Despite the shakeup in traditional banking, asset-based lenders appear to be standing on solid ground. For finance professionals interested in commercial finance, the field can be a great long-term option. But finding opportunities may require some creativity.
In a nutshell, asset-based lending is secured credit, with the loan traditionally backed by inventory, accounts receivables, or company equipment. Even less tangible items can back the loan - such things as trademarks or intellectual property. And while many finance pros may not be aware of this side of commercial finance, asset-based lending is big business. According to the Commercial Finance Association, the industry's trade association, ABL accounted for $480 billion in loans outstanding as of year-end 2009.
While the industry wasn't completely immune to the downturn, it certainly did better than most. Plus, it now appears to be in growth mode. While most banks maintain ABL divisions, there are also stand-alone ABL firms and even asset-based lending hedge funds. The more established and bigger players include GE Capital, Bank of America, Wells Fargo, JPMorgan Chase and CIT.
Job opportunities are generally for skilled finance professionals. Barry Kastner, head of asset-based lending at TD Bank, notes that many of the leading individuals in the ABL world "happened" into their positions after working in a variety of banking or finance roles. "I think a lot of it is more opportunistic than anything," he says.
Kastner admits that the industry hasn't been very big on formalized training and recruiting programs for younger recruits. Generally, professionals might have a few years in a finance department in private industry, another role in banking, or at an accounting or consulting firm. From there, they would routinely move into a post at an asset-based lending firm or in an asset-based lending division at a big bank.
Where You'll Start
The starting job is typically as a credit or collateral analyst, checking credit and collateral valuations. From the analyst position, Kastner says it's usual to move to a field exam post, where you'll "get a real taste" of the business by handling the due diligence process. This is where you'd undertake on-site reviews of a company's financials and internal controls, as well as physical inspections of company operations. Field examiners are expected to walk the floors of a company plant, distribution center, or inventory space to get a better sense of business processes and establish asset valuations.
But field examiners better enjoy large amounts of travel. After getting sick of being on the road, Kastner says ABL professionals usually move back to the home office or branch for a job in new business generation (sales), underwriting, portfolio management or credit side. "The business development side is definitely starting to beef up," he adds.
David Rains, president of Commercial Finance Consultants, an executive search firm based in Heath, Texas, believes that asset-based lending is growing in cache, as many in the banking community come to understand the industry's stability in good times and bad. "We're seeing many more banks opening ABL shops," he says. Most are beefing up operations, including TD Bank, adds Kastner. While most banks are pulling back on traditional lending, the asset-based lending side is picking up the slack.
A Good Time to Jump
According to Jay Ferrari, managing partner at Ferrari Search Group in New York, this may be a good time to jump into the field. "The pendulum is shifting, and the market is certainly picking up," he says. "Given the difficult economy, risk officer searches are big."
But professionals looking to make the leap into asset-based lending need to make sure they have a strong finance background plus the personality and sales skills to deal with corporate clients. Ferrari observes the banks and independent ABL firms usually hire from the traditional lenders. The hedge fund players have routinely poached the highest-level ABL professionals to their business. But the best and brightest needn't look to hedge funds just yet. The economic bust has put many out of business and others are in regroup mode.