Hey DF,

Most of you know..... We are Seacoast Business Funding, a division of Seacoast Bank. We are the factoring and asset based lending division of the bank. Some of you know I am a capital markets veteran of over 25 years. My last role before joining Seacoast was an investment banker for a prominent advisory firm in South Florida.

My deal flow comes from a variety of referral partner types. For the last several years, the majority of lower middle-market deal flow has come from the broker community. This was mostly due to the business owner not wanting to elusively engage an advisor, pass a retainer, and pay success fees at closing. In a robust economy when business owners are getting called 50 times a day asking if they need money, some did not feel the need to hire a professional advisory firm.

The tide has changed over the last couple of months. The majority of deals I am currently closing and/or are in process to proposing came from professional advisory firms. This is happening for a variety of reasons:
-The capital markets system has vastly changed during COVID. Hiring a professional to navigate who actually can close a transaction is critical. There are a LOT of alternative lenders claiming they are closing deals, but in reality.....that is far from the truth. Many have lost their credit facilities or their lender has tightened requirements.
-Many business owners have blown through covenants on their current facility. They have been asked by their lender to seek professional advise and/or hire an advisor to seek a new lending relationship. The lenders want to be sure that a professional and reputable firm has been hired while in forbearance. They also want to be sure that the client is able to obtain a lender that pays off the entire amount of debt due.

I expect over the next several months more lower and middle market deal flow will shift from brokers and people hunting for money on the internet to professional advisory firms.

I am NOT discounting or bashing loan brokers as I have and always will have great relationships with loan brokers. I am just giving some friendly color on what I am seeing in the market,

Best,

Kevin