President’s Message (January 2021)
While 2020 is technically now history, its after-effects are still being felt. What a year it was and we’ve yet to catch our collective breath. As of the writing of this Letter, the pandemic has taken a turn for the worse and Congress is coming close to approving a second stimulus package; one for which we don’t know all the particulars but will definitely be scaled down from the first package. But I don’t want to get ahead of myself. Let’s start with what we saw in the second half of 2020:
In terms of Celtic Capital’s client base, sales rebounded (for the most part) and 80%-85% of our clients are at or above sales levels pre-pandemic. Collections had always been strong and remained so. Borrowings that fell in the second quarter did not rebound even when sales did. Since all received PPP money, that was not surprising. Overall, our clients are doing well and we’ve had no COVID-related business closures or liquidations.
New business, however, is down across the board – from leads to new fundings. Banks have just not started exiting clients; they’re hanging in to see how, and if marginal clients can recover. I expected activity in the fourth quarter but that didn’t materialize. It’s really been unclear how banks will, and are, looking at COVID issues. It’s yet to be seen how PPP money flows through to the balance sheet and what the banks’ take on that will be; which brings us to the present:
From an ABL perspective, if losses are covered up through loan forgiveness, banks will keep clients longer. Another stimulus package will also delay bank exits which would continue to affect borrowing levels and new business. This just means that the day of reckoning will be pushed back a little father. But as I said in my last Letter six months ago, and which is still cogent today, the sooner banks start the exiting process of marginal clients that are unlikely to recover, the better it will be for them and for those clients.
On a more positive note, while I had expected to bring on only one new Client Development Officer last year, I brought on two. I found two great candidates – Bryan Hatfield and Jonathan Bloom who handle our Southeast and Mountain West territories, respectively.
Our Client Development Officers, while restricted in their ability to conduct in-person meetings, have embraced working remotely and the use of digital platforms thus enabling them to continue to seamlessly interact with, and support, their referral sources and the businesses they refer.
As a company, we are committed to the business communities in which we serve and we’re poised to handle the busy time we know is coming as soon as it arrives.
Wishing everyone a better year.
President & CEO
Celtic Capital Corporation