Stuart Armstrong President GA Capital
Stuart Armstrong
GA Capital

ABFJ: Please describe your career and how it led you to GA Capital.

SA: Early on in my career I had the opportunity to join GE Capital, and over the next 12 and a half years really learned asset-based and cash-flow lending from some of the best people in the business. The GE experience instilled many things in me, including an intense credit discipline and customer focus that has stayed with me throughout my career. While at GE I had the privilege to start and grow several new business groups, including the National Restructuring and National Retail Groups, and I eventually became the Vertical Industries leader for the Corporate Lending Group.

After more than a decade at GE, I wanted to continue to do something entrepreneurial, so I joined a hedge fund to start a middle-market finance business, and then I was fortunate to join up with a team of ex-GE and Heller executives to start another commercial finance business, Tygris Commercial Finance. After Tygris, I was searching for another interesting specialty finance company to start or grow, when I was introduced to Great American Group. The existing platform they were looking to grow, GA Capital, was an excellent fit with my background, plus I was impressed by the GA organization as well as its entrepreneurial and collegial culture. And so I joined GA, hired a new team and re-launched GA Capital in the fall of 2012.

ABFJ: What types of financing does GA Capital offer?

SA: We are a specialty lender that focuses on providing middle-market companies with customized senior secured financing solutions. Our products include: first and second lien term loans, first-in last-out (FILO) facilities, unitranche loans and bridge facilities. We provide asset-based, asset-backed and cash-flow solutions structured specifically based on the needs of our borrowers. These financing needs really cover a broad range of situations, from straight refinancing to acquisition or growth capital, to a specific one-time event that requires capital, to a restructuring transition where a customer needs liquidity while they address strategic issues.

ABFJ: What differentiates GA Capital from other specialty finance lenders?

SA: A key advantage that GA Capital has, and what gives us a unique competitive edge, is that we are part of Great American Group (GA). GA has more than 180 employees spread across six different divisions in North America and Western Europe. The core competency of GA is industry and asset expertise. That means that, for virtually every industry, GA has in-depth knowledge of the market and knows the specific drivers of the short- and long-term trends within that industry. GA also has incredible expertise concerning the values of assets across all collateral classes. That includes inventory, receivables, machinery and equipment, intellectual property and real estate. The benefits to GA Capital are obvious — when we look at a deal in almost any industry, from energy to healthcare to commercial & industrial to technology, we have seamless access to insights on critical macro trends, along with the strengths and weaknesses of that particular industry. When we then move to analyze specific collateral categories, we have a clear view of the value of that asset today, — and more importantly, what that value is likely to be in the future.

This knowledge benefits our customers as well. We can deliver a better customized solution to our customers if we are more comfortable with the exact value of the assets on which we are lending. For instance, we can “stretch” further on certain asset classes because we have a very good handle on the underlying values. Conversely, on the risk side we have a much better perspective concerning on which assets we want to lend and from which ones we want to stay away. Again, this benefits our customers because we can be more precise with them as to what we can and cannot do, and advise them on the best structural solution for their particular need.

ABFJ: As a nonbank lender, how does GA Capital compete with banks that have a lower cost of capital?

SA: A very good question, but let me be very clear we do not compete with banks. We consider banks our customers and partners. GA Capital targets either a part of the capital structure or an asset class on which banks usually have no interest in lending. And that’s why we make a logical capital partner for banks.
A typical example of how that partnership can work best is when a bank provides a traditional ABL facility, and GA Capital provides a FILO structure behind the bank revolver, where we “stretch” and lend above and beyond the traditional ABL advance rates. This structure provides the bank’s customer with the additional liquidity it requires, thus helping our bank partner meet a customer need and, if it is a competitive situation, win the transaction.

Similarly, there are situations where, for whatever reason, a bank or finance company is not comfortable lending on a collateral category or specific asset. In this case, the range of possibilities can be very wide — it could be real estate, an out-of-favor or difficult to value industrial asset, intellectual property or a foreign asset. In these situations the bank or finance company lends on the traditional assets, and we creatively find ways to value and lend on the company’s other assets. Either way, we work with our bank or finance company partners to find a way to create value and provide a liquidity-driven solution for the customer.

ABFJ: What types of borrowers are a good match for GA Capital?

SA: Any middle-market company that is looking for more liquidity than a traditional bank or finance company can provide is a potential customer for GA Capital. Because of our core competency of understanding collateral values, some of our best solutions are for those customers with a relatively significant asset base.

ABFJ: What is GA Capital’s organizational culture?

SA: We are still a young company, so our culture is evolving, but the people currently on our team as well as the people we will look to add as it grows are creative, entrepreneurial and customer-focused. And because we are relatively new and very lean, they need to be willing to work very hard and stay highly motivated even when we have an occasional setback. Most importantly, they need to have a positive, “Yes, we can accomplish that and/or find a solution to that” attitude. Those qualities don’t all come naturally to everyone, so having the right people on your team is critical, especially in the early stages.

ABFJ: How does GA Capital find its prospective borrowers?

SA: We find prospective customers from a fairly wide variety of sources, and the primary deal channels are: 1) referrals or partnering with banks or finance companies that have customers that need additional liquidity; 2) internally, we receive a strong flow of financing requests from the GA network and all the customers they touch on a daily basis; and 3) from GA Capital’s team of established contacts and deal intermediaries across the industry. We have not done much in the way of traditional marketing thus far, but that will change as we evolve.

ABFJ: What do you want referral sources to think of when GA Capital comes to mind?

SA: What we always strive for is to be responsive, creative and solutions-driven. Customers or referral sources are typically coming to us with an event-driven liquidity need, and often there is a time constraint or urgency associated with that request. So we try to respond as fast as we can with a solution that works and to negotiate in a fair, straightforward manner, so that customers and deal intermediaries will want to build a long-term relationship with GA Capital and come back to us with multiple financing requests in the future.

ABFJ: How has GA Capital developed since it was created?

SA: Originally, GA Capital was strictly retail-focused. We’ve had very good success in that sector, and we certainly like that market. However, in the last year we’ve put a very strong emphasis on expanding into other major industries and verticals. This strategy makes tremendous sense, because it plays into my background and more importantly, with Great American Group’s deep expertise across so many industries, it really expands our potential customer base by several multiples. Additionally, we are seeking to do more in Western Europe where GA has a very strong business, and we can really leverage its expertise in a market where asset-based lending is not as developed as it is in the U.S.

ABFJ: What are your plans for GA Capital?

SA: We are looking to grow GA Capital. The challenge is how to do that in the most intelligent fashion, and to learn from what has occurred in the financial industry over the past four to five years. On one side that means keeping your cost structure lean, building a credit intensive culture and continually improving your sources of funding. And then you need a competitive edge, or better put, a compelling reason for your customers to build long-term relationships with you. Once you have that, it is all about having the right team in place, focusing on your customers and executing. I think we have the foundation in place to really grow GA Capital into a significant player in the specialty finance market sector.

Howard Brod Brownstein, CTP

Howard Brod Brownstein is a Certified Turnaround Professional, the president of The Brownstein Corp. and a contributing editor of ABF Journal. He can be reached at