Competition in the Mid-Market ABL Space


As most of you know, we at Revitalization Partners generally write our own blogs. But when we see some insight that we think will be very valuable to our readers, we try and pass that along.

This article comes from Charlie Perer who is Head of Originations at Super G Capital and a member of its Credit Committee.  He is responsible for originating and structuring transactions across all loans products and corporate development initiatives. businesses.



The past few years a battle has been taking place between the nation’s largest banks, regional banks and non-bank asset-based lenders (ABLs), all focused on $30-50 million ABL facilities.

This competition has pitted the big banks vs. the regional banks and a new crop of non-bank ABLs that were formed to serve this market.



At the same time, a new crop of non-bank ABL firms emerged to go after the $3-10 million ABL facilities. The result is that today’s market is hyper-efficient when it comes to larger ABL facilities where banks are truly giving away money for free in return for deposits, treasuries and facilities of less than $10 million that bigger banks can’t serve.

The barriers to entry for sub-$10 million space are lower and competition for larger facilities is too crowded.

This intense competition and over-crowding has created a void in the marketplace for $10-30 million facilities with a real focus on $10-20 million.

There are four constituencies headed on a collision course right now: big banks, regional banks, large non-bank ABLs and smaller non-bank ABLs-with the $10-20 million facility size being the concentric circle.

These firms should each be put in distinct buckets.



The “Big-Three” banks – Wells Fargo, JP Morgan Chase and Bank of America – have the scale, talent and capital to compete anywhere and anytime. The regional banks have the home-field advantage in their respective markets and deep-rooted relationships.

On the non-bank side, the bigger and smaller non-bank ABL firms have rarely crossed paths until each of their spaces-sub-$10 million and greater-than $30 million-have become crowded and difficult, with the banks riding out a long bull market.

The edict from Monday morning sales meetings across the country is simple-book assets at almost any cost. The economy is still great and regulation does not seem to be on the horizon, so make hay while the sun is out, as they say.

The natural solution is for everyone to go after the inefficiency, which is becoming more and more apparent.



The new competitive battlefield is really between $10 million and $20 million facilities. They are just big enough for the larger banks and non-bank ABLs to focus on, and still within reach of the smaller non-bank ABLs that want to separate themselves from their own competition.

The “Big Three” banks, meanwhile, are trying to understand how to serve this space. They have invested in platforms, back-office technology and systems; and they currently have capacity-human and financial capital-due to competitive market conditions.

Given this is the case, they are all strongly discussing how to serve this market-especially since they know the regional bank ABLs have been quite happy to book these assets.



In a parallel universe, there are clear battle lines being drawn in the ABL market, which is getting smaller with the recent bank acquisitions of Marquette, Crestmark and AloStar, and will probably continue to shrink even more.

This narrows the field of non-bank ABLs to a smaller number of independents. Ares, Encina and CIT Northbridge were each formed (or changed their strategies) to go up-market.  

Ares purchased First Capital for the human capital and platform and promptly directed themselves up-market, given less competitive market opportunity and the ability to take advantage of Ares’s balance sheet.   

Encina and CIT Northbridge were formed specifically to go after the larger non-bank ABL deals. These folks and a few others have proved formidable competition, which is why they have all been known to look down-market in their pursuit of growth.

It just so happens their smaller independent competitors are all looking up-market as a way to differentiate themselves and to grow assets given it takes the same amount of work to book a $5 million facility as it does a $50 million facility.   The sub-$10 million facility ABL competition is toughest because of the sheer number of players competing for the largest number of possible borrowers. 

Their average borrower borders on the cusp of transitioning from retail banking to business banking, and has real capital needs.   It’s not only competitive, but it’s time consuming to manage and monitor collateral.



This is just another reason why the $10-20 million space contains one the best market opportunities across the country. This space is the heart and soul of business banks for the national and regional powerhouses. These companies are typically privately held and are able to draw on the full resources of their banking platform.

Each bank sells on platform and full-service offerings that are symbiotic. Banks have proven to be aggressive at keeping these clients.

The convergence of all these competitors is most likely going to create an over-lending situation in both larger (greater than $30 million) and smaller (less than $10 million) facilities.  

What’s unique and interesting about this perfect storm of competition is that it is pitting four distinct constituencies against each other rather than a few.  

The business size to warrant a $10 million to $20 million facility is optimized to attract a lot of attention. This will surely create an over-competitive situation, with availability being stretched and prices sure to drop.



Here at Super G, we have seen first-hand all the constituents mentioned above competing with each other. The market is ripe for competition. Smaller firms want the business and bigger firms can easily do a smaller deal.

This area is going to be the next battle zone for market share, given the other areas have been fought over to create this white space in facility size.

It should also be noted that some of this is defensive as we are all in a zero-sum game and the real constituents under attack are the business-banking groups throughout the country.

In some ways this has caused the business-banking groups to be aggressive with credit as it’s clearly a borrowers’ market. The issue they face is that borrowers will trade lax monitoring for more availability in a true ABL structure.

The ABLs across the country are all focused on the business-banking market. 

The commercial banks understand this competitive threat as it has dictated lax lending terms.

This is clearly going to change, and borrowers are going to be heavily marketed to by all aforementioned constituents.

So put your seatbelt on, because the intersection is going to get busy really fast.



Revitalization Partners specializes in improving the operational and financial results of companies and providing hands-on expertise in virtually every circumstance, with a focus on small and mid-market organizations. Whether your requirement is Interim Management, a Business Assessment, Revitalization and Reengineering or Receivership/Bankruptcy Support, we focus on giving you the best resolution in the fastest time with the highest possible return.

What Does Your Banker REALLY THINK?


We have written many blogs about banks, providing insights into their thought processes and approach to lending.

With that in mind, we thought it would be interesting to share information related to a quarterly survey conducted by Phoenix Management Services that may impact your business.

The survey, “Lending Climate in America” is administered quarterly to an array of regional and national lenders from various commercial banks, finance companies, and factors across the country.

The purpose of the survey is to gauge how they feel about the economy, lending practices and other related issues.



The survey highlights several interesting points regarding where they expect their lending activity will come from over the next several quarters.

  • For example, over 50% of the respondents believe new loans will be driven by merger and acquisition, organic growth and business expansion.
  • Only 13% believe growth will come from business looking to refinance loans at a lower interest rate.



Another interesting point relates to lenders’ optimism regarding the 2018 equity markets.

    > Over 60% of the respondents believe there will be modest single digit growth and

    > 12% believe there is room for double digit growth.

    > Virtually no lenders expect a decline in equity markets in 2018!

Lenders’ outlook on the US economy over the next six months improved over the past quarter.

Nearly 80% of the lenders surveyed believe the economy will perform at a B average, up nearly 10% points from last quarter.

On a longer-term basis, 53% of the lenders believe the economy will perform at a B average while 46% believe the economy will perform at a C average.  The combined group represents a 11% increase over last quarter.



Lenders’ outlook on interest rates changed significantly, as 89% (up from 50% last quarter) believe that rates will increase by ½ % or more. The overall sentiment for loan structures (covenants, advance rates, etc.) changed significantly. 

Of those surveyed:

  • 17% will tighten their loan structures up from 8% percent last quarter.
  • And finally, the number of lenders expecting their loan losses to increase rose to 39% from 25% last quarter, reflecting a significant increase in their perception of risk.



The survey reveals a certain dichotomy in lender sentiment.  It ranges from being bullish on the economy and growth of new loans, to pessimism related to increasing interest rates and loan losses.

One might ask, “How does one reconcile these different viewpoints and what impact do they have on my business?”.  

The truth is, it often seems that lenders want the best of both worlds.



They strive to take advantage of growth opportunities yet are still concerned with the risk associated with a highly competitive market.

This is especially true in this market, where lenders have a vast amount of lending capability that significantly outweighs demand.

Business owners must navigate this sentiment, particularly when they are looking to refinance or want to increase the size of their credit facilities.



Over the past couple of years, we have helped a number of companies refinance existing debt and have experience dealing with an array of different lenders.

Based on that experience, our advice is to choose your lender carefully.

Not every lender is right for every company. The market is very competitive; however, it is really important to understand if the prospective lender has the right loan structure, favorable advance rates and will stick with your company through thick and thin.

And if there is any question about how you should proceed, don’t be afraid to seek advice from a trusted advisor.


We specialize in improving the operational and financial results of companies and providing hands-on expertise in virtually every circumstance, with a focus on small and mid-market organizations. Whether your requirement is Interim Management, a Business Assessment, Revitalization and Reengineering or Receivership/Bankruptcy Support, we focus on giving you the best resolution in the fastest time with the highest possible return.

Kern Gillette Joins Revitalization Partners as Senior Director


Kern Gillette joins Revitalization Partners as Senior Director

Seattle, Washington April 18, 2018 – Revitalization Partners is pleased to announce that Kern Gillette has joined Revitalization Partners (RP) as a Senior Director. Before joining RP, Gillette was founder and managing member of Gillette Northwest, LLC.

In addition to nearly a decade as an advisor to distressed situations he has over 15 years’ experience as a C- Suite executive, in CFO and CEO roles.

Prior to Gillette Northwest, Mr. Gillette was Senior Director with Alvarez & Marsal ‘s North American Commercial Restructuring practice. Before A&M, Kern was Principal with Scouler & Company, where he worked with distressed companies, lenders and creditors across the country.

Mr. Gillette brings to RP a strong track record of successfully representing constituencies in the restructuring and bankruptcy process, as well as expertise in complex analysis, strategy development and leading entities through difficult transitions. His work has spanned a variety of industries, including: food processing, multi-unit retail including restaurants, technology, manufacturing, franchise, retail and wholesale distribution, seafood catching and processing, lumber and specialty building products, financial and professional services, aerospace, real estate, construction and alternative energy.

He has direct experience with a wide variety of capital structures including family owned, private equity, ESOP, public, and cooperative.

Mr. Gillette served as Engagement Lead Financial Advisor for Hot Dog on a Stick, a quick service food retailer; Beall Corp., a tank and trailer designer and manufacturer; and Qualteq, Inc., a direct mail marketer. Recently he represented lenders interests in a large vertically integrated seafood company transaction, monitoring operational performance and cash management for many months prior to the sale of the entity. Among his many previous engagements, he was Financial Advisor to Contessa Premium Foods, Inc., a frozen foods packaging and distribution company, and Universal Building Products, Inc., a manufacturer and supplier of concrete forms and accessories.

Mr. Gillette has wide and deep experience as an operator. Positions include President and CEO of Cinnabon, Molbak’s and Graces Kitchen. He was CFO of Reese Brothers, Cinnabon, Grace’s Kitchen, and Olympic Boat Centers. As President, Chief Executive Officer and Chief Financial Officer of Cinnabon, Inc., the national food retailer and franchisor, Mr. Gillette designed and executed a successful turnaround.

As Chief Executive Officer of Molbak’s, a regional specialty retailer, he executed a successful creditor composition plan and led the company through reorganization. As Chief Financial Officer of Olympic Boat Centers, he guided the company through the bankruptcy process.

Mr. Gillette earned a bachelor’s degree in accounting from the University of Washington and an MBA from Eastern Washington University. He is also a Certified Public Accountant (inactive).


About Revitalization Partners

Revitalization Partners specializes in improving the operational and financial results of companies and providing hands-on expertise in virtually every circumstance, with a focus on small and mid-market organizations.

Whether your requirement is Interim Management, a Business Assessment, Revitalization and Reengineering or Receivership/Bankruptcy Support, we focus on giving you the best resolution in the fastest time with the highest possible return.

Assignment for Benefit of Creditors – Simple As ABC

The third alternative to liquidating your own business or filing for bankruptcy is to follow a procedure called an “assignment for the benefit of creditors,” or ABC. Here you work with one of the many ABC companies or law firms that specialize in liquidating insolvent businesses. Basically, the ABC company will liquidate your assets and pay off your creditors (for a percentage of what it is able to sell your assets for), while you and your co-owners move forward with your lives.

This option generally works well if your business is a corporation or LLC with a lot of debts and assets. A large liquidation can take months or years to wind up—something you probably can’t afford to spend your time doing—so it makes it worth selling your assets to a third party in one fell swoop.
How Does Assignment for Benefit of Creditors Work?

Your business assigns (transfers) all of its assets and debts to the ABC company or law firm, meaning that liability for the business’s debts moves to the ABC company or firm. You might still be liable for debts with personal guarantees (or all debts if you are a sole proprietor or partner), however, so you want to discuss with the ABC company paying these debts first.

EXAMPLE: Angelo’s Meatpacking, Inc., has been suffering from poor sales for the past year, and now Angelo’s accounts payable list is growing, creditors are demanding payment, and the company will be out of cash within a few months. Angelo consults with two ABC companies and finds that one company has experience with liquidating meatpacking companies, meaning that this company is more likely to get top dollar selling Angelo’s business equipment. Angelo signs a contract with the ABC company (now called the assignee) and provides a list of the company’s creditors as well as all of the business assets to be assigned.

First, the ABC company investigates whether Angelo’s company can be sold as a going concern. If not, it will send a letter to all creditors notifying them of the fact that the assignment has been made and providing a claim form for each creditor to submit a claim to the ABC company. At the same time, the company advertises the assets for sale in industry publications and, using its contacts, searches for another company to take over Angelo’s lease, for a fee. It also publishes a press release simply stating that it has acquired the assets of Angelo’s Meatpacking, Inc. After all of the assets have been liquidated, the ABC company takes a percentage of the proceeds as its fee and distributes the rest based on the creditors’ claims. In six months, it’s all done.

An ABC company will almost always get more for your assets than a bankruptcy trustee will, and it may be able to sell any intellectual property you own to help pay debts, something a bankruptcy trustee usually will not do. Going the ABC route is also usually faster and more private (and less embarrassing) than a bankruptcy.

To learn more about ABCs, you should speak to a business lawyer. You can submit your question or case to a local business lawyer on Nolo’s website.

When Does a Sale Become a “Sale”?


We recently received an email from an old friend who was looking for clarification and help for her husband’s daughter.

The daughter works as a sales person for an optical equipment company receiving 100% of her compensation as commission.

There is also a bonus structure based on “sales” at the end of the fiscal year.



When the fiscal year ended, there were several last minute “sales” for which the company was declining to recognize for her bonus.

The “reasons” given in the email included: The orders arrived on the East Coast too late to be shipped; the Sales Manager didn’t want her sales to exceed the sales of the owner’s son, and other emotional issues.

But it was clear from the various issues, that she didn’t really understand what constituted a sale on the part of the company.



There are several International Financial Reporting Standards criteria for the recognizing revenue on the sale of goods and services.

They break down into Critical Events and General Rules with some exceptions.


Critical Events Approach

The Critical Event Approach provides five criteria for identifying the critical event for recognizing revenue on the sale of goods:

1. Risks and rewards have been transferred from the Seller to the Buyer

2. The seller has no control over the goods sold

3. Collection of payment is reasonably assured

4. The amount of revenue can be reasonably measured

5. Costs of earning the revenue can be reasonably measured.


General Rules Approcah
Under the General Rule:

1. Revenues are realized when cash or claims to cash (receivables) are exchanged of goods or services. The revenues can be recognized when the asset received in such an exchange are converted to cash or a claim to cash

2. Revenues are earned when such goods or services are transferred or rendered. Both such payment assurance and final delivery or completion (with allowances for warranty, returns, etc.) are required for revenue recognition.




There are unique circumstances that are related to revenue recognition:

1. Revenue from rendering services are recognized when the service is completed and invoiced

2. Revenue related to the use of company assets (money, rent from using fixed assets or royalties for using assets) is only recognized as time passes and the asset is used and is or maybe invoiced for the percentage use of the asset.

3. Revenue from the sale of an asset, other than inventory, is recognized at the point of sale when it takes place.



There are several exceptions to the revenue recognition criteria both for revenues that cannot be recognized at sale and for revenue that can be recognized prior to a sale:

1. If the sale contains a buyback agreement in which the company sells a product and agrees to buyback the product after some time. If the buyback covers the cost of the product and any related holding costs, the “sale” cannot be recognized until the buyback expires.

2. If a company experiences a high rate of returns and cannot reasonably estimate those returns, it cannot recognize the revenue until the returns can be reasonably estimated and reserved for against the revenue.

3. In companies with long term contracts such as construction or development and the contract includes a provision for invoicing based on a percentage of completion clause, then revenues may be recognized based on the agreed upon percentage of completion.

4. There is also and exception that allows revenue recognition even when there is not a “sale” at all. This generally applies to agricultural products and minerals. There is generally a ready market with reasonably assured pricing and the units are interchangeable with a low cost of selling and distribution.



A good example of the problems that can occur with improper revenue recognition was a company that became a client of Revitalization Partners where they shipped product prospectively to dealers with rights of return if not sold and also gave 180-day payment terms.

They were essentially using the dealers as warehouses, however they invoiced them, treated the shipment as revenue and an as account receivable when shipped. They had no idea if the product would get sold and their process led to problems with their bank and credit line. Part of our process was to restructure their sales process for a new bank.

As for our sales person and her bonus, a discussion with her management as to how her “sales” do or do not fall into these categories, may be helpful.



We specialize in improving the operational and financial results of companies and providing hands-on expertise in virtually every circumstance, with a focus on small and mid-market organizations. Whether your requirement is Interim Management, a Business Assessment, Revitalization and Reengineering or Receivership/Bankruptcy Support, we focus on giving you the best resolution in the fastest time with the highest possible return.