Stretching Out: SG Credit Partners Continues to Evolve from Cash Flow Lending Origins

SG Credit Partners has a clearly defined role in the lending marketplace. It is a term lender and provider of senior and junior structured credit solutions to the lower middle market. Led by Marc Cole as CEO, the company focuses on situational needs in the $1 million to $10 million range, with Cole noting that between $2 million to $7 million is the real sweet spot for his team.

But SG Credit Partners wasn’t always set up like this. In fact, it wasn’t always called SG Credit Partners.

SG Credit Partners can trace its roots back to Super G Capital, where Cole and Charlie Perer, who now heads originations at SG Credit Partners, ran the company’s cash flow lending vertical. At that time, Cole and Perer were primarily focused on partnering with the asset-based lending community to provide secured, non-collateralized term loans, or what are commonly called stretch pieces, to fill a credit void that conforming ABL could not solve. The cash flow lending vertical was part of a two-division approach for Super G Capital, with the second division focused on merchant services, which was the original driver of the business. While the company as a whole was active in lending to the payments industry, Cole and his team kept their eye on ABL as a growth opportunity and entry point into the market.

However, despite finding a niche for themselves, and close to several hundred million funded, Cole knew that relying on a single product was inherently risky.

“Our success in building national relationships with senior lenders and investment banks led us to see a much bigger picture and opportunity. This realization helped us rethink our product suite, team and capital base.”

“We mostly target the non-sponsored businesses as we understand the family-owned business mindset and needs,” Cole says. “Our partnership with the ABL community is still front and center, but for us it was important to expand beyond providing the stretch piece to their clients. We will never compete against conforming ABL, and instead we focus our products on the credit voids that regulated lenders can’t sell with traditional products.”

“As a startup, you go through periods where you are hoping for the phone to ring when you are trying to build a name for yourself,” Cole says. “Starting as lending outsiders, it wasn’t easy to see quality deals in the early days. We were patient and over time earned trust from senior lenders that saw us as a shorter-term capital solution for their clients. A few years ago, we woke up and were not a startup anymore, which mandated a new period of change. As deal flow increased and assets grew, suddenly credit discipline became everything.”

Part of that change involved bringing in an expanded senior leadership team to best position SG Credit Partners as it reached $100 million in assets.

“With Andrew heading credit, Lon guiding portfolio management and Charlie focused on originations, that enabled me to expand the team and build SG Credit into a national credit platform,” Cole says.

“We now have superb professionals in each region,” Cole says. “These executives complemented our core team in Southern California and enabled us to have senior professionals throughout the country.”

Cole got started as a professional with a five-year run in the venture capital space, an experience that still influences his perspective today.

Cole eventually moved on from venture capital and took a role leading investments with a family office in New York. There he was introduced to bridge lending and structured credit in the lower middle market, an experience that would later lead to SG Credit Partners. While working at the family office he met Perer, with whom he would work as a business partner for years, even to this day.

Within the family office, Cole became a business founder himself, helping to co-found fintech firm Bluefin Payment Solutions and guiding it through the startup and growth phase.

“These different experiences are vital to a firm that focuses on providing situational credit to entrepreneurs,” Cole says. “I think my prior ventures solidified a belief that we can build a collaborative culture, think differently and provide lending solutions that were previously unavailable to lower middle market business owners.”

Another recent and important step in SG Credit Partners’ growth was a 2019 investment from Cynosure, MidMark and the 4612 Group. The investment helped introduce some of the new leadership to SG Credit Partners and better capitalized the company to focus on the gaps it hopes to address in the market.

“We feel that our team, the product set and capital base make us hard to compete with in an otherwise very competitive industry. Most conventional finance companies live and die by the terms of their own lenders’ credit buckets, and we are very fortunate to have two sophisticated family office backers that understand the importance of flexible capital and the cyclicality of credit markets,” Cole says. “There’s a large void for us to fill. By focusing on that credit void rather than owning the client relationship, we are a unique player in the market. We truly view other senior lenders as partners and not competitors, where we can provide shorter term capital to their clients.”

“We remain cautious given significant uncertainty,” Cole says. “We’re eager to onboard new clients across all of our verticals when the collateral or cash flow meets our high bar of market caution. Across the industry we see defensive postures as the focus remains on portfolio management.” •

– By Phil Neuffer, Managing Editor, ABF Journal