Bay View Funding has a unique and interesting history, most notably being acquired by its own management twice in less than a decade. The company was formed as Concord Growth Corporation in the late 1980s by a group of venture capitalists and entrepreneurs. Based in Palo Alto, CA, Concord provided a variety of factoring and asset-based products.
In March 1997, Concord was purchased by bank holding company Bay View Capital, which had a subsidiary bank, Bay View Bank. The goal was to merge Concord into the bank’s commercial finance group, which was then expanded to include ABL and leasing units. Following the transaction, Concord changed its name to Bay View Funding to be “more synonymous” with its new parent, Glen Shu, Bay View Funding’s CEO and president, says.
In 2002, the factoring unit’s management orchestrated a buyout and became an independent factoring company. Five years later, just before the Great Recession, Bay View Funding was acquired by Capital Corp of the West, a bank holding company, who’s CFO was the former president of Bay View Bank.
What all parties didn’t expect was the credit crisis and economic downturn that ensued almost immediately after the acquisition. “As we went through 2008 and things started to unfold around the world, our parent company began to feel the effect of what was happening in the economy and started to get into financial trouble,” Shu explains. “We watched as our parent company’s financial health just deteriorated.”
He notes that during this time, many in management were wondering if they could possibly buy back the business. The factoring unit was performing well, Shu says, with good assets and good cash flow. “We were doing fine, but our funding came from our sister subsidiary, County Bank. So you can imagine, if they were having trouble, we were pretty nervous about our source of funding.”
In 2009, the bank was seized by the FDIC. Bay View Funding management worked out a deal with the new purchaser and entered into a temporary funding arrangement with the buyer. By March, the offer by Bay View management to buy the company was accepted and the acquisition closed in April. “We once again became independent from the bank. In the course of a five-year plus history we did the acquisition/spin off transaction twice… But what made it interesting was what was going on outside in the financial world and our ability to actually get it done under the circumstances.”
Able to show further proof that it could expand during a downturn, Bay View bought Phoenix, AZ-based Rexford Funding seven months later, in November. “This was a milestone for us,” Shu says, “to be able to do that so soon after buying ourselves back.” By the end of its first fiscal year, Bay View grew by 50%, and in the three years since then has expanded by 40%. This growth was accomplished not only with the acquisition but also organically. “Our volume of invoice purchases drives all areas of growth in our company” Shu notes. “If we’re buying invoices at the level that we’re expected or that we budget ourselves to, then generally everything else follows, which was obviously fuels growth and profitability.”
The company’s client base has swelled as well. Bay View serves a national footprint. Shu considers the company to be a generalist, covering such industries as transportation, manufacturing, oil field services, staffing and government contracting to name a few. Two industries not on the roster include construction and medical insurance claim receivables.
The company’s philosophy with its customers is one of shared goals and existence. Simply put, he says, “without them, there’s no us. All members of the Bay View team regardless of their position … are responsible for developing and maintaining customer relationships in some form or fashion. Customer service is without a doubt a chief focus for our team.”
With the competition always at the ready in the industry it helps to provide unique aspects of service and product offerings to get the deal done. “Bay View can be very competitive in terms of facility, structure and rates, but also timely with its service offering.” The company distinguishes itself from the competition in three ways. Two are with creativity and experience. “We have an amazing ability to deploy creative solutions when difficult transaction opportunities arise. I am often so amazed that our underwriting and portfolio management teams do such an outstanding job at either structuring client facilities or solving existing client challenges.”
Another factor is the company’s reliability. Shu relates, “I’m careful never to say that we consider ourselves to be the best out there, because I don’t know what defines the best. But one of the things I want to be known for is being the most reliable, which I think we demonstrate by our ability to serve as a reliable financial partner to our clients. It’s incredibly important that we provide our clients with peace of mind that we have capital in place to support their financial needs.”
Shu has had a part in building Bay View’s philosophy and accomplishments as much of his career mirrors the company’s history. With a tenure in the factoring and ABL industries that spans two decades, he began in the financial services field after earning a Bachelor of Science degree in Finance from San Jose State University. Beginning with a position at San Francisco Federal, he began a friendship with a customer, who after a few years asked him to switch gears and interview at Concord Growth. Shu joined the company in 1992 as an account executive managing a portfolio within its ABL division. .
After five years, and before Concord was sold to Bay View, Shu went to work for KBK Financial with a colleague. Together they opened a San Francisco/Bay Area office, and Shu worked in business development and underwriting. By the next year, KBK decided to shutter the northern California office and Shu returned to Concord, now Bay View Funding, in its factoring division. From 1998 to 2002, Shu was the senior vice president of underwriting and operations for Bay View Commercial Finance Group. In 2004, he was promoted to executive vice president of the division, and in 2007, when Bay View was acquired a second time, Shu was named chief operating officer. When management purchased the business in 2009, he was named president and COO, and was again promoted last year to CEO and president.
As Bay View continues in its “second coming” and Shu embarks into his third decade in ABL and factoring, the company is poised with goals for growth and better customer satisfaction. Shu notes the company is constantly examining areas where it can augment existing processes and procedures through advancements in technology. “There is so much involved with reviewing and processing transactions and there is a certain higher level of due diligence required for factoring transactions. On the flip side, we think there are ways we can preserve that level of diligence but make the process easier for the client and improve their overall experience. One of our major objectives for 2013 is becoming more automated because many businesses we’re dealing with and their end-user customers are becoming more automated, more electronic, more digital.”
Shu notes that a continuing goal is to maintain sustainable growth in the portfolio, whether it be via acquisition or organically. And it’s this growth that Shu expects to see within the industry. “I hold a very positive outlook for our industry… I believe that specialty lenders and factors around the world still hold the advantage by having the ability to respond very quickly to the sometimes … unpredictable needs of businesses.”
Shu explains that the company has been seeing growth in many of the sectors it covers. “We are seeing increased activity within the service industry specifically in areas of consulting and staffing. I think with technology on the rise, we’re starting to see more IT-based engineering companies emerge and require factoring or specialty lending services.” Another area that receives a boost during and after downturns is the temporary staffing sector. “We continue to receive many new clients and leads in that particular sector primarily as a result of businesses that I think are still too scared to bring on large amounts of permanent employees.”
Another sector with growth is the government contracting sector. “We’re seeing more activity there, particularly in the military side where we have clients that are advising in terms of training and education. Despite the fact that we’re becoming a smaller global force, it seems the objective is to make that force more intelligent, more highly trained and we have many clients providing those types of services.”
On the flip side, Shu says that he’s been seeing a decline in the oil field sector. “In the last few years, we have experienced a significant boom in businesses that are providing the outsource support to the big oil field companies. But it seems that a lot of the businesses that were popping up … are suddenly going away — either the work they were formed for has gone away or larger companies are taking over.”
Along with trying to service industries on the decline, Shu notes another great challenge for the specialty lending industry is fraud. Shu says he has noticed, “higher than normal occurrences of fraud attempts by prospective clients… Fraud and deception by prospective borrowers is something we realize we have to deal with … but I would say that in the last eight to 12 months, there have been more occurrences than ever before. To make things worse, these perpetrators have become incredibly sophisticated and elaborate in their schemes.”
He adds, “We are just amazed at the amount of effort these people go through just to try to deceive us. It’s a stark reminder that we need to stay on our toes and keep our eyes wide open. But, more importantly, it really requires a certain level of open communication between all factors and specialty lenders to prevent these bad deals from spreading.”
Shu sees the greatest opportunity for the company in reviewing its service offerings for its clients. As a result of listening to customers’ needs and wants and getting feedback from the field, it became apparent along with financing, customers have many other needs as well. “The outcome of all these discussions was that we discovered an opportunity to develop some vertical products for our clients to complement our current factoring services. We are currently working on a couple of these products and they … are being tailored to meet the needs of businesses within specific industries.” Shu says that Bay View plans to launch some of these new products in the very near future.
“While I think it’s an opportunity, it’s also a must for all factors and specialty lenders going forward to stay current with the times. If I look at our client base today versus 15 years ago, the needs and wants are different. With technology changing, with end-users’ wants and needs changing, the world changing, it’s going to require that we adapt. Vertical product development is an opportunity that we are working on and we will continue to work on throughout 2013.”