“Do we really have to stop this for a couple days?”

That’s what Bruce Sim remembers asking his colleagues regularly on Friday nights in the late 1990s when he was working for FINOVA Capital. Even 20 years since the former commercial finance giant filed for bankruptcy and ultimately dissolved, Sim still holds a special place in his heart for that era.

Sim, who currently serves as head of acquisitions at eCapital, isn’t an overly enthusiastic outlier either, as Jeff Appleton, who served as a vice president and business development officer for the business credit group at FINOVA from 1995 to 2000, can attest, describing days when he’d be in the office early enough to watch the fog lift over the river near his office in Atlanta.

“It wasn’t because we had to be there — we wanted to be there,” Appleton, who now serves as executive vice president of Briar Capital Real Estate Fund, says.

FINOVA, which was first known as Greyhound Financial when parent company Dial Corp brought the business to market in March 1992, experienced a meteoric rise during its decade in business, reaching $12.5 billion in assets by the end of 2000. At its peak, FINOVA took its place alongside Foothill Group and Fremont Financial as one of the powerhouses in the alternative commercial finance industry. As one of what Appleton calls the “three F’s of lending,” FINOVA captured a great deal of market share and owned a lofty reputation in the industry, helping fuel its ability to bring in some of the best talent available.

“If you were in finance, it was the shop to work at,” Robyn Barrett, managing member and owner of FSW Funding and a former vice president of business development at FINOVA, says. “They only hired the top of the top, and every person that worked there was definitely an A-type personality.”

FINOVA’s impressive standing wasn’t limited to the United States, as it also made a name for itself in Canada, entering what was then, as Sim describes it, a smaller market dominated by five or six banks.

“I’m not saying we spawned the alternate finance business in Canada, because it did exist, but alternate finance in Canada got credibility through FINOVA,” Sim says. “Businesses that never would have dreamed of talking to anybody other than their bank started to consider the world of alternate finance in Canada. I think that’s a lasting legacy that [FINOVA has] as a company.”

The Head of the Dog

While FINOVA seemed impressive from the outside, the people who worked there got a better look at what set it apart. As Donna Calderaro, a former vice president at the company and a current senior vice president and business development officer at People’s United Bank, puts it, FINOVA put in the time to teach its employees every aspect of asset-based lending while providing mentors and tools to help everyone succeed.

“If they saw something in you, they pushed you, and they wanted you to be successful,” says Calderaro, who worked for FINOVA from 1995 to 2001.

FINOVA was also rabidly focused on the sales side, with Appleton calling the sales department “the head of the dog instead of the tail,” making for a culture that “was different than anything that I’ve ever experienced before or after.” As a company with a litany of distinct lending groups, cross-selling was a major part of FINOVA’s approach.

“They promoted cross-sell in a way that I’ve never seen done more successfully anywhere close before,” Sim says.

FINOVA was also a pioneer in other ways. For example, Sim notes the company developed a strong portfolio of warrant interests in middle-market companies through its corporate finance division, which provided conforming ABL and stretch pieces in return for warrants in a way bank financing just couldn’t match.

“That was so valuable to those companies as an alternative to equity,” Sim says. “And that was really an innovative product at the time that FINOVA should be really proud of.”

FINOVA also stood out for how it evaluated deals, as it emphasized the four C’s of credit: cash flow, capital structure, collateral and character, although there were some specialty lending groups at the company that took a collateral-first approach.

“You don’t look at the balance sheet. You don’t look at the cash flow. You look at the value of the collateral. And that’s a significant difference between real asset-based lending and bank asset-based lending. That was a major piece of why FINOVA could do loans that others weren’t [able to do],” Jeff Wurst, a partner at Armstrong Teasdale who served as outside counsel to FINOVA, says.

All of FINOVA’s philosophies were built on its aggressive growth goals. According to Barrett, the most recent stock price for the company was on display in multiple places in the company’s offices every day. Barrett says that singular focus and the benefits it provided were a product of the work of Samuel L. Eichenfield, who served as CEO of the firm.

“Sam wanted everybody to know how the stock was doing and how your performance affected that stock,” Barrett says. “He was an amazing leader. Sam would walk the floors, come into your office and ask you how you’re doing. He made a point of knowing everyone on a first name basis.”

Nuclear Downfall

Despite its strengths, FINOVA eventually stumbled. In March 2000, an $80 million charge and a $70 million loan write-off, combined with the sudden departure of Eichenfield, sent shockwaves through the marketplace. According to a report from American Banker at the time, those early tremors signaled distress to Wall Street and caused FINOVA’s stocks to fall precipitously.

“If Sam Eichenfield would’ve remained in place, I think it wouldn’t have caused as much of a liquidity problem for FINOVA,” Barrett says. “But announcing there was going to be issues in the portfolio and Sam Eichenfield stepping down was just a nuclear bomb.”

Things only got worse from there, as the company’s primary source of funding (commercial paper) dried up, forcing it to draw on its bank lines, further exacerbating the decline in confidence from outside observers. In addition, in spring of 2000, FINOVA became embroiled in multiple shareholder lawsuits claiming the company and leadership, including Eichenfield, “made materially misleading statements regarding FINOVA’s loss reserves, and otherwise violated the federal securities laws in an effort to bolster FINOVA Group’s stock price.” Eventually, in February of 2001, FINOVA entered an agreement with Berkshire Hathaway and Leucadia National for a $6 billion loan as part of a restructuring that ultimately led to bankruptcy and the sale of pieces of the company.

The writing was on the wall before anything became public. For example, FINOVA leadership scheduled when to write off losses on underperforming loans, with some scheduled for up to 18 months down the line. After the Enron bankruptcy, financial reporting requirements eventually changed.

Although Barrett believes losing Eichenfield was an accelerator for FINOVA’s demise, some of his actions while CEO may have put the company in a risky position. According to Barrett, Eichenfield called for very aggressive year-over-year growth, which spurred a great deal of activity but not without negative effects.

“It put a lot of pressure on line of business leaders and employees to meet the aggressive goals which were tied to bonuses. I think lending then became a little more aggressive than it should’ve been,” Barrett says, although she contends if Eichenfield had been able to stay on to help clean up portfolio issues and reclaim the confidence of Wall Street and the finance community, FINOVA may have had a better shot at surviving.

Speaking of aggression, FINOVA also became very active in the M&A space near the end of the 20th century, as it would eventually buy up multiple entities, including Fremont Financial as well as a commercial mortgage-backed securities group, an acquisition that Appleton says was poorly timed.

As the dominoes continued to fall, so too did some of the company’s top talent. Appleton resigned two weeks before Eichenfield left the company. Barrett departed in March 2000. Sim left in January of 2001, nearly a year after becoming Southeast division manager for the company. Calderaro left in February of 2001 on maternity leave as the company geared up for bankruptcy. More and more followed from there, with the company eventually dying out entirely, with Wurst saying it was finally entirely liquidated in 2009.

“What I tell young people coming into our industry today is make as much as you can, as fast as you can, and invest it, because somebody is going to shoot the horse,” Appleton says. “We all did very well and then it all got yanked out from under us.”

Lessons and Legacy

Although FINOVA left a crater-sized hole in the commercial finance space when it dissolved, its impact on the industry has not gone the same way. You just need to look at its former employees to see that.

A little more than a year after leaving FINOVA, Barrett founded FSW Funding, a major player in the factoring space still going strong today.

“When I started my own company, I saw how I wanted to be managed [at FINOVA] and that’s how I manage my employees; that’s the culture I built at FSW,” Barrett says. “My network of FINOVA alumni and mentors were instrumental in my success in building and growing FSW.”

While Barrett launched her own business, Sim and Appleton both continued to make waves while working across multiple roles.

Sim went on to join eCapital as head of acquisitions in 2017. During his tenure, eCapital has already grown quite a bit, with notable acquisitions of the North American operations of Bibby Financial Services, Prosperity Funding and Advantedge Commercial Services in 2020 alone.

Meanwhile, Appleton went from FINOVA to take on leadership roles at Bridge Finance Group, Wells Fargo, TD Bank and JPMorgan Chase before becoming senior vice president of Briar Capital in 2017 and then adding the role of executive vice president of Briar Capital Real Estate Fund in 2019.

Just as it has been for Barrett, the expansive network of former FINOVA employees has been a major boost for Appleton in his post FINOVA days.

“I took my product [at Briar Capital] national, which is completely different than any asset-based lending shop, but I went to every asset-based lending shop and 90% of them have a FINOVA person there or a connection to a FINOVA person,” Appleton says. “That’s helped me build what I’m doing now very significantly.”

Calderaro spent six years away from the finance world while she raised her children but returned to the industry in 2007 as a vice president and relationship manager at Lakeland Bank before she moved to her current role at People’s United Bank in 2013. Returning to ABL “was just like riding a bike,” Calderaro says, noting her background at FINOVA has consistently opened doors and allowed her to make connections in the industry because of how widespread the FINOVA network has become in the wake of the company’s downfall.

“You go to Secured Finance Network events or Turnaround Management Association events and there’s always someone there from FINOVA, and it’s like a family,” Calderaro says.

To Sim, it’s the lessons he learned at FINOVA that have sustained him, particularly the importance of maintaining a sense of team, a customer focus and an overarching belief that what the commercial finance world does is important.

“I don’t think it’s an accident that people [from FINOVA] land[ed] on their feet,” Sim says. “People in our industry always tend to take away the best things they’ve learned someplace and bring that to bear in their next role. FINOVA has many ‘best practices’ at work to this day wherever its alumni can be found.”

Phil Neuffer is managing editor of ABF Journal.