By Ilana Greene and Ranjit Suresh
When Brad, President of Commercial Lending X saw the economic downturn coming, he did what few of his competitors in the commercial lending industry did. He differentiated himself. He realized that he would have to stand out so that he would have work even after the worst of the recession hit.
Before he started his own loan review and consulting business, Brad had been involved in commercial lending for over 12 years. His career began at a Community Bank, where he worked not only as a Commercial Lender but also as the Credit Manager for the bank President and Credit Department. At the bank, he oversaw overwriting for lending officers and also dealt with examiners and auditors. Later he went to work as Vice President of Commercial Lending at another regional bank.
When the economy began to hit rough waters, Brad had an idea of what was going to happen and knew he might eventually lose his job. Historically commercial lenders had been in such high demand, a lender typically would only have to take the next headhunter call and they could get another job. But due to the large changes in the industry, no one was hiring lenders but everyone was laying them off. So while he still had a job, Brad hired a professional career coach to help him differentiate himself, and it was going through the coaching process that the coach identified Brad’s desires to be independent and recognized a business plan he had in his head, and convinced him to go for it. Because of that planning, Brad had a business model planned out before he got laid off.
As a commercial lender he dealt with small business owners. During his years in lending he found that many small business owners had strengths in either sales, product development, supply chain management, etc., but what many entrepreneurs lacked was a handle of the financing side of their businesses. So, Brad targeted this market by offering small business consulting, out-sourced CFO solutions, and commercial debt placement to help small businesses better manage their finances and grow, while the owner could focus on what they did best.
His foresight paid off when barely 6 months after starting his own business, a local bank colleague called Brad to come in and provide some advice. They were having some regulatory issues and asked Brad to provide some guidance from his background in credit management. Brad recommended some potential solutions for them. By the end of the meeting they looked at Brad and asked him instead to implement those solutions, which he did. This led Brad to identify a need in the banking industry for additional consulting support, so he put together a team to provide out-sourced loan underwriting, loan review, portfolio valuation services, and other commercial loan portfolio services to banks throughout the Country.
From the beginning,Commercial Lending X was unique. Most of the major players in the loan review industry are accounting firms. Typically, the job is over-seen by a mid-level accounting reps and junior CPA’s do the leg work. At best, they have 5 to 10 years’ experience in the industry all on the loan review side. Most importantly, they don’t have lending backgrounds and lack the experience of being on the street. By contrast, anyone who works at Commercial Lending X has significant experience as a lender or as a commercial credit analyst with a traditional lending institution. Because of this Commercial Lending X provides a higher level product as their staff has better foresight into potential problems and is better equipped to give bank management reports and solutions that can be incorporated into their credit approval process. They do consulting all over the country for banks an investors looking to capitalize banks, including quite a bit in the Chicago land area. Moreover, they have been able to form strategic partnerships with other companies that provide consulting solutions.
Commercial Lending X primarily works with small companies with anything between 100 million to 3 billion in assets. Many smaller banks were previously regulated by State regulators and are now being regulated by Federal regulators, which is providing for a different level of scrutiny then many institutions are used to. What sets Commercial Lending X apart is that they know how to deal with the regulations smaller banks are now experiencing and have significant experience in helping smaller banks comply with the stricter regulations they are now seeing from Federal regulators.
Regulators are now requiring or at least requesting that most banks have an external audit of their loan portfolio. Bank’s can go to traditional CPA firms for such an audit purely to comply, or they can hire Commercial Lending X to get detailed reports that go beyond pure compliance but also make recommendations and provide assistance to the institution in managing their overall loan portfolio from experience and seasoned lenders and credit analysts that have spent their careers in the banking industry, and usually for a cost well below that of traditional CPA firms. Commercial Lending X also offers sophisticated models that can protract loss rates and risk rates to an entire portfolio, to give banks an idea of how their entire portfolio is performing. This gives a real picture of the potential loss rate of the entire portfolio. This is just one valuable service the company offers.