hat would you say was the
biggest challenge of the year
Scot Sandal, managing director,
Watermark Advisory Group, LLC,
Orchard Park, NY
As counter-intuitive as it may seem,
a big challenge facing the industry is
staffing. The problem is not finding
high quality staff, as many qualified
finance professionals are still sitting
on the sideline. Banks and finance
companies, however, either do not
have the budget to add staff or are
unwilling to make the investment
until the market fully rebounds.
We all know that there was tremendous
downsizing during the past several years;
however, with higher required credit quality and documentation being required,
there is more work than ever. Lenders
need to diligently monitor their portfolio
and perform field exams. As liquidity
constraints loosen and new credits are
booked, the existing staffs which were
previously right-sized, will face increasing
workloads and fatigue. The strain that it
is taking on the professionals responsible
for the work is beginning to show. Lenders
that do not address this run a risk of a deterioration in credit analysis or unacceptably
high levels of attrition when the market
Two options to this dilemma are pre-
emptive hiring and selective outsourcing.
Preemptive hiring is an act of faith, which
in the long run may produce favorable re-
sults, but in the short term carries expense
implications which might not match the
appetite of some lenders.
Bruce Sprenger, group senior vice presi-dent-region manager, Cole Taylor Business
Credit, Brookfield, WI
A key market dynamic that gave challenge
to our industry in 2010 is the significant uptick in lender pressure to be “competitive”
for good quality business. Many lenders,
including ourselves, found the environment full of opportunities to support
mid-market clients who needed to rebuild
their capital, having survived the recent
downturn in the economy.
Last year started off as a year, as it
should, where sound ABL credit principles and pricing discipline were guideposts in the competitive landscape.
It’s what we do as ABL lenders; create
value for our clients and support them
in both the down and growth cycles of
our economy and we do it well. Where
else in the capital markets can access to
capital be this responsive to clients who
were recovering from sales falling 40 to
50% or even 60% in a scant year?
As 2010 unfolded further, we saw credit
pricing fall dramatically, in some cases to
pre-2007 “credit-crash” levels. The advent
of springing covenants and requests for
covenant-lite deals returned and the prob-
lems of the most recent down cycle, for
many ABLs, seem to be a long-lost memory.
Did we really see the prospect targets in
our market improve that dramatically?
Was this a reaction from capital providers,
both ABL and regional banks, that loan vol-
ume was needed to achieve growth targets
in 2010? The answer to that question may
remain a mystery.
Scot Sandel is managing director
of Watermark Advisory Group, LLC.
Watermark provides outsourced
credit risk functions including
underwriting, portfolio management and field exam to commercial
finance companies and banks. He is
responsible for marketing and managing all ABL exams and underwriting engagements.
Bruce Sprenger is a group senior
vice president with Cole Taylor
Business Capital responsible for
developing the new Midwest region
for Cole Taylor. Formerly with
LaSalle Business Credit, his experience spans 30 years in all aspects of
commercial finance. He is currently
first vice president of the Commercial Finance Association.