Best of Both Worlds — Trade Capital & AR/PO Groups Join Forces at Wells Fargo Capital Finance
Under Stuart Brister’s leadership, the recently launched Commercial Services Division of Wells Fargo Capital Finance brings together the company’s trade capital business and AR/PO financing group under one umbrella, resulting in greater operational and marketing efficiencies and providing the opportunity to broaden the unit’s product offerings and geographic reach.
In late June, Wells Fargo Capital Finance announced the launch of its Commercial Services Division, unifying the various factoring units established throughout the company. Specifically, the new division, led by Stuart Brister, joins the accounts receivable/purchase order (AR/PO) financing group and the trade capital group to streamline operations, expand its footprint and offer more products and services.
Laying the Groundwork
According to Brister, the two groups have been operating as one commercial services division since March. However, the idea began when Wells Fargo acquired the North American factoring portfolio of the Commercial Services Division of GMAC Commercial Finance in May 2010. The initial orchestration of the endeavor started more than two years ago. The challenge — each group had its own back office system.
“The long-term plan was to put these two groups together and ultimately share best practices because there was quite a bit of overlap. In order to effectuate the efficiencies that we wanted to gain, we needed to focus on integrating both groups into one system. When we acquired the GMAC factoring business, we opted to purchase the Choice application that it was using, and we’ve been working ever since with William Stucky and Associates. It became the target system of record for both groups. Trade Capital migrated to that platform roughly more than two years ago, and the AR/PO group merged to the system approximately a year ago,” Brister explains.
The Commercial Services Division now administers all of its clients’ accounts on one account management platform, providing them with a real-time snapshot of key information about their account status, cash availability, sales and collections through a specially designed portal.
“Migrating both groups to a common platform allowed us to merge our back offices. We picked both New York and Dallas to be our operation hubs for geographical reasons as well as redundancy reasons,” Brister adds.
Market Clarity and Expansion
The creation of the Commercial Services Division not only allows for operational efficiencies, but it also provides clarity in the marketplace. Brister explains that prior to the new division, Wells Fargo Capital Finance operated its historical Trade Capital business, which was the traditional factoring business focusing mostly on consumer product channels such as textiles, apparel, shoes, home furnishings, toys and electronics. At the same time, the lender had a large specialty factoring group that was engaged in government services, staffing, trucking and transportation, as well as having a purchase order finance unit and a general receivables finance group.
“We were creating market confusion, internally and externally. For example, the people at Trade Capital and at AR/PO could claim to be with the factoring group at Wells Fargo. We wanted to present one face to the marketplace,” Brister says.
The endeavor also eliminates duplicate processes by combining and streamlining best practices from each group to serve the new division. “The AR/PO group did a superior job of marketing itself within the bank, whereas, Trade Capital did well with third-party referral sources and working with professionals externally,” Brister explains.
Moreover, the AR/PO group had more product offerings than Trade Capital, yet Trade Capital had a larger footprint and did business around the world. The combined sales force, with its unified internal and external referral sources, enables geographic expansion of the business units. For example, the staffing business, which is strong in the Central and Southeastern U.S. markets, now has the opportunity to grow in the Northeast and West Coast. The Government Services group can extend product offerings to San Diego and up the West Coast.
“By putting the groups together, we gave ourselves the opportunity to stretch our territories as well as look at a broader array of product offerings. Trade Capital has done an excellent job of offering its products in Europe, Asia and Central and South America, and we are exploring expanding product groups in those areas,” Brister notes.
The business units of the new Commercial Services Division include Government Services based in McLean, VA; Staffing Services in Dallas and Ft. Lauderdale; Transportation Services in Denver; and the Purchase Order Finance group and Receivables Funding Group in both Denver and Dallas. The units focus on a variety of small to medium enterprises with revenue size between $1 million to $400 million. Typical loan size ranges from $1 million to $100 million, which varies by unit.
Analyzing the work processes of both groups took more than a year, focusing first on the sales groups, then credit administration and finally operations. Brister makes it clear that a goal of the undertaking was to allow all of the various units to continue to operate individually and maintain their specialties.
“For example, the Government Services group is excellent at procuring and managing those particular transactions. We certainly didn’t want someone from the Trade Capital group to start telling them how to do that business. We wanted to maintain the nature of the specialties, but also create the efficiency behind the scene with the operations, technology and utility to support the frontline businesses,” Brister notes.
The new division provides benefits to its personnel, as well, by broadening professional growth opportunities for teammates. “Somebody who had always been working at Trade Capital in New York or Los Angeles could now move to Dallas and work in Staffing Services or Denver in Transportation Services,” Brister explains.
Demand for Factoring & AR/PO Financing
When the ABF Journal spoke to Brister last year (“Coverage in Many Countries Benefits Wells Fargo Trade Capital Finance,” September 2012), the economic recovery was underwhelming at best, and he explained that at a high level a slow-growth or no-growth environment benefits asset-based lenders and finance companies. Now that the economy has recovered somewhat, he notes that such specialty financing remains in demand.
“Factoring is a solid choice in good and poor times. In bad times, when traditional funding sources dry up, borrowers tend to go to asset-based lenders and factors. The flip side of that is also true. Although people are chasing a lot of assets now and banks are opening back up again, the factors are ideally suited in the verticals they represent because of their industry knowledge and expertise and willingness to often lend a little bit more on the assets or leverage of the companies than traditional players are,” Brister says, adding that specialty financing products are ideally suited to fund companies through both organic growth and acquisition.
Before being named the head of the new Commercial Services Division, Brister led the trade finance group and will continue to develop the unit’s international presence. He explains that historically the group does not market directly to suppliers and companies abroad. Rather, his team has developed relationships with correspondent factors and banks around the world, a group consisting of about 300 members. Through this network of correspondents, Wells Fargo Capital Finance is best able to navigate compliance and regulatory issues necessary to conduct business effectively. With offices in Hong Kong, Shanghi, Ho Chi Minh City and Mumbai, representatives from his group work closely with correspondents to assist in trade being channeled into the U.S. and to finance that flow of commerce.
“The countries where we see opportunities are Europe and Asia and to a degree South America. Historically, we have financed a great deal of inbound traffic into the business. We may look to expand, especially Trade Capital, in the European market. We are looking to see if it makes sense to explore Government Services overseas with our U.S. companies’ affiliates. However, our focus is not to be a competitor but to assist in the flow of the business and work with our correspondents overseas,” Brister notes.
Big Task, Big Rewards
Although the convergence of the Trade Capital and AR/PO businesses took an enormous amount of planning — and many late nights — the rewards are tangible. “When I took over the Trade Capital business in 2007, we were doing $4 billion and this year combined, we’ll do close to $40 billion,” Brister says.
And, he has the pedigree to lead the new division, with 28 years of industry experience, and brings a domestic and global perspective that is ideal for international specialty finance. He joined Wells Fargo in 2005 and prior to that was president of GMAC Commercial Services, managing director of strategic investment at Bank of America and president of Bank of America Commercial Corporation.
“It was a big endeavor, one that took a lot of foresight, but I think we are very fortunate to have a great bank, and Wells Fargo Capital Finance has been a tremendous support in carrying this out. It has been good fun putting these teams together and rewarding to work with all of the people here who understand commercial finance extremely well,” Brister adds.
Lisa M. Goetz is editor of the ABF Journal.