4 interesting business development trends from post-crisis regulation in B2B finance

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Oh, Basel. As capital requirements increase, the cost of capital and liquidity increase and it puts strong pressure on bank margins. When that happens some business development trends emerge.

Trend #1: More fees please.

Mid-sized and large companies are getting beat to death with derivatives and other capital markets solutions and all businesses are getting flooded with the treasury management sale. It’s not really less business development focus on credit as much as it is a massive ramping up of the other stuff. Following these strategies, banks are tweaking their client profitability models to require more “cross-sell” or non-interest income as opposed to just swooping in and doing the credit. Total relationship profitability standards are higher than in recent memory if ever. This means a potential pressure on customers to maybe buy more than what they are seeking.

Trend #2: Closer monitoring of credits

Could the days of the annual review be ending? Maybe. Many banks are implementing bi-annual and quarterly reviews on even simple cash flow deals. Regardless, the closer attention means increased pressure to covenant compliance in an environment where convenants are generally tightening.

Trend #3: Heightened battle for credit exposure

Equipment finance groups are fighting with working capital…even treasury management department for precious, more scrutinized hold levels within the bank. And while syndication markets are frothy, always easier to sell a single investor deal than a club deal in the middle market and in some cases even with bigger companies. This can be a real problem though for asset intensive smaller business.

Trend #4: Commercial finance rising

Don’t take the GE thing as an indication commercial finance and other non-bank sources of capital are fading. In fact, we see the opposite. GE clearly became exhausted with the flood of regulatory crap enforced now because of their size. Most commercial finance companies do not have this obstacle. Even beyond traditional senior finance, mezz, second lien and other debt providers are growing rapidly and the run of private equity has been almost meteoric over the last few years. All that is happening because banking is not meeting the magnitude of the need. Not because they don’t to, but because the regulation has them in handcuffs to a point. And that creates an opportunity for commercial finance.

If you ever wanna chat about how to take the trends of the regulatory environment and turn them into a business development opportunity, both banks and commercial finance companies can gain ground…give us a holler.

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