Pivoting to Working Capital Lending, Part 1

Covarity’s October 6th webinar, Transitioning to Working Capital Lending: A Guide for Making the Pivot to C&I, featured Mr. Todd Williams, Chief Credit Officer at Fidelity Bank and was very well attended with a great number of questions across a range of strategic and tactical facets in working capital lending.  If you missed the event, you can access the recording or download the slides.

There are two interesting data points that came out of the presentation that we wanted to share more generally.

First is a graph that depicts recent (June 2010 – June 2011) fluctuations in Construction and CRE vs C&I portfolios by Total Loans:

This graph – based on reported FDIC data – clearly indicates a shift towards C&I lending, but growth is really only being enjoyed – on average – by lenders with total loans outstanding greater than 500M.  This was somewhat unexpected – we would have anticipated that with less organizational impact, smaller organizations could act with greater agility to seize on growing interest and demand for working capital lending. We can only hypothesize that other dimensions of this lending model – more frequent and robust loan monitoring requirements, as an example – give an out-of-the-gate advantage to larger lenders with greater operational resources.

We ran a poll during the presentation to get a glimpse of where attendees (300+ commercial banking executives) fell in terms of their portfolio strategy with respect to working capital lending.

Q: Where are you with your current portfolio?

While the results are by no means scientific and the nature of the subject would naturally introduce bias, in our poll 67% of respondents were either considering a pivot to working capital lending, were currently pivoting or had themselves recently pivoted.