-market businesses in the area. “We’re proud to attract high-quality talent like Ginny and Maria to our growing team in Washington, D.C.,” said Zach Mayo, Eastern regional manager of City National’s Commercial Banking division. “Since we opened, the D.C. region has been extremely receptive to City National’s brand of commercial banking. Every day we’re talking with more entrepreneurs and business owners about City National’s exceptional level of service.” In addition to Heine and Josephs, the team includes: Christopher Ragheb, senior vice president, working directly with businesses and nonprofits to provide City National’s comprehensive financial solutions. Phil Ayoub, vice president, with more than 10 years of commercial banking experience and delivering the bank’s full range of expertise to businesses. Lorraine Bains, vice president, providing consultative expertise in treasury management process and cash flow analysis to businesses in the region. “City National has a strong commitment to helping business owners grow and prosper,” said Heine. “I look forward to working with the outstanding team in Washington, D.C. to serve our valued clients.” Heine has more than three decades of financial services experience in the Washington, D.C. area. Prior to joining City National, Heine served as a senior banker and director of business development with Union Bank & Trust in Northern Virginia. Active in the community, Heine serves on the board of TechLaw Holdings, which provides environmental consulting, and previously served on the boards of the National Kidney Foundation and Words&Music, a music ensemble in Northern Virginia. Heine is committed to giving back and has volunteered and served on committees for regional nonprofits, including Volunteer Emergency Families for Children (VEFC), ChildHelp, Easter Seals, United Way, West-

ern Fairfax Christian Ministries (WFCM) and the Salvation Army. Professionally, she has been an active member of organizations such as the Professional Services Council, the National Defense Industrial Association, the Association for Corporate Growth, Women in Technology, Women in Business and Springboard 2000, among other organizations. She earned a bachelor degree from Indiana University. Josephs has more than 30 years of commercial and government contract lending experience. Prior to joining City National, she served as a senior relationship manager with TD Bank’s government contracting team. Josephs was a senior relationship manager with Citizens Bank for more than 12 years. She has been an active member of the Northern Virginia Chamber of Commerce, Professional Services Council and various women’s executive groups. She earned a bachelor degree from Syracuse University.

Jason supported the sales team in various markets including Chicago, Cleveland, Houston and Los Angeles evaluating new opportunities and structuring competitive solutions. Prior thereto, Jason was with GE Capital where he had completed the GE Capital Investment Analyst program. Ward was born and raised in Chicago and holds a bachelor degree in economics from the University of Illinois at Chicago and an MBA from Roosevelt University. FGI (www.FGIWW.com) is a global leader in the commercial finance and services industry, equipping small and medium enterprises with the tools they need to safely grow their business. FGI’s two principal business units, FGI Finance and FGI Risk, provide clients with flexible and customized lending and risk mitigation solutions designed to support international and domestic growth. Headquartered in New York City, FGI maintains a presence on six continents with clients in over 60 countries around the world.

FGI: Jason Ward has joined as business development director. In this position, Ward will be responsible for business activity throughout the Midwest, with a focus on maintaining and strengthening relationships with fellow lenders, finance companies, equity sponsors and other intermediaries. “Jason brings with him a wealth of asset-based lending experience and industry knowledge. He is a tremendous asset to our company, and we are very excited that he has joined our team,” says David DiPiero, president and CEO of FGI. Tessa Payne, managing director, adds, “Jason’s well-rounded ABL experience and acumen will be a great contribution to our business development team. I’m very excited to have him onboard to further grow our success in the Midwest market.” Prior to joining FGI, Ward was a loan originations associate, AVP with Wells Fargo’s Middle Market team serving companies with $20MM to $200MM in revenue.

First Business Capital Corp.: Chris McCarty was hired as vice president – business development. With an expertise in accounting and credit analysis, McCarty has helped clients for the past 13 years solve cash flow and funding issues through the application of asset-based lending, specialty finance, and commercial lending solutions. McCarty is a member of the Commercial Finance Association, Turnaround Management Association, and the Association for Corporate Growth. Prior to joining First Business, McCarty worked at First Tennessee Bank. He holds a bachelor degree in accounting from Mississippi State University and serves the Tennessee, Kentucky, Georgia, and Alabama markets for First Business Capital Corp. McCarty may be reached at cmccarty@ firstbusiness.com or (901) 341–5545. FSW Funding: Anthony Fortunato was promoted to the position of senior vice president – underwriting & credit. Fortu-

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nato will oversee the credit and underwriting process, as well as assist in managing the factoring and asset-based lending (ABL) portfolio. “With over 22 years in the factoring and ABL industry, Anthony is a key part of the FSW Management team as we continue to grow our portfolio,” said Robyn Barrett, founder and managing member of FSW Funding. “FSW Funding is in a great position to expand its lending capabilities, and Anthony will help us continue to grow and minimize risk.” Fortunato attended Arizona State University where he focused his studies on business management at the W.P. Carey School of Business. After college, he began his career in factor financing as an account manager with a factoring company in northern California, and quickly moved up the corporate ladder to the position of

business development officer. He then relocated to Utah, joining Summit Financial Resources where he was hired as assistant vice president. After two years in Utah, Fortunato returned to Arizona to help launch Landmark Business Capital LLC. Prior to joining FSW Funding, Fortunato worked for Rexford Funding as senior vice president of operations and Bibby Financial Services serving as vice president of underwriting. FSW Funding is headquartered in Phoenix, AZ and is a leading factoring firm that offers flexible and affordable lines of credit to small and mid-size business-to-business and business-to-government companies. Hitachi Business Finance: Greg L’Herault has joined its business development team, concentrating his efforts on attracting new asset-based lending, syndication, and factoring clients across the United States.

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L’Herault is based in Denver, CO and is responsible for scaling the company’s growth plans by connecting with business owners and trusted advisors. “The addition of Greg is yet another step in our strategy to strengthen our market position and expansion efforts,” says Mike Semanco, Hitachi Business Finance president and COO. “With more than 15 years in the commercial lending industry, Greg is an established leader in the Rocky Mountain region and we’re looking forward to leveraging his experience as he works to help clients improve their working capital.” “I was drawn to Hitachi because of its strong brand recognition and resources,” adds L’Herault. “The company’s focus on developing and sustaining deep client relationships will allow me to create custom solutions – in a fast and effective manner – that help businesses in taking that next step.” L’Herault’s previous position was VP, business development at First Business Capital. Prior to that, he held commercial banking and lending roles with Zions Bancorp, Vencore Capital and Silicon Valley Bank. Additionally, he worked in various corporate finance and consulting capacities assisting the executive suite. L’Herault has a bachelor of business degree from Marquette University and an MBA from the University of Colorado. He is an active member of the Association for Corporate Growth (ACG) and board member of the Turnaround Management Association (TMA). He can be reached at glherault@hitachi businessfinance.com or (303) 506-5095. Hitachi Business Finance is a source of opportunity and information for entrepreneurs seeking solutions beyond traditional lending. Backed by the global power of Hitachi Ltd., and with more than a decade of proven success, it offers asset-based financing designed to help improve a company’s cash position. Hitachi Capital America Corp. is an independent, diversified leasing and financial

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services company providing financing to commercial businesses and other Hitachi companies in the United States and Canada. It offers a variety of asset-based financing solutions with a focus on truck, trailer, and floorplan financing; trade financing; structured financing; vendor financing; and asset-based lending. LBC Credit Partners: John Jadach was promoted to partner and Will McCarthy was hired as managing director. Jadach is responsible for the firm’s portfolio function and capital markets activity. An LBC team member for nearly nine years, he has served in roles of increasing importance and responsibility. John has 23 years of leveraged lending and financial services experience. McCarthy is responsible for sourcing, structuring and negotiating new investments. He is a veteran investment professional providing financing solutions to middle-market companies throughout the United States. Previously, Will was a director with Orix USA in their Leveraged Finance Group and held senior positions with ING Capital and GE Capital. At the same time, LBC announced five more promotions within its investment and accounting teams. These include the promotions of Adam Slager to director, Rocco Christino and Brian Einfeldt to vice president, Mike Zarrella to senior associate and Kari Shumaker to fund controller. “I would like to welcome Will and congratulate John and the others on their promotions,” said John Brignola, managing partner. “With over 45 investment professionals and a senior team with more than a decade of shared working history, LBC continues to enhance and strengthen our firm as we enter our 15th year of business. We are excited for the next level of the firm’s leadership and look forward to their contributions to our growth.” Slager is responsible for the firm’s treasury and financial planning activities. He has 16 years of industry experience and

has been with LBC for nine years. Christino is responsible for leading a team in the research and underwriting of new and existing investments. He has 16 years of leveraged lending and financial services experience and has been with LBC for four years. Einfeldt is responsible for managing a portfolio of loans, capital markets research and loan syndications. He has seven years of leveraged lending and financial services experience and has been with LBC for six years. Zarrella is responsible for supporting the research and underwriting of new and existing investments. He has 12 years of leveraged lending and financial services experience and has been with LBC for two years. Shumaker is responsible for fund accounting and tax matters. She has 15 years of experience in the asset management and alternative investments industries and has been with LBC for seven years. LBC also announced the expansion of its Chicago office and the relocation of its headquarters to Radnor, Pennsylvania, a suburb of Philadelphia, to help accommodate growth. Neptune Financial Inc. (NepFin), a technology-enabled lower middle-market commercial lender, announced that it has expanded its presence in the Midwest by opening a Chicago office. The Chicago office will be led by Matthew Kirst, senior managing director. In this role, Kirst brings deep industry knowledge and expertise to the firm and will drive initiatives throughout the Midwest. “There are many phenomenal middle-market companies throughout the Midwest and we are excited to expand our practice into the Chicago market so we can work even more closely with those companies on their capital needs,” said Albert Periu, NepFin co-founder & CEO. Kirst has nearly 30 years of experience in the banking industry, serving in a variety

of market-facing and risk management roles. Kirst has held positions with Heller Financial, GE Capital and CapitalSource in the Greater Chicago area. Periu continued, “Matthew has an accomplished career spanning almost three decades providing financing solutions to middle-market companies. Our Chicago office will be well positioned to better serve our clients with the capital solutions that they demand.” “NepFin is the first of its kind in middlemarket lending,” Kirst said. “I’m excited to lead the Chicago office and expand NepFin’s presence across the Midwest.” Joining Kirst in Chicago is Nick Stevens as vice president. Stevens was most recently a vice president at SVB Financial Group. Neptune Financial Inc. (NepFin), is a technology-enabled commercial lending platform that provides capital solutions and financial intelligence tools to fuel the growth of mid-sized businesses across the United States. Headquartered in San Francisco, CA, NepFin’s platform serves one of the most underserved sectors of the broader U.S. economy – businesses with between $10 million and $100 million in revenue. Prestige Capital: Rachel Hersh, based in New York and Long Island, was recently promoted to sales director, North America at Prestige Capital Corp., a 35-year-old factoring firm based in Ft. Lee, NJ. Hersh has more than 20 years of experience in the factoring industry and will be responsible for continuing to grow Prestige Capital’s footprint in North America. “In the 12 years that Rachel has been with Prestige, she has successfully expanded partnerships across the continent. This title better reflects the broad reach that Rachel has established and will continue to maintain for Prestige Capital,” said Stuart Rosenthal, Prestige Capital’s executive vice president. Hersh has gained national recognition

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as one of the most influential and successful business development officers in the factoring industry. She was also featured in 2018 CFA’s Women in Commercial Finance. Hersh has recently been interviewed as a thought leader on the factoring industry on 77WABC Mind Your Business. She is a frequent speaker on finance panels, including seminar presentations to commercial banks, law firms, accounting firms, and has been a speaker at the Daymond John Academy. She has authored numerous articles and has a featured monthly blog. Prestige Capital Corporation, founded in 1985, is a commercial finance company which specializes in factoring for early-stage and mid-size companies. They purchase invoices from a broad spectrum of businesses whose accounts receivable range from $100,000 to $25 million. Financing situations range from growth financing, refinancing, leverage buyouts, turnaround and DIP financing. For decades, Prestige has been a leader in financing new industries such as artificial intelligence, innovative software, telecommunications, and energy conservation companies, as well as, traditional industries such as staffing, construction, consumer products, and many others. Rise Line Business Credit: Paul Martin, formerly the company’s senior advisor, has transitioned to a full-time position with Rise Line as senior managing director of credit. Since inception, Martin has worked closely with the Rise Line’s credit department and executive team. Martin’s career includes over 30 years of full profit center responsibility across various commercial lending disciplines including asset-based lending. He spent 17 years with HSBC Bank USA where he held various credit and line management positions including chief credit officer, head of credit policy, head of credit operations and deputy head of asset-based lending. Prior to joining Rise Line Business Credit he was EVP & CCO of NewStar Business

Credit, an independent financial services firm providing asset-based financing to businesses nationally. Paul was also co-founder of NewStar Business Credit’s predecessor, Core Business Credit, where he served as EVP and chief credit officer. Prior to Core, Martin served as chief risk officer of First Horizon Home Loans, the 12th largest originator of home loans in the United States. Prior to First Horizon, Martin was with HSBC Bank USA. Rise Line Business Credit, LLC (Rise Line) is a New York City-based senior secured lender to middle-market companies across North America. Rise Line’s thoughtful and tailored financing solutions are designed to directly address financing needs for expansion, refinancing, and restructuring. Rise Line is relationship-focused, striving to develop and maintain strong, long-lasting partnerships with our clients. “We are thrilled to have Paul join us to lead our credit group”, said Gaurang Vyas, founder and managing principal. “Paul’s extensive experience in both the bank and non-bank lending space has been instrumental in the steady, selective growth of our portfolio, and we are excited to have him in a broader capacity.” Sallyport Commercial Finance: Wade Concienne has joined as vice president in the greater Houston territory. “I am excited to represent Sallyport Commercial Finance as vice president of business development. Spending time in underwriting has been an incredible learning experience and I am truly grateful to have had the opportunity to learn so much. I am now eager to take that knowledge and apply it to building new relationships and partnering with entrepreneurs while watching their business grow.” “We are excited to have Wade on our team. As an entrepreneur himself, Wade has a strong commitment, understanding and passion to help business owners,” said national sales manager, Greg Dyson. Sallyport’s strong management team

and eagerness to creatively solve working capital concerns has placed Wade in an ideal environment to support entrepreneurs in the greater Houston area and beyond. Sallyport Commercial Finance, LLC is an independently owned and operated, specialty finance company focused on providing entrepreneurs with working capital solutions for small to mediumsized businesses, to help drive growth and achieve business hopes and dreams. The senior management team have over 70 years of collective experience in helping entrepreneurs grow their businesses in the US, Europe and Canada by turning their invoices and assets into cash. Sallyport Commercial Finance offers a full suite of factoring and asset-based products. Signature Bank (Nasdaq: SBNY), a New York-based full-service commercial bank, announced the official opening of its first financial center on the West Coast. The new financial center is located at 201 Mission Street in downtown San Francisco, which is the heart of the city’s financial district. Signature Bank’s new banking offices are home to three private client banking teams. Each team is headed by banking veterans, including group directors-senior vice presidents Kelny Denebeim, Sumiko Sheaffer and Dale Zeigler. Joe Petitti, head of West Coast Operations, is leading Signature Bank’s West Coast expansion while John (Jack) Knight, managing director – Cash Management Operations, oversees cash management products and services. “For nearly 18 years, Signature Bank has been a leader in commercial banking throughout the New York metropolitan area. During this time, we built a strong and solid franchise, based on providing clients stellar relationship-based banking services, delivered by talented private client banking teams, equipped to handle all their needs. We determined that San Francisco would be a market ripe for our single-point-of-contact model, based on

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the local penetration of privately owned businesses including not-for-profit organizations – our niche target market – as well as mega bank market domination. Our differentiating service-oriented, client-centric model is most successful amid these types of business landscapes. We look forward to introducing our single-point-of-contact approach to the community,” explained president and chief executive officer Joseph J. DePaolo. Signature Bank’s San Francisco private client banking office provides a full suite of commercial banking products and services. Bankers can be reached at (628) 218-2188 or signatureSF@signatureNY.com. TradeCap Partners: Jay Burchfield has joined as vice president and will be responsible for managing TradeCap’s operations and portfolio. “We’re excited Jay has joined the TradeCap team. Having previously worked together in excess of a decade, Bryan and I have great confidence and trust in Jay and his capabilities. His experience and knowledge of our offering and the commercial finance space will add tremendous value as we continue growing our portfolio and providing creative finance solutions to businesses,” remarked Clinton Stanton, TradeCap’s managing partner. Prior to joining TradeCap, Burchfield served as vice president – credit officer with Citibank’s Commercial Lending Group for five years, managing portfolio risk and the credit needs of clients in New York and California. Prior to Citibank, Burchfield was vice president and investment committee member at King Trade Capital for 11 years where he originated and structured trade finance facilities and managed client relationships. He has over 20 years’ experience in commercial finance with Citibank, King Trade Capital, GE Capital, Bank One, and Textron Financial Corporation.

Vayana Network, an award-winning Supply Chain Finance (SCF) platform announced that Peter Nunes has joined them as SVP of Sales to spearhead their business development and sales. Nune is a seasoned and entrepreneurial finance executive with over 25 years of trade finance experience, having worked with banks, factoring companies, hedge funds and his own companies in New York and Miami. Kannan Ramasamy, chairman of Vayana Network Inc., said, “With deep domain expertise and experience in the trade finance space, Peter brings his extensive business network, insights and program ideas to help with the sales and business development leg of our growth model. We are excited to have a person of Peter’s credibility and reputation shape and drive our plans for the Americas.” Speaking on his appointment, Peter said: “I am excited to join such a dynamic organization that is disrupting the Supply Chain Finance space. Vayana’s promise of offering a technology-enabled financing program, in partnership with the FIs to help SMEs meet their working capital needs, appealed to me as a terrific way to bring the efficiencies of digital experience to this segment. I am looking forward to playing an active role in this phase of Vayana’s accelerated growth.” Nunes has successfully structured offbalance-sheet solutions for complex deals including $10M in funding for a US-based exporter in the aerospace industry selling to Brazilian state governments, utilizing both international factoring & SCF. He has also structured SCF solutions for Maintenance, Repair & Overhaul (MRO) companies in Florida and for a Latin American apparel exporter to US box store buyers. He has worked with banks and independent lenders; and more recently had responsibility for setting up supply chain finance programs within FIs. Peter holds an MBA in management from Dowling College in New York and a BBA in Finance from Baruch College, City University of New York.

Wells Fargo Equipment Finance (WFEF) announced Lisa Thomason was promoted to lead its operations team. Effective immediately, Thomason reports to Lisa Sawyers, head of operations for Wells Fargo Commercial Capital (WFCC). WFEF is one of seven Wells Fargo lines of business that comprise WFCC. Based in Moberly, MS, Thomason brings more than 19 years of experience in financial services to her new role. She is responsible for partnering with WFEF business lines and leaders to ensure customers and vendors are being served effectively. In addition, she collaborates with the group’s technology partners to advance system integrations, driving productivity and efficiency. Thomason joined Wells Fargo in 2016 through the GE Capital acquisition. She previously held various leadership positions, including product delivery process and systems leader, document generation process owner, and operations special handling leader, supporting Vendor Financial Services, Transportation Finance, and Corporate Finance. “Lisa is a genuine and knowledgeable manager with keen instincts for improving processes to benefit customers and vendors,” Sawyers said. “Her resolute emphasis on putting their needs first is a true representation of Wells Fargo’s values.” She earned a bachelor of science degree in marketing and management from Columbia College in Columbia, MO. Wells Fargo Equipment Finance provides competitive fixed- and floating-rate loans and leases covering a full range of commercial equipment for businesses nationwide as well as floor planning and inventory financing, and vendor programs in selected industries in the United States and Canada. Wells Fargo Equipment Finance is a leading bank-affiliated equipment leasing and finance business in the United States by asset portfolio and annual originations, with more than 335,000 customers, and 2,500 team members. Wells

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Fargo Equipment Finance is the trade name of the equipment finance businesses of Wells Fargo Bank, N.A. and its subsidiaries. Canadian business is transacted by Wells Fargo Equipment Finance Company.

AMONG CFA EDUCATION FOUNDATION CONTRIBUTORS GlassRatner announced several additions to the firm. In California, Marc Spizzirri, an expert in the automotive industry with more than 30 years’ experience in M&A transactions and turnarounds, has joined. Spizzirri, a highly accomplished senior executive and entrepreneur in the Irvine office, brings more than 30 years of success in a diverse range of businesses with an emphasis on retail automotive, commercial real estate and education. He leverages vast experience in business startups, business turnarounds, M&A transactions with an emphasis on automotive, cash flow and P&L management, business development and process planning, crisis management, corporate valuations, negotiations and dispute resolution and staff development. He is a versatile leader with a comprehensive business skill set who can help established companies going through change, growth, and expansion, as well as create national brands and expand operations on a national scale. William “Bill” Thomas joined GlassRatner as managing director in the Atlanta/ Orlando and Tampa regions. Thomas is a CPA with more than 20 years of experience in forensic accounting and 10 years in the commercial banking industry. He is an experienced expert witness with a practice focus on litigation support and damages in the construction industry. His services are provided on matters that include breach of contract, lost profits, requests for equitable damages in delay and disruption cases, and fraud-related issues. Thomas consults with owners, contractors, insurers, and attorneys in the development and resolution of disputes

in the construction industry. He has performed damage quantification and delay damages analysis of numerous projects involving hundreds of millions of dollars in construction costs. He has provided expert testimony, both in deposition and trial proceedings, in the area of contract disputes and cost accounting matters. Jin Wang has joined the Atlanta office as managing director in the Corporate Finance & Valuation Practice. Wang joined GlassRatner in 2018 and is a veteran financial consultant with significant experience in business valuation, M&A transaction advisory services and litigation support. She has served hundreds of clients, ranging from Fortune 500 companies to privately held businesses in diversified industries. She has testified as an expert witness on valuation issues in U.S. courts related to cross-border transactions involved with Chinese companies. She provides financial valuation consulting, economic analysis and financial advisory services for corporate planning, M&A, financial reporting, tax, and dispute resolution purposes. G. Matt Barberich, Jr., CPA/ABV/CFF/ CGMA, CIA, CFE, ASA, MBA has joined as a managing director in Glass Ratner’s Kansas City office. Barberich is an accounting and financial professional with over 16 years of experience. Prior to joining GlassRatner, Barberich provided litigation support, business valuation, and forensic accounting services for MarksNelson, LLC in Kansas City, Missouri from 2004 through 2018. He was an associate of Taylor, Perky & Parker, LLC during 2003. Barberich has led numerous litigation support and forensic accounting engagements involving the quantification of losses from alleged embezzlements and other asset misappropriations; accounting irregularities; calculation of lost profits and other economic damages; critiques and rebuttals of lost profits and other economic damages; shareholder and business disputes; statutory and/or regulatory compliance; and whistleblower investiga-

tions. Jeanne Aulbach has joined the Atlanta office as director of data analytics and business intelligence. Aulbach has 27 years of experience in information technology and business intelligence. This includes over 12 years as an independent consultant providing application development and process improvement to corporate clients in insurance, retail services, commercial property management, manufacturing, and non-profit services. Prior to moving into technology, Jeanne worked in banking in retail banking, financial reporting, capital markets, and cash and treasury management. McGuireWoods continues to grow its nationally recognized debt finance practice with the arrival of Margaret Seurynck, who brings more than 15 years of experience advising clients, including national and multinational banks and private equity firms, in complex financings. Seurynck, who joins the firm’s Chicago office, represents lenders and borrowers in transactions such as secured and unsecured loans, asset-based and cash flow loans, and single-bank and syndicated credit facilities. She also handles structured finance arrangements, including structured note tax credit finance transactions and commercial paper programs. Seurynck assists private equity firms and multinational corporations in financing aspects of M&A deals and regularly advises clients on sales of distressed commercial loans in the secondary market. She comes to McGuireWoods from Jones Day, following the January addition of highly regarded finance partner Chris Molen, who joned McGuireWoods in Atlanta. “Margaret’s impressive range of experience will be a tremendous asset, enhancing the market-leading service we deliver for financial institutions and private equity firms,” said Raj Natarajan, chair of McGuireWoods’ Debt Finance Department.

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McGuireWoods’ debt finance practice is one of the largest in the United States, with more than 90 debt finance lawyers in the U.S. and London. The firm represents each of the top 10 U.S. banks ranked by assets and has handled domestic and cross-border commitments exceeding $150 billion in each of the past eight years. The firm has developed nationwide programs to bring together investors and companies seeking financing, including its annual healthcare-focused private equity, lending and finance conference, which began Feb. 20 in Chicago. “Margaret is an outstanding addition whose skill and insight strengthen our capabilities in Chicago and nationally,” said Christina Egan, managing partner of the firm’s Chicago office. McGuireWoods was named 2019’s “Law Firm of the Year” for banking and finance law in U.S. News-Best Lawyers’ “Best Law

Firms.” In addition, Law360 recently named the firm a “Banking Practice Group of the Year” for 2018. McGuireWoods consistently ranks among the top five U.S. law firms by deal count and among the top 10 by dollar volume in Thomson Reuters’ league tables. “McGuireWoods is widely recognized as a national leader in delivering a full range of services to its financial industry clients and I am excited to join this accomplished team,” Seurynck said. McGuireWoods LLP is a leading international law firm with 1,100 lawyers in 22 offices worldwide. It ranks as the top firm in the business of law in Financial Times’ prestigious North America Innovative Lawyers report. The firm has been recognized 13 times on BTI Consulting’s “Client Service A-Team” — elite firms singled out for client service excellence based on unprompted feedback from clients in major companies. Its full-ser-

vice public affairs arm, McGuireWoods Consulting LLC, offers infrastructure and economic development, strategic communications and grassroots advocacy, and government relations solutions.

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Atlanta The Chapter has the following events scheduled in 2019 (please check the website for updates): May 2019 - Annual Atlanta Braves Outing and Annual Tennis Outing; June 2019 - Educational Event; June/July 2019 - CFA/TMA Summer Social; October 2019 - Annual Golf Outing; and December 2019 - CFA/TMA Joint Holiday Party. For more information visit community.cfa.com/atlantachapter California The Chapter will host a speaker panel at the JW Marriott in downtown Los Angeles on April 10; a summer party at The Standard-Rooftop on July 10; a Hot Topic Panel Discussion at the Luxe Summit Hotel in Los Angeles on October 2; the Annual Fall Golf Classic in October at Coyote Hills Golf Course (Date TBD); and a Women of CFCC event on October 23, (location TBD); a Chapter networking event at Center Club-Orange County on November 13; and a holiday party at Mr. C’s in Beverly Hills on December 11. For more information visit community.cfa.com/californiachapter Europe The Chapter held a Cross-Border ABL Update in a Changing Landscape event at NautaDutilh in Amsterdam on April 3. The event explored and debated the economic landscape, current market opportunities, the effect of Brexit on business and ABL specifically from lender,

legal and advisor perspectives. The event kicked off with a networking lunch, followed by a welcome speech and keynote address. The first panel, How Brexit May Impact Your Asset Based Borrower - How Can A Lender Prepare? explored the key factors influencing ABL borrowers and how lenders can best prepare and brace their clients for a positive outcome, including: • What you need to consider as an ABL Lender of a business affected by Brexit • What may happen to your borrower’s business • Tax aspects and implications of Brexit • Jurisdictional issues – how these may change in the future • Eligibility criteria • Impact on trade-related cross-border European ABL deals • Financing/lending perspective – how to prepare clients • Typical items on the Brexit due diligence list for a lender.

State College in Boca Raton, FL, featuring a past JR List, CEO of List Industries, and the Past recipient of the Chapter’s Lifetime Achievement Award. For more information visit community.cfa.com/floridachapter

Speakers included: Walter de Wit, partner, Indirect Tax Global Trade, EY; Mike Roth, director, head product specialists Large Corporates, Deutsche Bank AG and Shanan Dunstan, partner, Bryan Cave Leighton Paisner. The Chapter will host a Pre-ILC Event in London on May 21 at Squire Patton Boggs. This event will be held prior to the CFA’s 12th Annual International Lending Conference. Please note separate registration is required for the International Lending Conference. There will be networking, a keynote speaker, a panel and a closing networking reception at the Pre-ILC event. For more information visit community.cfa.com/europechapter

Minnesota The Chapter hosted a Lunch and Learn Preparing a Bank for 2019 on March 6 at Barnes & Thornburg LLP in Minneapolis, MN. The speakers covered the following topics: Red flags/be proactive with problem loans; How are your documents?; industries that may be most impacted in 2019 and how to prepare for them; legal issues to be aware of in 2019 and the effect of rapidly changing technology on banking. Presenters included Tom Hoffman, partner, Barnes & Thornburg LLP, a banking industry consumer regulatory and compliance and a commercial financial restructuring and bankruptcy attorney; Mike Cavallaro, partner, Barnes & Thornburg LLP, who advises banking and financial services companies on national and regional regulatory and legal compliance issues related to consumer and com-

Florida The Chapter held its CEO Forum with GrowFL on March 20 at Palm Beach

MidWest The Chapter’s Annual Blackhawks Outing was held March 11 at Super Suites West C&D, United Center in Chicago, IL. Attendees watched the Arizona Coyotes vs. Chicago Blackhawks. The Chapter’s CFA Cares Spring Gala will be held May 10 at Ivy Room in Chicago. The Brewers Outing will be held May 22 at the Miller Lite Deck in Miller Park in Milwaukee, WI. Attendees will watch the Cincinnati Reds take on the Milwaukee Brewers. The 25th Annual Cubs Outing will be held June 24 and the 30th Annual Gold Invitational will be held July 18 at Harborside Intentional Golf Center in Chicago, IL. For more information, visit community.cfa.com/midwestchapter

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mercial bankruptcy and restructuring, collections, vendor management, foreclosure, loss mitigation and default servicing, and Connie Lahn, partner, Barnes & Thornburg LLP and managing partner of the Minneapolis office and co-chair of the firm’s Asset Revitalization and Special Servicer teams. For more information, visit community.cfa.com/minnesotachapter New Jersey The Chapter held a Happy Hour at Cadillac Cantina in Hoboken on March 14 and a TopGolf event on April 9 in Edison, NJ. The Chapter’s Golf & Tennis Outing will be held May 28 at Essex County Country Club in West Orange, NJ. Essex County Country Club (ECCC), established in 1887, is New Jersey’s oldest country club and is the sixth oldest in the country. For more information, visit community.cfa.com/newjerseychapter New York The Chapter held a breakfast eventTrade Credit & Political Risk: Answers to your Questions on March 20 at Marsh & McLennan Companies in New York, NY. A survey of CFA members yielded questions with four main themes: 1. What are the available policy terms that should matter most to lenders and their clients? 2. What is the state of trade credit and political risk claims now, and how is it changing? 3. What are some recent claims resolutions scenarios? 4. What can a lender do before or during a claim to improve the outcome? Attendees joined for breakfast and to hear the answers to these questions and more at the scheduled event. Speakers included James Dezell, senior vice president, Marsh – Credit Special-

ties, US Trade Credit Growth Leader and F. Xavier Roliz, associate producer, Marsh – Corporate Segment. Marsh is a global leader in insurance broking and risk management, recognized by Trade Finance Magazine as the Global Broker of the Year. It provides risk management, risk consulting, insurance broking, alternative risk financing and insurance program management services to businesses, government entities, organizations and individuals around the world. Marsh’s team approach draws on dozens of industry and risk specialties within Marsh to customize solutions for each client. For more information, visit community.cfa.com/newyorkchapter Ohio The Chapter will host a golf outing on June 6 at Quail Hollow Resort in Painesville, OH. The Chapter’s Annual CFA/TMA Joint Shuffleboard Event will be held August 29 at Forest City Shuffleboard in Cleveland, OH. The venue features indoor and outdoor shuffleboard courts, regulation shuffleboard tables and a patio. For more information, visit community.cfa.com/ohiochapter

Philadelphia The Chapter’s Day One at the Master’s Networking Event was held April 11 at Tavern on Broad in Center City, Philadelphia). The Chapter’s Annual Golf Outing will be held May 13 at Philmont Country Club in Huntingdon Valley, PA.For more information, visit community.cfa.com/philadelphiachapter Southwest Save the dates for the Chapter’s 2019 events: Middle Market Update - April 25, Location TBD; Clay Shoot at the Elm Fork Shooting Range Dallas, TX on August 29; the Eighth Annual Energy Summit on September 17 at the Belo Pavilion in Dallas; and the Holiday Party with TMA and TFF at Dallas Country Club, Dallas, TX on November 21; and PEGapalooza 2020 Dealmaker Wine and Whiskey Tasting held January 30, 2020 at 3015 at Trinity Groves in Dallas, TX. For more information, visit www.cfasw.org. For more information on CFA Chapters, please visit community.cfa.com/ ch/chaptersmain

Orlando The Chapter held a March Madness YoPro Mixer at Graffiti Junktion Church Street in Orlando on March 21 to celebrate the start of spring. Hosted by the CFA Orlando YoPro, attendees met with other like-minded business professionals and dealmakers in Central Florida at this after-hours reception and got to root for their favorite college basketball team. The Chapter’s Spring Social was held March 28 at Irish Shannon’s Pub in Orlando, FL. For more information, visit community.cfa.com/orlandochapter

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April 9, 2019 CFA’s New Jersey Chapter Event TopGolf Edison, NJ April 10, 2019 CFA’s California Chapter Speaker Panel event JW Marriott DTLA Los Angeles, CA

May 10, 2019 CFA’s Midwest Chapter – CFA Cares Spring Gala Ivy Room Chicago, IL May 13, 2019 CFA’s Philadelphia Chapter 24th Annual Golf Outing Philmont Country Club Huntingdon Valley, PA May 14-16, 2019 CFA’s Spring Operations Bootcamp Location TBD Chicago, IL May 15, 2019 CFA’s Minnesota Chapter Brew and Learn Location TBD

May 16, 2019 CFA’s Michigan Chapter - Euler Hermes 2019 Economic Update with RMA East Michigan Chapter Location TBD Detroit, MI May 21, 2019 CFA’s Europe Chapter – pre-ILC event Panel and Networking reception Squire Patton Boggs London, UK May 21-23, 2019 CFA’s International Lending Conference 2019 DLA Piper London

April 11, 2019 CFA’s Philadelphia Chapter – Day One at the Masters Networking Event Tavern On Broad Philadelphia, PA April 16-17, 2019 CFA’s What’s it Worth? All You Need to Know About Inventory – Webinar 2:00 - 3:30 p.m. ET April 17, 2019 CFA’s Minnesota Chapter – Credit Market Update Panel IDS Center Minneapolis, MN

COLLATERAL CONFIRMED. CONFIDENCE SECURED.

April 25, 2019 CFA’s Southwest Chapter Middle Market Update Location TBD

Michael A. Boeheim, CIA, CFE Director

May 8-9, 2019 CFA’s Independent Finance and Factoring Roundtable Holston House Nashville Nashville, TN

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AD INDEX ABLSoft Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.ablsoft.com. . . . . . . . . . . . . . . . . . . . . . . . Page 3 CFA Cares Spring Gala. . . . . . . . . . . . www.community.cfa.com/midwestchapter/gala. . . . . IBC CIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.cit.com/commercial/. . . . . . . . . . . . . . IFC

May 22, 2019 CFA Midwest Chapter- Brewers Outing Miller Lite Deck, Miller Park Milwaukee

Freed Maxick ABL Services . . . . . . . . . . . . . . . . . . . . www.freedmaxick.com. . . . . . . . . . . . . . . . . . Page 54 Hilco Global . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.hilcoglobal.com. . . . . . . . . . . . . . . . . . . . BC Phoenix Management Services . . . . . . . . . . . . . . . www.phoenixmanagement.com. . . . . . . . Page 7 William Stucky & Associates, Inc. . . . . . . . . . . . . . www.stuckynet.com. . . . . . . . . . . . . . . . . . . . . Page 1

May 28, 2019 CFA’s New Jersey Chapter Golf & Tennis Outing Essex County Country Club West Orange, NJ June 4-6, 2019 CFA’s Summer Field Examiner School – Online Class 2:00-3:30 p.m. ET June 6, 2019 CFA’s Ohio Chapter Golf Outing Quail Hollow Resort Painesville, OH June 10, 2019 CFA’s California Chapter - Summer Party The Standard – Rooftop Los Angeles, CA June 11-12, 2019 CFA’s Summer ABL Basics Virtual Workshop 2:00-4:00 p.m. ET June 18, 2019 IdeaCon Roundtable New York, NY June 19-20, 2019 CFA’s Advanced Legal Issues Workshop Location TBD New York, NY June 24, 2019 CFA Midwest 25th Annual Cubs Outing Fannie May Bleacher Sweet, Wrigley Field Chicago, IL

Tiger Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.tigergroup.com. . . . . . . . . . . . . . . . . . . . Page 51 Utica Leaseco, LLC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.uticaleaseco.com. . . . . . . . . . . . . . . . . . Page 46 Webster Business Credit. . . . . . . . . . . . . . . . . . . . . . . www.websterbcc.com. . . . . . . . . . . . . . . . . . . Page 43

July 9-25, 2019 CFA’s Summer Underwriting Fundamentals Virtual Classes 2:00-3:30 p.m. ET

September 17-19, 2019 CFA’s Fall Operations Bootcamp Location TBD Atlanta, GA

July 15-31, 2019 CFA’s Summer Operations Fundamentals Virtual Classes 2:00-3:30 p.m. ET

September 17, 2019 CFA’s Southwest Chapter’s Eighth Annual Energy Summit Belo Pavilion Dallas, TX

July 18, 2019 CFA’s Midwest Chapter 30th Annual Golf Invitational Harborside Intentional Golf Center Chicago, IL August 29, 2019 CFA’s Ohio Chapter - Annual CFA/TMA Joint Shuffleboard Event Forest City Shuffleboard Cleveland, OH August 29, 2019 CFA’s Southwest Chapter – Clay Shoot Elm Fork Shooting Range Dallas, TX September 10-11, 2019 CFA’s Advanced Underwriting Workshop Location TBD Chicago, IL September 11-12, 2019 CFA’s 2nd YoPro Leadership Summit Location TBD Chicago, IL

September 19, 2019 CFA’s Cross Border Lending Summit Winston & Strawn LLP MetLife Building New York, NY September 24-26, 2019 CFA’s Foundations of Account Management Virtual Class October 2, 2019 CFA’s California Chapter Hot Topic Panel Discussion Luxe Summit Hotel Bel Air, CA October 2019 CFA’s California Chapter Annual Fall Golf Classic Coyote Hills Golf Course Fullerton, CA October 23, 2019 CFA’s California Chapter Women of CFCC event Location TBD

THE SECURED LENDER APRIL 2019 55

revolver

TSL OPINION COLUMN

oe Accardi of People’s United Bank talks about training to win the gold medal Gerry and Evan were teammates on the high school track team. They competed in the same event, the 1500 meter run and, as juniors, posted very similar, very respectable times. After their junior year, they both talked about trying to improve their times and giving it their best in their upcoming senior year. Gerry thought about the training he had been doing, and decided to do more. He increased his daily running time from 45 minutes to 60 minutes, which included distance runs and interval training on the track. He was confident that this increased training would put himself in a position to improve his performance. Evan had the same idea about doing more in his senior year to improve his time in his event. He continued running 45 minutes a day, like he did during his junior year, and like Gerry, varied his training from a straight distance runs to interval training on the track. In supplement to this running, Evan, in the morning before school, was in the weight room three times a week, building strength. On three other days of the week, Evan practiced yoga, knowing that such activity would improve muscular flexibility and thus minimize the chance of injury during his training. He also sought the advice

of a sports nutritionist, understanding the importance of maximizing the nutrient intake from all calories consumed. On weekends, he watched championship races on YouTube, and studied the racing strategies of the gold medal winners. He made time to read about the typical mental stress of runners trying to break time barriers and about the importance of remaining emotionally poised before and during races. So what happened during their senior year on the track? Gerry improved his time by six seconds and finished third in the conference championship. He was delighted that he took home the bronze medal. Evan improved his time by 15 seconds. He easily won the conference championship and his time qualified him for the state championship meet. He was one of the favorites in this big race and his competitors knew that he was both physically and mentally sharp and would be tough to beat. Evan entered the state championship final extremely confident, knowing that few, if any, competitors had prepared over the last year the way he did. Evan won the gold medal. What kind of an athlete are we? As you think about the future of your team, you may want to ask, “What kind of an athlete are we?” Some incremental change here and there, resulting in some moderate improvement; is a bronze medal good enough? Or are you taking a serious look at every aspect of your business and confronting issues that will likely keep you from winning the gold medal at the state championship meet? Over several decades of observation, I have come to believe that the following points are the some of the most important in building a culture for gold medal performance.

◗ Clarity of purpose. Set clear and reasonable goals and priorities, and be sure that resources and incentives are sensibly aligned with them. ◗ Independent thinking. Encourage team members to respectfully challenge tradition and the status quo on all processes and procedures, especially those which involve valuable customers. Be open-minded to differing points of view, and work hard to get to the best pragmatic way to do things. Discourage obedience; obedient team members have limited value. ◗ Appreciation. Celebrate significant accomplishments and be sure that team members feel appreciated for their hard work. ◗ Empowerment. Allow those who have demonstrated good judgement to make decisions and have some control. ◗ Respectful resolution. Have a process in place for healthy and constructive conflict resolution. ◗ Connection. Constantly invest in relationships with customers and colleagues. Tune in, engage, and connect with people. Competitors are routinely looking to lure away your customers and team members. ◗ Active mentoring. Encourage continuous learning and growing. Plan on winning the gold in the years to come. If you’re passionate about maximizing results and winning the gold medal, it may be time to do some things differently. TSL Joe Accardi is the head of new business development of People’s United Bank’s ABL Division. Feedback welcomed: joseph.accardi@peoples.com

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