President’s Message (January 2020)
As I usually start my Letter with a recap of the prior year, there’s no reason to change course this year, so let’s take a look at 2019:
New business activity was better than it’s been for last couple of years, but it’s been much lumpier. What I mean by that is that we had very busy first and fourth quarters (which continue to be our busiest quarters), but we had a slow second quarter and start to the third before things picked up again. All in all, new business was what I expected; it just came in a bit differently than expected.
2019 was challenging in terms of getting some of our deals on the books. We’ve had to overcome issues including IRS liens, state liens, merchant cash loans, and availability. These issues necessitated a longer sales cycle, which pushed a couple of fourth quarter 2018 deals into 2019 but our patience paid off; the deals funded and are performing well.
Some of our clients faced challenges in 2019, too, leading to a few bankruptcies, liquidations and a couple of businesses being acquired to save themselves from liquidation. And many clients (more than normal) had cash flow struggles during the year. Fortunately, we survived unscathed as the vast majority of liquidations tended to be friendly and cooperative.
In terms of runoff, I’d say that was in the normal range for us, but we did see a decline in borrowings for the year. All in all, though, we once again had a year with modest growth.
What do I see for 2020? All I can say is, who knows! For the last four or five years I’ve been hearing that a recession is a year or two away. I now think that’s been the mantra just because people believe we’re bound to have a recession eventually. I don’t believe it will be anytime soon as we’re going into an election year and the Republicans are going to want the keep the economy going. There’s been a softening in manufacturing, but manufacturing is now less than 15% of our economy so that won’t have much of an impact. Until something happens one way or the other to pull the economy dramatically up or down, I expect more of the same in 2020.
I think the competitive landscape will remain the same, too. There will always be some small businesses struggling so there will continue to be a need for what we do.
We brought on two Client Development Officers in 2019 both of whom have well-positioned themselves in their respective markets and are starting to see the fruits of their labor. So, for Celtic Capital in 2020, I expect to again see active new business activity (but not gangbusters) and lower than normal runoff of existing clients (based on how they’re doing now) which should all equate to an “up” year.
I am proud to tell you that as was announced at the recent SFNet (formerly CFA) Convention in New York, my dad, Bron D. Hafner Sr., (Celtic Capital’s founder) was elected into the inaugural class of SFNet’s Hall of Fame.
My dad started Celtic Capital in 1982 and for over twenty years, served as its CEO. He was also President of a stand-alone industry association in Southern California during the mid-eighties and was instrumental in helping convert it to what is now the Southern California Chapter of the SFNet. For many years, he was active in the Chapter, serving as President, Chairman, and on the Board. He also sat on the Executive Committee of the SFNet for ten years.
As a pioneer in the industry, Bron helped hundreds of business owners gain access to capital not available from traditional financing sources and mentored me and many others who have become leaders in the field.
My dad passed away in 2015, however, with this honor, his legacy as a visionary, pioneer and leader in the asset based finance industry will continue for years to come.
And to further carry on the Hafner legacy, I am also proud to tell you that in January, my son Dylan will be joining Celtic Capital. He will train as an Auditor.
I am looking forward to starting out the new decade with a prosperous 2020 and I wish all of you, a happy, healthy and prosperous new year as well.
President & CEO
Celtic Capital Corporation