Commercial Finance Company (CFC) Professional Services Loans
The Commercial Finance Industry is extremely fragmented. Most of the industry is driven by some form of collateral lending. Alternatively, professional services companies have substantial income generation but have very little collateral. The understanding of the risk of this type of business is minimal at best. Also in certain segments of the market, such as Dentists, the market is rather crowded but in other segments such as attorneys it market is rather thin.
CFC decided that they wanted to make loans to attorneys but did not have the experience necessary to implement such a plan.
Why Goff Associates, Inc. (GAI)?
GAI has substantial experience in commercial lending including new product development, pricing and marketing. GAI has a unique understanding of the risk associated with lending to attorneys as well as how to market to them.
GAI initially identified the majority of commercial lenders in the market place targeting attorneys. Once identified, GAI analyzed their products and determined that the largest lender in this segment had a flaw in their product structure. GAI designed a new product and supporting credit policy and initiated test marketing of the product.
Once the product was proven, GAI documented the marketing plan, established policies and procedures, designed and managed implementation of the systems, established pricing levels, and implemented the management reports that are required to manage the business.
With all of this in place GAI led a capital raise that resulted in over $10 million through a mixture of equity ($2.2 million) and subordinated debt ($8.0 million). With the capital raised, GAI assisted in the recruitment of executive, operational and sales personnel. GAI then guided the rollout of the marketing plan and origination of loans. Once the initial capital was deployed, GAI assisted the company in obtaining a $20 million loan from one major bank and a $2 million working capital line from a different bank. GAI established an audit procedure for CFC’s clients and continued to refine CFC’s processes to maximize efficiency and keep risks under control.
In four years this product generated $38 million in loans with minimal credit losses. The company was profitable within eight months of GAI joining the project. The company has grown to become a leader in the industry.