BRIEF DESCRIPTION OF WRITER AND GENERAL BACKGROUND OF THE ASSET BASED LENDING INDUSTRY
Brian Banning
Brian earned a Bachelor's degree from Walsh College of Accountancy and Business Administration and began his career with NBD (National Bank of Detroit). Brian sharpened his skills as a financial professional by earning his Master of Science, Finance from Walsh and entering NBD's commercial loan training program. After twenty years in the finance industry, and over fifteen years focused on asset based lending, Brian assisted in the formation of Citizens Bank Business Finance (a division of Citizens Republic Bank) and currently serves as First Vice President at Citizens Bank Business Finance. His experience nationally has developed a number of professional relationships to assist companies with suitable contacts across the country. He currently provides asset based loans throughout the "Big-10" states (the Midwest).
Brian is active in a number of professional organizations Turnaround Management Association, Indiana Association of Corporate Renewal and Association for Corporate Growth.
Brian enjoys family time with his wife Janell of 20+ years and his two boys, Luke (17) and Logan (13). Activities revolve around weight lifting, wrestling, baseball, basketball, hunting and fishing.
Asset Based Lending
Asset Based Lending is a discipline developed to provide financing to companies that are unable to obtain conventional bank financing. Twenty years ago asset based lending was primarily a last-resort option and few borrowers wanted others to know they were asset based borrowers. Today the discipline has evolved into a tool financial institutions use to provide loans to companies that are heavy in working capital assets or that want to run their business without a lot of financial covenants. Additionally, asset based lending can assist companies in industries that are out of favor (currently automotive) or highly levered (acquisitions, losses, recapitalization, rapid growth, even bankruptcy).
Asset Based Lending focuses on companies heavy in working capital assets (accounts receivable and inventory). The lender pays tremendous attention to these assets and provides loans based upon the value of these assets. Many asset based lenders will provide term loans against the value of machinery and equipment and to a lesser extent, owner occupied real estate provided these term loans comprise 50% or less of the total financial commitment.
Asset Based Lending vs. Middle Market Lending - Asset based lending is very focused on the value of the assets in some form of liquidation scenario (orderly liquidation/wind-down or auction). Middle market will tend to use the value of the assets as a proxy for what should be lent with less focus on liquidation scenarios.
Asset Based Lending vs. Cashflow Lending - Cashflow lending considers the net cashflow generated and the certainty of the continuation of cashflows. Cashflow lending swings based upon many variables; competition, economic environment, liquidity in the market to name a few. These tend to be available only for larger companies; $100 million + revenue.
Asset Based Lending - Bank vs. Finance Company - Much similarity but finance companies (being unregulated) are capable of taking greater risk (not necessarily afraid of lending into a liquidation and therefore are less aggressive on machinery and equipment and real estate, tend to have less access to inexpensive funding sources (frequently borrow from banks themselves) and therefore tend to have higher pricing; Prime + 2 - 25% all-in pricing.
Asset Based Lending vs. Factor - Factors generally purchase and advance against the value of specific invoices not lending on inventory, machinery and equipment or real estate. They generally close extremely fast and have higher pricing 10% - 30% all-in pricing.