1. W
ith almost 30 years of combined ABL,
commercial banking, factoring and auditing
experience under his belt — including a
number of liquidation scenarios — Albert Perez was
ready for the next step. “You reach a point in your
career where you know the transition to the CRO posi-
tion is the next natural progression,” he says. “I felt
that I was at a crossroads.”
When Hana Financial launched a new ABL group,
Hana Business Capital, Perez was eager to get on board.
“As we started to discuss things early on when I was
interviewing, we felt that there was a grossly under-
served market of lower middle-market companies,”
he says, adding that companies within Hana’s target
market have borrowing needs up to $5 million.
Due to the increase in regulatory requirements on
commercial banks, Perez says he and Clark Griffith,
president and senior managing director of Hana
Business Capital, were attracted to the opportunity
to start up an ABL shop. “We credit Sunnie Kim, our
parent’s CEO, for having the foresight to support this
initiative,” he adds.
Perez believes non-regulated lenders in Hana’s
target market have a number of advantages. “Most
commercial banks prefer ABL deals in the $10 million and above range
and view anything less as too small for the costs involved,” he explains.
“Non-regulated lenders very seldom require personal guarantees, contrary
to commercial banking policy, and do not burden borrowers with a large
number of financial covenants.
“We believe in the next five to ten years, the smaller middle market
segment will continue to be grossly underserved as the economics — cost
and time invested — of managing these credits become less worthwhile for
commercial lenders,” he continues. “Even some of our competitors believe
the economics makes more sense to pursue the middle and larger middle
market segments. With pressure to meet loan goals and increase their
books either through new business generation or portfolio acquisitions,
this trend to up-market is expected to continue.”
Threefold Path of Pursuit
Hana plans to utilize a threefold process to pursue its underserved target
market. “First of all, we’re going to leverage our factoring division relation-
ships,” Perez says. “They’ve got access to thousands of customers and
hundreds of clients, so quite a number of them are under tri-party arrange-
ments with other banks but to try to consolidate that and keep it under
one house.”
Second, Hana plans to maximize relationships with commercial banks
to finance deals that have increased perceived risk that preclude the banks
from pursuit. “Due to heavy regulatory requirements, they are very conser-
vative,” Perez explains. “If there is even a little bit of a blip or a slight loss
that results in covenant defaults, commercial banking ratings will likely
deem these companies as ‘not a good fit’, so they’ll refer those over to us.”
And third, Hana intends to leverage long standing relationships with
industry referral sources — boutique investment banking, private equity,
appraisal and law firms. “We look upon these more as personal friend-
ships in the community rather than mutually beneficial business partners,”
Perez says. “They’ll let us know transactions that are in our target market.”
To really stand out from the crowd, Hana plans to differentiate itself
through its ability to provide timely responses to prospects as all of the
The Small and Swift Advantage —
HanaBusiness Capital Servesthe Lower
MiddleMarket at Light Speed
BY RITA E. GARWOOD
Newlyappointedchiefriskofficer,AlbertD.Perez shares the threefold process that Hana Business Capital
plans to employ in its quest to cater to the underserved lower middle market. Thanks to the small size, depth
of knowledge and experience of his team, Perez says Hana has decision making speed unrivaled by competitors.
ALBERT D. PEREZ
Hana Business Capital
ABFJ EXCLUSIVE: NEW ON THE SCENE
“We don’t have a bureaucratic process where it’s back and
forth between business development officer and a credit officer.
We have unified roles within our group and so that kind of hands-
on approach and the speed in which we can respond to the
market will help us, more so than our competitors.”
42 • abfJournal • OCT 2015

2. Business Capital is trying to accomplish today. “From my perspective,
factoring made the transition to ABL much smoother and enabled me
to pay closer attention to detail as a result of learning the minutia of
receivable management inherent in factoring,” he explains. “Those
skills and discipline have naturally carried over to the minutia of ABL,
particularly in interpreting field exam results with regard to receivable
roll-forwards and inventory tracking.”
When asked to describe an underwriting situation that was both
memorable and instructional, Perez points to a transaction that was
referred by Hana’s factoring group, which exhibited all the classic
warning signs of a problem factoring relationship. “After discussing
details of a contemplated ABL loan structure and the company’s
financial performance, we discovered the company was not in any
serious trouble but needed additional capital in the form of inventory
advances,” he says. “We are in the process of transferring this relation-
ship over to the ABL division while maintaining our factoring volume.
I think this really demonstrated the synergy that our ABL group will
have with our factoring group.”
Rate Hikes & Regulation Ahead
Looking ahead at the possibility of increases interest rates, Perez says
the net effect would be neutral for Hana, provided it matches funds.
“From a practical standpoint, Hana Business Capital will be sourcing
capital/debt on a floating rate and in turn, will redeploy capital based
on floating rates such as LIBOR and WSJ Prime,” he explains.
On the positive side, Perez says increased interest rates would
improve risk returns for the ABL industry. “The cons are overall cost of
funds may also increase for lenders like Hana, which will experience
tighter margins with existing transactions that may be priced lower
than the newer higher priced deals in the market,” he adds.
Perez sees regulation as both an opportunity and a concern for
the ABL industry’s future. “The non-bank financial ABL lender space
should strengthen and grow as regulations increase,” he explains.
“This means that overall returns can grow, which over time will allow
lenders to take more risk and allow entrepreneurs and business owners
to have more access to capital.” Perez believes this could enable the
industry to return to its roots, as a non-bank financial space, with rates
that offer lenders increased returns and borrowers their desired capital.
“The greatest concern is that regulations that have been enacted
continue to focus on financial performance metrics and not facility
risk, most of which ignore the benefits of the ABL structure and its
protections,” he explains. “This would conceivably reduce the number
of commercial banks that would offer a conforming ABL product.
While this may be a boom for non-regulated lenders, the volume will
far exceed the available capital to satisfy the demand.” abfj
RITA E. GARWOOD is interim editor of ABF Journal.
credit committee members, including Perez, are located in the same
office. “We don’t have a bureaucratic process where it’s back and
forth between business development officer and a credit officer. We
have unified roles within our group and so that kind of hands-on
approach and the speed in which we can respond to the market will
help us, more so than our competitors,” he says.
However, timely decision making is not the only differentiator.
Perez says Hana’s depth of knowledge and experience enable a
true understanding of a prospect’s business model and thus, its
borrowing needs. “More often than not, lenders generally get
caught up in pitching loans based on a borrower’s responses and
structure accordingly,” he explains. “We instead pride ourselves on
our ability to understand a business owner’s concerns and history
better than our contemporaries to arrive at solutions that meet the
borrower’s true working capital needs.”
There is one additional differentiator, and that is the culture
at Hana, which is a lender with global perspective. Sunnie S.
Kim, who founded Hana Business Capital’s parent 21 years ago,
is of South Korean descent. Many of Hana’s borrowers, of which
approximately half are of Korean origin, can be assured that they
are working with a lender that is culturally sensitive. Additionaly,
Griffith lived over 12 years in Japan and travelled several years
back and forth to Spain. Hana brings this global perspective to
lending and understands the importance of international trade.
Mitigating Risks
As chief risk officer, Perez’s primary responsibility is to structure,
analyze and manage the credit underwriting process for each
transaction. “Clark and I will take a look at a company’s financial
statements, look at their collateral pool, and I have the authority
to determine whether or not this would be a worthwhile relation-
ship,” he explains. “Then we will discuss it with the other credit
committee members if we indeed feel it’s worthwhile to proceed.”
This approach allows Hana to respond to prospect requests
quickly. “We’re not wasting a client’s time,” he says. “It adds to
our ability to provide a timely response and, with regard to our
factoring division, to try to enhance opportunities there.”
Another aspect of Perez’s role includes informing his factoring
and SBA colleagues about solid leads for the division. Since the
ABL factoring and SBA divisions analyze credit differently, this
approach enables Hana to leverage opportunities. To ensure fidu-
ciary duty and remain objective, Perez says third party field exams
are required to independently assess a prospect’s books, records
and inventory to determine the liquidation value of the asset pool
in the event that Hana is exposed to the collateral.
“Obviously we are looking at companies that are a little bit
more volatile in earnings but we can’t afford to make too many
mistakes,” he says, before adding. “Mistakes do happen, and I
think that’s inherent in any opportunity or potential borrower that
you analyze. If you want to move forward with it, our job is to try to
mitigate those risks by clearly identifying them based on common
mistakes made in the past.”
Focus on Factoring
Perez began his career in factoring, as a credit analyst with Heller
Financial, before transitioning to ABL later in his career. He says
that he is able to utilize what he learned at Heller with what Hana
“The non-bank financial ABL lender space should strengthen and
grow as regulations increase. This means that overall returns can
grow, which over time will allow lenders to take more risk and allow
entrepreneurs and business owners to have more access to capital.”
OCT 2015 • abfJournal • 43