Tom Bayer serves as Origination Leader at Hitachi Business Finance, a division of Hitachi Capital America. He has more than 30 years of experience in asset-based lending and syndicated transactions. Read below as Tom discusses the co-lending/syndicated market as well as some of the challenges and concerns facing businesses today.
1. What is Hitachi’s position in the co-lending/syndicated market?
On the co-lending/syndicated buy side at Hitachi Business Finance, we look to invest $5MM to $25MM in asset-based and lender finance transactions. We prefer transactions with utilization over 50%. We consider ourselves a friendly co-lender and are agnostic from an industry perspective. We believe as a non-regulated lender, our approach is more collateral focused. We don’t take issue with high financial leverage of a borrower if the transaction’s exit plan makes sense.
2. With the current volatility in the financial markets, how do you see this as it relates to the co-lending/syndicated buy side at Hitachi?
We understand that these transactions will typically involve companies and industries that are in a restructuring phase. As a non-regulated lender, we are not under the same underwriting constraints as a traditional bank. We understand the process and are comfortable in pre-bankruptcy, bankruptcy, and exit situations. From an asset-based perspective, it is often times the safest place to be. We also understand that sometimes there may be a recalcitrant lender who may force their way out of a transaction; at the request of the administrative agent, we are not averse to replacing such lender.
3. What are some common misconceptions you hear regarding ABL and A/R financing? Who are the ideal candidates for these types of financing?
Major misconceptions regarding ABL and A/R financing relate to the lack of flexibility relating to reporting requirements. While reporting requirements are typically more stringent, once set up properly it becomes relatively easy to report. Ideal candidates for these types of financing are companies in the growth mode of their cycle and companies that have strong collateral bases. This allows for more borrowing availability than could be obtained with a cash flow loan structure.
4. What is a referral program? What role do referral partners play in helping businesses secure financing?
A referral program is built upon relationships between business associates. It allows participants to benefit, even when opportunities are not directly linked to their core products. Building quality referral relationships does not happen overnight, it takes time and effort, and is built on mutual generosity. Good referral partners are trustworthy, have a strong product knowledge, and genuinely want to help others succeed. These relationships can help businesses to secure financing from lenders they might not have otherwise considered.
5. What are some important things that businesses should look for when choosing a lender?
A company should look to a responsive lender that understands their business. Understanding their borrowing need is critical to providing a lending solution that works for the company. This is what I believe sets Hitachi Business Finance apart from its competitors.