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