Borrowing to acquire equipment, supplement cash-flow or finance company expansion can be challenging for some businesses depending on financial strength and operating performance history. Patrick McMullan, president of ALCS Capital, says he has firsthand knowledge of the difficulties businesses face despite a borrower-friendly upper middle market. McMullan sees this gap as an opportunity for his young company to seek not only medium and large businesses, but also smaller companies that tend to have more difficulty securing the financing they need to grow.

“The reality is that there is a huge opportunity to serve Main Street America, which isn’t being served today by traditional banks,” McMullan explains. The ratio of the total amount of small business loans to the lenders’ total assets, or total asset ratio, has declined steadily in the last six years from 16.4% in 2007 to 14% in 2012. This ratio is the share of lenders’ assets that is lent to small firms. Small businesses have been falling behind in the competition with other uses of capital held by lending depository institutions. To fill the void created by a lack of coverage on the smaller scale loans, McMullan announced ALCS Capital’s launch in spring 2014. “We’re looking for those opportunities where folks are being told no by their banks, and we try to find a creative solution that works for them,” he says.

Cranford, NJ-based ALCS Capital is an independent commercial finance company that offers a wide range of products including SBA financing, medical financing, franchise financing, equipment leasing and financing, and sale/leasebacks. In the leasing space, McMullan says the company targets oil and gas, heavy equipment, medical, mining, food processing, tractor/trailer, marine and other industries.

The myriad of products ALCS offers may seem like a large portfolio, but McMullan and his team have the experience and the knowhow to advise their clients as to how a specific product fits their needs. “I think you need to have knowledge of all of those pieces,” he says. “They’re all tools. When you approach clients, you have to be well versed and be able to educate them on the pros and cons of each approach.”

For example, McMullan describes a situation where a client was looking at a sale/leaseback transaction to raise liquidity, but after further review, his team found that the customer had a substantial book of receivables. “Leasing is such an important tool, but when talking with a client you may come across additional areas in which they need to raise capital,” he explains. “We were able to recommend a factoring line in addition to the sale/leaseback that enabled the client to take advantage of early payment discounts and raise additional liquidity.”

Getting to Business

Buoyed by his 25 years of experience in the commercial finance world, McMullan is confident in his team’s ability to have a significant impact. “The back office systems and procedures are really poised for growth as we look at the balance of 2014 and into 2015. I have developed many of these relationships over the years, so a lot of the infrastructure and the procedures are all done. We’re really looking forward to getting out there and helping businesses.”

McMullan says ALCS is a flat organization, a structure in which most middle-management levels and their functions have been eliminated, bringing the top management in direct contact with salespeople, shop floor employees and end users. This highly personalized approach spans nationwide. “We are a national platform. We work with all credit grades,” McMullan says. “We have programs at the micro-ticket level — such as the $3,000 level — all the way up to the multi-million dollar transaction, so we really cover a wide path.”

McMullan’s path began at KPMG and led him to Bell Communications Research (BellCore), before joining the equipment finance world at AT&T Capital, where he provided financing to the telecommunications industry. Drawing upon his experience at BellCore, the research and development company for the Baby Bells, he felt he would be a good fit at AT&T Capital, and ultimately CIT, companies which he says prided themselves on establishing strong customer relationships. At that time, AT&T Capital and CIT were unregulated, which gave them the ability to offer creative solutions for their customers in all market cycles. However, McMullan notes that the Great Recession of 2008 turned the finance world on its head.

“Smaller to mid-sized businesses struggled to gain access to capital,” he says. “We find that many business owners and executives aren’t really aware of the options that are available to them. The good news is that there is plenty of capital out there if you know how to find it.”

ALCS Capital bridges the gap in order to connect businesses to capital and help them find the right product, terms and structure for each client. “The desire here is based on the need to get back to basics and restore true relationship lending. That was the cornerstone of AT&T and CIT. [To get] back to that, we are taking the time to ask questions to learn about each business, [its] short-, medium- and long-term goals, and finding the right product for it at a particular stage of the business’ life.”

The Independent Advantage

One of the perks of being an independent financial services provider is not being hampered by government regulations, and the paperwork and sluggish turnaround associated with them. McMullan says the benefits and opportunities presented to ALCS as a non-bank commercial finance company include speed and efficiency in closing transactions, as well as its broad product offering range.

ALCS Capital utilizes its portfolio through a direct origination strategy, however the company will partner with banks or other financial institutions to ensure the customer gets what it needs. “We feel we are in a unique position to offer creative strategies that are really designed and developed for our clients’ funding alternatives and facilitate access to new capital sources,” McMullan says. “In addition, we also work with other financial institutions to help manage their customer declines, which ultimately help them keep depository relationships while still meeting the needs of the end-user customer.”

He finds many of his relationships are with local banks, as these lenders reach out to McMullan if they have a customer needed something the bank doesn’t offer.

“Given that we do not take deposits, we work well and in concert with many traditional financial institutions,” he says. “There are times financial institutions will turn to a non-bank financial company to help the bank’s client because it is unable to; otherwise the customer may pick up his or her business and go to another bank, resulting in the initial bank potentially losing a depository customer. We work well with others, but our primary approach is direct.”

In addition to the direct approach, as well as his ongoing relationships with traditional financial institutions, McMullan says one of ALCS Capital’s short-term goals is to develop relationships with key vendors. “In the short term, we are looking for equipment vendors that are seeking to increase product sales. Through our program we may be able to qualify more customers, which allow the vendors to move more product,” he says.

In the long term, McMullan has global aspirations. “Since our platform is national, we believe that a lot of successful companies in the long term need to have a global presence to develop opportunities to help [international companies] reach their funding needs as well.”

This growth stems first from the ALCS Capital team. While all the senior positions are filled and ready to take the financial world by storm, McMullan says he is looking forward to continue growing and finding individuals who share the ALCS vision.

“That vision is on the relationship side — really getting to understand customers, taking time to ask the important questions,” he says. “It’s not the quick-get-them-in, one-product, one-size-fits-all approach. We’re looking for select folks to [help] continue to grow the business.”

Cautious Optimism

McMullan’s growth aspirations aren’t the only things on the horizon. The continued uncertainty of the current economic state, stemming from rising interest rates, market demand and regulations, clouds forecasts for 2015 and beyond; however, McMullan is far from discouraged at what is to come.

“Our outlook for the equipment leasing and finance industry is contingent on a lot of macro-economic forces. We’re looking at the interest rate environment. Rising interest rates obviously could cause reactions in the market. We’re seeing some continued uncertainty in the regulatory environment, which is a key issue. We do see demand in certain market segments. The overall economy will dictate any meaningful recovery. We remain cautiously optimistic at this point for the balance of 2014 and into 2015.”

Megen Donovan is an associate editor of the Monitor.