Monroe Capital’s Aaron Peck loves looking at different companies to understand how they tick. As co-head of the firm’s new specialty-finance lending unit, he’ll get more opportunities than ever to do just that.
“I get excited about understanding a business plan and a strategy and looking at unique types of companies,” Peck said in a phone interview.
Along with his title as co-head of specialty-finance lending, Peck is a managing director at Monroe Capital and portfolio manager of the firm’s $350 million publicly traded Business Development Company.
The Chicago-based middle-market commercial lender has backed four or five companies in the specialty-finance space within the past year. For example, Monroe made a minority investment and loaned $50 million to Channel Partners LLC, a provider of small-business working-capital loans of $25,000 to $250,000 each.
Monroe Capital decided to ramp up this part of its business with a dedicated unit because of a large potential market opportunity in the space, Peck said. Monroe’s specialty-finance unit is taking aim at litigation finance, small business lending and leasing, commercial real estate finance, royalty streams and structured settlements, according to the firm’s website.
Traditionally, BDCs have provided some capital in the specialty-finance business. Some of that supply dried up because public BDCs trading under their net asset value are less able to sell stock to raise capital to make new loans. Traditional banks often aren’t interested in the smaller loans sought by specialty-finance companies.
“It’s an interesting risk-reward part of the market,” Peck said. “Not a lot of capital has flowed into the space. Demand for capital outstrips supply.”
But the practice demands a specific skill set, he said.
“You have to understand the unique aspects of each business, along with its regulatory issues and different types of due diligence,” Peck said. “It definitely takes a team that’s experienced and understands the nuances of lending.”
Peck is joined by Lee Stern, managing director, and Kyle Asher, vice president, in leading the firm’s new specialty-finance unit, based in Monroe’s offices in New York and Chicago. Monroe Capital has the staffing resources in place to handle the business, although Peck said the firm will look to gradually add members to its underwriting team.
Photo courtesy of Monroe Capital