2016 Outlook and Beyond

by Toby Dahm


The imbalance of supply and demand in the financial markets will continue indefinitely. This means that more money will continue to pursue a small market that is looking for capital throughout 2016 and beyond.

One dynamic to keep in mind is the shifting of the business landscape. Two important factors are: (1) the shift in business activity from large companies to small and (2) the demographic shift in the workplace as boomers exit and millennials emerge. Lenders must acknowledge these changes, shift to a culture that anticipates change, and embrace a much greater use of social media and technology.

These changes have created three key areas of vulnerability in our business: (1) marketing, (2) sales, and (3) onboarding. Online/social media is becoming more important and will be a major, if not the major source of attracting clients. Traditional relationship marketing will always have a role, but it is diminishing. Those without a strong online/social media position will be at a major disadvantage. The execution of converting contacts into clients will be driven more electronically. Social media has gained credibility and trust, especially with millennials, who are becoming more influential. This does not stop once a target customer becomes interested. Technology-driven processes that are customer friendly and efficient are necessary to move the target to a prospect. Recent entrants into the lending arena are incredibly efficient in onboarding clients. They are able to fund deals within days, compared to the weeks and months it takes us to fund. This advantage often outweighs the lower cost and better loan structure that we provide. Speed is very important to borrowers in this world of instant gratification.

We do have competitive advantages that we must leverage if we are to succeed. These advantages include: (1) being established, (2) a strong depth of knowledge, and (3) we offer a working relationship. The new entrants have not proven that they are sustainable, especially during a recession. This is not important to companies looking for a one time fix, but might be a consideration if they anticipate similar needs in the future. Our depth of knowledge, particularly relating to industry verticals, can enable us to add greater value than money. Our knowledge enables us to provide a better fitting loan structure, fund aggressively where appropriate, and offer advice as a trusted advisor. We also can emphasize that we provide an ongoing relationship and the willingness to respond intelligently to opportunities or problems our customers face.

Anyone with enough capital can survive for a period of time; however, in order to succeed, which means growth in clients and profitability, we must improve our value proposition. We offer a better product than the new entrants; however, we are at a disadvantage in attracting clients and funding speed. We do not need to beat the new entrants in speed to close. That is likely to be impossible and reckless. We do, however, need to close the gap, so that our better product outweighs speed in the overall value proposition.


About the Author


Toby Dahm serves as Senior Vice President and ABL Portfolio Manager for Hitachi Business Finance. In this role, he assists in business development and is responsible for underwriting and managing of all asset-based loans.

Toby has more than 25 years of experience in commercial lending. He is active in the Association for Commercial Growth, the Commercial Finance Association, and serves as an Advisory Board Member for The Salvation Army.

Contact Toby today at tdahm@hitachibusinessfinance.com or (248) 658-3208.

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