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September 8, 2020

STRETCHING OUT: SG Credit Partners Continues to Evolve from Cash Flow Lending Origins

SG Credit Partners was once a single product division of Super G Capital, but in 2018, Marc Cole and Charlie Perer decided to branch out by co-founding SG Credit Partners. Since then the company has expanded its product offerings, brought in a bevy of new talent and used an infusion of capital from Cynosure, 4612 Group and MidMark to position itself for further growth. 

SG Credit Partners has a clearly defined role in the lending marketplace. It is a term lender and provider of senior and junior structured credit solutions to the lower middle market. Led by Marc Cole as CEO, the company focuses on situational needs in the $1 million to $10 million range, with Cole noting that between $2 million to $7 million is the real sweet spot for his team.

“By focusing on situational needs between $1 [million] to $10 million, we stay above the fray of fintech and below the crowded and competitive field of much larger funds,” Cole says. “We are transactional by nature and do the hard work the bigger funds and conforming pools of capital can’t do in our size range.”

But SG Credit Partners wasn’t always set up like this. In fact, it wasn’t always called SG Credit Partners.

Beyond a Stretch Piece

SG Credit Partners can trace its roots back to Super G Capital, where Cole and Charlie Perer, who now heads originations at SG Credit Partners, ran the company’s cash flow lending vertical. At that time, Cole and Perer were primarily focused on partnering with the asset-based lending community to provide secured, non-collateralized term loans, or what are commonly called stretch pieces, to fill a credit void that conforming ABL could not solve. The cash flow lending vertical was part of a two-division approach for Super G Capital, with the second division focused on merchant services, which was the original driver of the business. While the company as a whole was active in lending to the payments industry, Cole and his team kept their eye on ABL as a growth opportunity and entry point into the market.

“Our initial cash flow division was solely focused on partnering with the ABL community,” Cole says. “We got our start by focusing on one product… and we grew that business from a startup within Super G to spin out as a separate company and built a brand in the industry.”

However, despite finding a niche for themselves, and close to several hundred million funded, Cole knew that relying on a single product was inherently risky.

“We realized the limitations and the risks that come from one product,” Cole says. “We set up SG Credit Partners as a platform focused on using national relationships to provide multiple solutions.

“Our success in building national relationships with senior lenders and investment banks led us to see a much bigger picture and opportunity. This realization helped us rethink our product suite, team and capital base.”

With that mentality in mind, Cole and Perer elected to spin off the cash flow lending business and launch SG Credit Partners in 2018, with their sights set on expanding their offerings in lower middle market business lending. In the two years since launch, SG Credit Partners has certainly been able to succeed on its expansion. The company now offers structured cash flow, non-conforming ABL, distressed/special situations lending, software lending and high net worth liquidity solutions.

“We mostly target the non-sponsored businesses as we understand the family-owned business mindset and needs,” Cole says. “Our partnership with the ABL community is still front and center, but for us it was important to expand beyond providing the stretch piece to their clients. We will never compete against conforming ABL, and instead we focus our products on the credit voids that regulated lenders can’t sell with traditional products.”

As SG Credit Partners built up its new lending capabilities, Cole identified a need to change the culture of the company, shifting from a focus on growth to one based on credit.

“As a startup, you go through periods where you are hoping for the phone to ring when you are trying to build a name for yourself,” Cole says. “Starting as lending outsiders, it wasn’t easy to see quality deals in the early days. We were patient and over time earned trust from senior lenders that saw us as a shorter-term capital solution for their clients. A few years ago, we woke up and were not a startup anymore, which mandated a new period of change. As deal flow increased and assets grew, suddenly credit discipline became everything.”

Assembling the Leadership Team

Part of that change involved bringing in an expanded senior leadership team to best position SG Credit Partners as it reached $100 million in assets.

First up was Mack McNair, previously from CIT, Silverpoint and Virgo, and currently CEO of MidMark Financial, who led the investment into SG Credit Partners as chairman. Then came Andrew Hettinger, who previously worked for Crystal Financial and was recruited to be SG Credit Partners’ chief investment officer. Lon Brown, a former Bank of America and credit fund executive with experience in real estate and special assets, joined next. Brown is now the senior credit advisor and a board member for SG Credit Partners, and Cole credits him with rebuilding the company’s portfolio management capabilities.

“With Andrew heading credit, Lon guiding portfolio management and Charlie focused on originations, that enabled me to expand the team and build SG Credit into a national credit platform,” Cole says.

The team building didn’t stop there. The company expanded its regional footprint by bringing in Gordon Brothers veteran Chris Koenig as a managing director in Boston, former AloStar Capital vice president Carlos Tan as a senior vice president in Atlanta and John Todd from AloStar Capital as a managing director in Chicago. Koenig and Tan became team members in 2019 and Todd was hired in February 2020.

“We now have superb professionals in each region,” Cole says. “These executives complemented our core team in Southern California and enabled us to have senior professionals throughout the country.”

Every team needs a leader, and Cole fills that role for SG Credit Partners, using a varied range of experiences to direct the company.

Cole got started as a professional with a five-year run in the venture capital space, an experience that still influences his perspective today.

“The venture world is incredible as it teaches you that the team is paramount and creativity and hustle can overcome most challenges,” Cole says.

Cole eventually moved on from venture capital and took a role leading investments with a family office in New York. There he was introduced to bridge lending and structured credit in the lower middle market, an experience that would later lead to SG Credit Partners. While working at the family office he met Perer, with whom he would work as a business partner for years, even to this day.

“Working side by side with a single successful investor teaches you how precious capital is, so there was always a focus on capital recovery similar to the lending world,” Cole says.

Within the family office, Cole became a business founder himself, helping to co-found fintech firm Bluefin Payment Solutions and guiding it through the startup and growth phase.

By 2013, with a number of varied experiences already on his resume, Cole joined Super G Capital to help institutionalize the business and five years later, he helped launch SG Credit Partners. Today, with the company continuing to grow, Cole still remembers what he’s learned.

“These different experiences are vital to a firm that focuses on providing situational credit to entrepreneurs,” Cole says. “I think my prior ventures solidified a belief that we can build a collaborative culture, think differently and provide lending solutions that were previously unavailable to lower middle market business owners.”

Filling the Void

Another recent and important step in SG Credit Partners’ growth was a 2019 investment from Cynosure, MidMark and the 4612 Group. The investment helped introduce some of the new leadership to SG Credit Partners and better capitalized the company to focus on the gaps it hopes to address in the market.

“Having a family office background, I understood the importance of working with long-term, patient family capital. It’s a huge market advantage,” Cole says, noting that SG Credit Partners has other advantages it leverages in the market.

“We feel that our team, the product set and capital base make us hard to compete with in an otherwise very competitive industry. Most conventional finance companies live and die by the terms of their own lenders’ credit buckets, and we are very fortunate to have two sophisticated family office backers that understand the importance of flexible capital and the cyclicality of credit markets,” Cole says. “There’s a large void for us to fill. By focusing on that credit void rather than owning the client relationship, we are a unique player in the market. We truly view other senior lenders as partners and not competitors, where we can provide shorter term capital to their clients.”

In a situation that Cole admits is not unique to his company, the COVID-19 pandemic created a difficult environment for SG Credit Partners to continue its growth, particularly during the months of March and April. However, Cole says the company will continue to meet the challenges ahead, with the hope of eventually completing acquisitions, hiring new team members and adding new lines of business.

“We remain cautious given significant uncertainty,” Cole says. “We’re eager to onboard new clients across all of our verticals when the collateral or cash flow meets our high bar of market caution. Across the industry we see defensive postures as the focus remains on portfolio management.”

Link to article here.