The Banker’s Vital PartnerDownload PDF
Since 1997, Sylvan Lake-based Eclipse Capital Group has specialized in transactions that not only help bankers reach their goals but that also benefit the bank’s clients in the process. Originally founded by CEO Frank Bromley as a commercial real estate finance broker, Eclipse quickly became involved in business lines of credit, equipment lending, and other forms of corporate growth financing as well. And while it proved itself adept at restructuring a client’s debt and taking other strategic actions, when needed, before finding appropriate refinancing partners, Eclipse also developed an extensive lender base, which over the years it has broadened into a financing network of thousands of lenders throughout the United States, Canada, and Europe. And many new lenders continue to seek out Eclipse to join an expanding network of alternative lending sources participating in profit-producing, win-win financing opportunities.
Refer New Loan Requests -- Retain Other Business
While Eclipse may be well-known to some as trusted workout experts with long experience in troubled assets, it also is an important lending option for bankers who may be unable to make particular loans but who still want to retain or acquire that client’s other business. Given the currently stringent lending standards, and the difficult commercial and investment real estate lending climate, a referring bank’s present standards may simply preclude it from making what otherwise would be an attractive loan, even to an A paper borrower. Eclipse Capital Group enjoys great success finding appropriate funding for these clients.
“We’re not bringing lenders of last resort; not at all,” says Bromley. “Some might believe we bring expensive money to the table, but that’s simply not the case.” Not all of its clients are involved in workouts, nor are its credits merely those that other banks have declined. Many of its transactions involve healthy, growing companies opportunistically looking for the best banking partner, and they’re hiring Eclipse as their first choice.
“We’re bringing the absolute best financing for our clients’ situation, whatever it may be,” says Bromley. “We’re able to go into the market and typically find less expensive rates, with longer amortizations.”
Eclipse calls regularly on market lenders, and it knows that every day they’re being asked to make loans they’d like to make but for one reason or another cannot. So rather than just say no, Eclipse tells these bankers, “Don’t say no.”
“One of the voids we fill, and the value we bring,” says Bromley, “is that we help banks retain their business clients.” Too often, clients turned down for financing immediately consider the naysaying bank an enemy. And they not only seek another lender but they take their other business with them. Instead of turning those loans away, they can refer them to Eclipse. Eclipse finds an alternative funding source and the referring bank keeps the client’s core business – taking deposits, handling payroll accounts, and providing other lines of credit.
“Stop turning clients, and business, away,” Bromley tells his banker clients. He cites one recent case in which one banker who didn’t want to say no to a new loan – even though he knew couldn’t extend the credit – strung the customer along while hoping the bank’s parameters might soon change so he could say yes. But ultimately he lost not only the loan but the customer’s other business as well. Meanwhile, another bank – knowing it was too small to extend a seven million dollar real estate investment loan – turned to Eclipse to get it financed. In return, Bromley told the borrower – “out of respect for the bank that referred you to us” – that Eclipse expected it to open a depository relationship with the referring bank and perhaps fund payroll and/or look into the bank’s other services.
“Everybody wins,” Bromley says. “And if and when the credit becomes acceptable to the bank later on, we’ll return it.”
Eclipse Senior Banking Relations Officer Alex Fedorowych recounts one recent incident in which the firm found a home for a specialized loan involving a church property that even the referring bank seemed skeptical about refinancing. “We have the capability to get that deal done that most believe just can’t happen,” says Fedorowych. And skepticism aside, Bromley considers this “a perfect example of a market lender knowing that it couldn’t do the deal – but knowing that we could.”
With a full-service staff of CPAs and former bankers to honestly evaluate transactional viability and to establish reasonable timeframes for progress, Eclipse is the perfect partner for bankers seeking to maximize loan recoveries from financially troubled borrowers. In a tense and litigious environment in which negativity swiftly gains momentum, Eclipse helps to find solutions by arming bankers with market alternatives to the usual options: selling the note (at cents on the dollar); foreclose; hold the credit (and simply hope it gets better); or liquidate. Better options are especially important because each of these not only yields the least amount of return but also puts the client in both a deteriorated market position and a worsened financial condition.
Most banks have neither the time nor the resources to complete the kind of comprehensive analysis, evaluation, and assessment that Eclipse undertakes. Beyond that, Eclipse is familiar with a much broader range of the marketplace, and is uniquely positioned to identify the most appropriate institutions to refinance credits that likely are burdening the originating bank with additional reserve requirements. Eclipse not only determines which portions and how much of the credit can be refinanced but it does so quickly – even as it seeks market feedback on each component from as many as 100-150 different lenders. Just as importantly, when it reports back to the bank, Eclipse already has analyzed how much greater the recovery would be in a refinancing than in a note sale, foreclosure, or liquidation. With Eclipse’s assistance, bank reserve requirements are lessened, regulatory scrutiny is diminished, and recoveries are faster, larger, and more profitable.
In fact, profitability is maximized in every Eclipse engagement – for healthy as well as troubled companies. “In every one of our deals, everybody wins,” Bromley says. “Banks wouldn’t accept what we bring to them if they didn’t think it was a good deal.”
Eclipse’s strategy is to provide the best available information to facilitate an educated decision about every credit. Any suggestion that Eclipse is merely a broker is a gross misconception.
“We review every metric, and make suggestions concerning manufacturing, marketing, and everything in between,” says Bromley. Industry-specific ratios and profit margins are analyzed, along with contribution margins, gross margins, net income percentages, and revenue and cost per employee. Experienced CPAs analyze balance sheets and P & L statements to make determinations and suggestions about cost burdens, capacity issues, product mix, contracts, and more. Eclipse also screens customers, performs all requisite due diligence, underwrites, and conducts the kind of comprehensive financial analysis, including three-year cash flow models, that every banker would need to ensure the legitimacy of any borrower’s representations.
“One client recently called us ‘financial engineers,’ and after thinking about it I decided it’s a reasonably apt description of what we do,” Bromley says. “We’re determining the best method for pulling apart real estate, equipment, accounts receivable, inventory, and other loans and assets, and then moving them into various markets where they will yield the highest returns. Then, we put it all back together, ensure that all parties get paid, and enable the company to go forward in the best light possible.”