Lending Where Others Fear to Tread— New ABL Group Says ‘Yes’ When Other Institutions Say ‘No’
With a year under its belt, Revere Finance is carving a place for itself in the ABL world. No strangers to secured lending, the bank’s head executives worked for years at sister entity and distressed asset management company PPL Group. Now, Revere is delving deeper into providing ABL solutions for small- and middle-market businesses nationwide — taking risks where other banks and lenders fear to tread.
In early 2013, a group of individuals from 40-year-old distressed asset management company PPL Group took a deep dive into the ABL world with the launch of Revere Finance. Previously, Revere’s now head executives, Todd DiBenedetto, managing director, and Alice Peterson, COO, had spent years in PPL’s industrial liquidation and auction side of the market before springboarding into providing ABL solutions in the small- to middle-market space.
“For us to lend into that space where we have a real understanding of asset values was a natural extension of that business,” says Todd DiBenedetto, managing director of Revere Finance. “We’ve been a secured lender and involved in these types of transactions for a long time, typically for companies that are in some sort of transition.”
Adds Peterson, “Revere formalized many of the activities that the company had been engaged in, and launched us into a formal growth plan to significantly expand them.”
In the same Northbrook, IL-based facility as PPL Group, Revere Finance specializes in senior secured, asset-based lending for acquisitions, bridge loans, DIP loans, note purchases, sale-leasebacks, restructuring and turnarounds. The group is focused on making loans of up to $10 million and select equity investments.
“We’ve had a full year under our belts, and we have a quickly growing portfolio,” Peterson says. “We have all of our marketing, origination and underwriting activities established so we’re ready to take on new significantly new numbers of loans.”
Carving Out a Niche
In an increasingly crowed arena of asset-based lenders, Revere Finance is distinguishing itself from the competition, first, by its unique experience in the world of hard industrial assets (e.g., machinery and equipment, construction, rolling stock, manufacturing plants, etc.). “It’s what gives us an edge, not only for speed but also accuracy and underwriting to the risk,” Peterson says.
Second, the unit embraces a borrower selection process that considers more than tangible assets and A/R.
“We make it a point to go out and meet with the client, visit the facility and potentially some of their primary customers to uncover soft, intangible value,” DiBenedetto says. “If we see a lot of intangible value — long-term customer relationships, blanket contracts, things like that — we’ll very often overadvance into the assets that we’re comfortable with, knowing the business is stable or becoming more stable in that arena. So that’s our strength. We frequently can bring more dollars to an event than our competition.”
Revere Finance thrives on helping businesses in transition, Peterson says. “That’s one of our core values here,” she explains. “We don’t hire people who don’t like doing that.” Very often, accountants, attorneys and consultants refer their distressed clients needing particular assistance during a time of upheaval to the lender. “They consistently tell us that they partnering with us because they can rely on us and because we do what we say we’re going to do,” she says.
Finding Unique Opportunities
Time and again, DiBenedetto and Peterson see situations where conventional lenders sever ties with long-time borrowers for sometimes no reason at all.
“Good clients with longstanding histories and track records and collateral are being asked to go refinance the debt elsewhere,” he explains: “And in today’s climate, it’s not as easy as it once was. They can’t go across the street to the neighboring bank like they could in the old days. So there’s a lot of those opportunities where credit facilities are simply maturing and the clients are being told, ‘We’re not going to renew your line of credit. You’re going to have to find another lender.’”
The pair capitalizes on these new potential customers by spending much of their time on the road and in air; the company owns an aircraft, and flies executives to see clients around the country two or three days a week.
Case Study: Minnesota Manufacturer
Revere Finance’s philosophy on building client relationships through personal interactions is best demonstrated by a recent example. A Minnesota manufacturer and family business found itself, due to illness and the untimely passing of the business owner, with instability overnight for the owner’s daughter. Company leaders approached Revere Finance for financial support to bridge the gap during the manufacturer’s unexpected leadership transition.
Revere Finance executives quickly paid a visit to the company to find out more. They learned the company was a primary vendor for Federal Express and received 70% of its business from the shipping giant.
“It wasn’t a single relationship, but many lenders would look at that as a concentration scenario — a negative — and choose not to lend a full advance into the accounts receivable in that situation,” DiBenedetto says. “After many visits, diligence and dialoguing with that main customer, we were able to get comfortable that that relationship [with Federal Express] was in tact — it wasn’t in jeopardy with the passing of the father — and so we lent into it.”
Revere Finance moved rapidly (inside of a week) to finance a deal for the manufacturer, avoiding an impending foreclosure event. The company survived and refinanced its way out of Revere Finance by restructuring capital so it could continue to employ 50-plus employees. “That was a case where if a lender was simply evaluating a spreadsheet or an accounts receivable aging report, they would discount or render some of that receivable ineligible because of the concentration issue,” DiBenedetto says. “So that comes from us meeting them, meeting the client and really immersing ourselves in the situation.”
The Wisdom of Experience
Along with DiBenedetto and Peterson, about a dozen employees make up Revere Finance — in back office and administration, origination, underwriting and marketing, along with field contractors / partners around the country. The pool of employees is diverse. Some individuals come from manufacturing backgrounds; others were once machinery dealers, appraisers or have financial backgrounds. “With our combined experience, we’re very comfortable in many different industries, and hybrid opportunities might involve a lending piece, an equity share or simply asset buyers,” DiBenedetto says.
Many team members also come from family business backgrounds and are sensitive to borrowers’ needs, histories and legacies. DiBenedetto tells borrowers: “We want to hear your story, and we want to come visit with you to hear the story.” He says Revere Finance leaders want to understand every situation. “Sometimes that’s a positive, and sometimes it’s a negative, but we feel it’s very important to continually try to make that personal connection, deal by deal.”
Realizing the group is targeted to the small and middle markets, leaders also want to establish a reputation of being easy to work with. “The last thing we want to be is that group that sends you 3,800 pages of application forms to complete before we’ll even talk to you,” DiBenedetto says. “We prefer to go meet you first and then decide which path makes the most sense or which product makes the most sense. And frequently, if it’s something we’re not experts in or we don’t think we can add value to, we usually know someone in the country in a related industry who can add value.”
Barring any macro changes in the economy and unpredictable national/world events, Revere Finance leaders predict the ABL industry will continue to grow, particularly in the upper-middle market. DiBenedetto believes the U.S. lower-middle market will flourish because of ongoing challenges facing conventional lenders internationally and Basel II regulations.
“Part of what we’re seeing now are these middle market manufacturers having opportunities to bring back work from overseas,” DiBenedetto says. “When they come to reshore the product lines of the manufacturing back here, they need growth capital — to add on equipment, to add on a facility for more capacity. And so we’re being approached for a lot of that activity for shorter-term-type credit — 12 months, 24 months — to allow them to get the facility up and running, get producing so they can then go a more conventional route.”
Jill Hoffman is editor of ABF Journal.