Specialty Capital News & Views: April 5, 2024

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In this week’s write up we wanted to focus on a few key topics that we have discussed internally as it relates to the small business financing market.

Trucking SIC: Tender rejections dropped back to 2023 lows and no real momentum is picking up. What does it mean to have low tender rejections? When a market is tight in the freight market carriers “reject” loads and demand higher pricing, which was the case post covid into mid 2022. Today, however, carriers are accepting whatever they can get regardless of price. The market remains loose and we do not see this changing in the near term. We still provide financing to strong customers in this SIC, but these are far and few in between, especially considering the low collectability behind a factoring UCC.

Minimum wage law in California – We saw a lot of chatter on this in recent days as the law went into effect. We wanted to share that this law only applies to restaurants offering limited or no table service and which are part of a national chain with at least 60 establishments nationwide. Our product is for restaurants that are much smaller in size. We believe that the restaurant SIC will be more desirable going forward in California, as the bigger chains will have to be increasing pricing and firing people (i.e more hiring capability and keeping pricing more competitive vs chains)

Neel Kashkari, Minneapolis Fed Chief, floated the idea of “no rate cuts” this year. In a virtual hearing event on Thursday, he said “if we continue to see inflation moving sideways, then that would make me question whether we needed to do those rate cuts at all” The good news is that he isn’t a voting member on monetary policy this year and while these comments spooked the market, we believe the FED pivot will play as this is an election year.

On the submission side, we have started to see better files come in at the start of April, and customers are now more in tune with the current pricing and landscape of the Revenue Based Financing Market. We remain thoughtful in our pricing and underwriting strategy

Happy Funding!

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