Boehm Looks Forward to a Record Breaking Year With TBFBy TBF Financial
Brett Boehm has been an integral part of the company he founded with his father, Robert Boehm, since its inception in 1998. TBF Financial, LLC, has become the leading purchaser of distressed equipment leases and other asset-backed loans. In fact, TBF has just completed its best six-month run in the company’s 15-year history, purchasing more than $70 million in charged-off leases and written-off loans, compared to $30 million recorded for the same time period in 2011. Boehm reports that he expects to close at least six deals with new sources in the first half of 2013, a greater number than ever before in any other similar time period.
WLN: Sounds like TBF is on quite a roll these days. What do you attribute that to?
Boehm: Thanks. I’d like to say our recent success is all a result of our unceasing dedication and hard work, but we both know better than that (laughing). Seriously, I think the value of what we do is becoming more evident, and a growing number of lessors, finance companies, and banks are coming to us to see for themselves.
WLN: So tell me a little bit about what TBF does.
Boehm: TBF buys distressed equipment leases, commercial loans, and lines of credit. Every equipment lessor or asset-based lender has them—a pile of uncollectible, past-due commercial lease or loan obligations. We buy them and attempt to collect on them. The value proposition to our lessor or lender sources has always been, and still is, that we are paying them for something they often consider worth very little because they have already exhausted the collection process on it. When we pay them up front for these distressed assets, they are generating revenue. It’s real money for them that they show on their books as profit.
WLN: It sounds simple enough. So why do you think it has suddenly become so popular?
Boehm: It might be that maybe word is just getting out, but I like to think the way we do business is a significant part of why we are seeing such an uptick in our business. We make the process as easy and uncomplicated as possible for our sources. When we combine the prospect of paying our sources up front for something they consider of little value and do so with a simple and straightforward purchase process, it’s very appealing. And it’s especially appealing at the end of a fiscal year, when leasing companies or other lenders are looking to clean up their balance sheets and increase revenues. The fact that we’re now starting to see companies extend their distressed asset sales throughout the fiscal year suggests that maybe they’re recognizing the value of the revenue stream we can provide. And the truth is, with any distressed asset portfolio, the sooner they liquidate it, the more they’re going to get for it. These accounts are not like fine wine: they don’t get better with age.
WLN: So walk me through the typical sale of distressed assets. How, exactly, does TBF make it easy?
Boehm: We keep it simple. Our sources’ due diligence effort consists of preparing an electronic spreadsheet with some minimal information for any account they would like to sell to us. We then use this information to perform due diligence on the accounts and develop an offering price for the portfolio. If the price we offer is acceptable to the seller, a purchase/sale agreement will be prepared, and the transaction will be closed. The entire transaction, from the time we receive the seller’s spreadsheet until closing, usually takes no more than one to two weeks, depending on the portfolio’s size.
WLN: So no more than two weeks from start to finish?
Boehm: That’s right–but that’s only for the initial transaction with a new source. Once we have established a forward flow arrangement with a source, no due diligence will be required after the first transaction. We will work with them to agree on a price for subsequent transactions, and the purchase/sale agreement for the first sale will provide the terms for all subsequent sales. The only document required for each new sale under such an arrangement will be a bill of sale. At the time of each sale, our source simply e-mails us a spreadsheet of accounts it wishes to sell. We will then pay for the portfolio by overnighting a check or making a wire transfer of the purchase funds. Really, it’s to both of our advantages to streamline the process as much as possible. We think we’ve got a pretty good system in place.
WLN: Now, if you’re paying your sources for their distressed assets, clearly you’ve found a way to collect on them. What’s to keep your sources from just doing their own collections work?
Boehm: They can. And many of them do. Most of our sources either have their own in-house collections function or they outsource that function directly to a collection agency. The distressed assets we are buying are almost always accounts where, to some extent, an effort has already been made to collect but it has been unsuccessful.
The biggest difference in selling your distressed assets to TBF is that you are no longer associated with them. Let’s face it: collections work can be an ugly business. It is not a happy time for the obligor, and it is not a pleasant task for the lessor or the lender. Especially today, after several years of a prolonged downturn, many companies are desperate and with their backs against the wall; they are pulling out all the stops to make any collections process against them as difficult and prolonged as possible. By selling to TBF, our sources can redeploy employees who would be required to monitor these accounts and eliminate liability for a collection agent or collection agency behaving badly. And they still get to apply the proceeds of the sale to their bottom line as profit–which has the biggest impact of all.
WLN: So your sources are able to walk away from these distressed assets once they sell them to you and not even get their hands dirty, so to speak.
Boehm: That’s correct—and it’s not just their hands that remain clean but their name. Unlike collection agencies,that are acting on behalf of the lender and under the lender’s name, TBF acts on its own behalf, as the title holder to the account. The sale of the portfolio to TBF is an arms’ length transaction without recourse, so the seller is totally out of the picture going forward.
In addition, TBF agrees not to re-sell any of the purchased accounts as part of the purchase agreement. This gives our sources additional confidence that we will be the last person dealing with the account and will act appropriately
WLN: So you must have to be pretty confident in your ability to collect successfully where your sources have failed or given up, right?
Boehm: Well, I wouldn’t say that we’re necessarily confident we’re going to collect on each of the distressed assets we buy. Actually, we always know that there are a chunk of files that are totally noncollectable But I will say that I think we have one of the most robust systems in place for evaluating uncollected assets and making a rational decision on the likelihood that they will be collected and the amount of that collection. That system, and our trust in it, is what allows us to pay up front for these accounts. Our expectations for collecting on a portfolio are always reflected in the price we are willing to pay for it.
And I will add this: unlike collection agencies, which are often motivated to pick only the low-hanging fruit from the accounts they are given, distressed asset buyers like TBF are experts at reaching higher by identifying collectible accounts and successfully collecting on them. Because of our expertise at recognizing value, we are able to offer substantial prices for the distressed assets we buy—and do so at the point of sale.
WLN: So where do you see TBF’s business going in the future?
Boehm: I certainly don’t have a crystal ball, but I like to think that the value we offer will always be evident as an alternative for companies that are accruing noncollectable commercial accounts and not realizing any revenue from them. To the extent that we can provide an alternative that generates real revenue from an essentially worthless line item on a lessor or lender’s ledger, I think TBF will always have a role to play. Selling commercial obligations that collection agencies have failed to collect converts a “worthless” asset into profits with very little effort. It’s a practice that’s showing many leasing, finance, and bank executives how to create revenue from an area they thought none existed.
Brett Boehm is the principal/director of business development for TBF Financial LLC. Headquartered in Deerfield, Illinois, TBF has been the leading purchaser of charged-off equipment leases and other forms of distressed commercial obligations since its inception in 1998. A 1998 graduate of The John Marshall School of Law, Boehm has been with the company since its founding.