In late August, Wells Fargo Capital Finance (WFCF) announced the formation of a new originations team for its Supply Chain Finance Group in the Americas. This team has been assembled as a result of Wells Fargo Capital Finance’s acquisition of GE Capital’s Commercial Distribution Finance (CDF) business, making Wells Fargo Capital Finance the largest Channel Finance provider for Technology Manufacturers in the Americas. John Schmidt, a co-founder and managing partner of Castle Pines Capital LLC, which was acquired by Wells Fargo in 2011, has been appointed to lead this new team. ABL Advisor spent time with John Schmidt and Scott Diehl, Head of Capital Solutions for Wells Fargo Capital Finance to learn more about Wells Fargo’s rationale for expanding in the supply chain finance sector of commercial finance.

ABL Advisor:  In March 2016, Wells Fargo announced the completion of the acquisition for the Americas portions of GE Capital’s Commercial Distribution Finance and Vendor Finance businesses as well as a portion of GE Capital’s Corporate Finance business. Please describe how the integration of CDF’s technology business into Supply Chain Finance is progressing.

Scott Diehl:  The CDF core business focuses on working with manufacturers of consumer durables but also has a technology channel finance business which is analogous to our Supply Chain Finance business, originally Castle Pines Capital LLC, so the synergies of the groups made it an amazing combination. While the two groups had historically been competitors, there was always a great level of respect between the groups and knowledge of each other’s approach to the market. We quickly found that the team members realized there are great qualities brought to the table by both teams despite the fact that they were formerly competitors, so it didn’t take long for them to begin working effectively together. Our approach from the onset was to understand the talent available in the overall team; and from an integration standpoint, we have focused on the various functional areas in order to ensure the business will work effectively in the long term by focusing on the pillars of the business –- our Vendor Relationship team for our technology manufacturing partners, our Sales team, along with Underwriting, Relationship Management, Credit and Operations. It’s been a strategically staged process that is going quite well.

ABL Advisor:  Why is growing the Supply Chain Finance Group important to Wells Fargo Capital Finance and what makes John Schmidt the right person to lead this group?

Diehl: This product can be sold as a primary product to customers or in addition to other Wells Fargo products – which is an important part of the Wells Fargo Bank culture. We have a mantra of creating relationships and doing more with our relationships over time. So the supply chain finance product fits very well within Wells Fargo’s strategy to provide excellent service, be a trusted advisor and also provide Wells Fargo’s clients with the many products they require to succeed.

John was a natural choice for us as a co-founder of Castle Pines Capital LLC. Beyond his technology expertise, John possesses experience in many different sectors. His ability to connect with customers and create and lead a cohesive group made him a natural choice to bring the two businesses together and create the largest business of its kind. We are fortunate to have him leading this group.

ABL Advisor:  John, please tell us briefly about the history of your relationship with Wells Fargo Bank.

John Schmidt: I was one of the co-founders of Castle Pines Capital LLC, so my relationship with Wells Fargo Capital Finance goes back many years – back to 2004 when the bank was our primary source of capital. When Castle Pines Capital LLC was acquired by Wells Fargo Bank in 2011, I initially intended to stay for five years, assist with the integration and perhaps retire from the business that made up my entire career. Then the opportunity presented itself to assist in the GE Capital acquisition and I am now so pleased to have been asked to lead the combined Supply Chain Finance Group for the bank.

ABL Advisor:  The Wells Fargo Supply Chain Finance Group consists of three products: Channel Finance, Supplier Finance and Sales Finance. Please describe the differences between these products for our readers and the solutions these groups provide.

Schmidt: In the Supply Chain Finance Group, channel finance is strictly for technology manufacturers, distributors and software providers. We call it channel finance because the vast majority of technology (hardware, software, services) solutions typically runs through their channel ... that channel being manufacturers, distributors, solutions providers or value added resellers. The role we play in this space is to assist in funding the gap between the manufacturing/sale and ultimate repayment from the end customer -- the timing of cash flow. These groups are so good in what they do best, which is to innovate new technology products and services, and craft that solution or service for their end-user customers.  The Channel Finance product provides capital to assist in the cash flow needs from the period of time when the solution is originally manufactured to the time it is ultimately paid for by the end-user. In addition, we use extensively technology to manage the flow of information on that solution. The ultimate goal is to assist in our customers' success.

The next product is Supplier Finance –- which again, assists in that cash flow timing gap. In this market we establish lines of credit for Wells Fargo Bank clients which are in multiple industries. An example of how this product works, when the client purchases their product to sell from their supplier, that supplier provides terms. Our solution provides a rapid repayment of that invoice to that supplier and we provide the capital to extend terms to the client which usually matches the ultimate sale and payment by end customers.

The third product is Sales Finance –- same situation again, cash flow timing. In this market, a Wells Fargo Bank client that sells their product wants to be paid in typical terms of, let’s say 30 days.  Their customer that purchased the product wants to pay for it under longer terms, maybe for their own cash flow gap. In these cases, we purchase that receivable which provides the capital to extend the terms and assist in the cash flow gap. An important distinction for our Supply Chain group customers is that we typically work with the larger Wells Fargo Bank clients for this solution.

ABL Advisor: Tell us a bit about the team you have assembled, how these teams will work together, and the commitment Wells Fargo has made to grow this team.

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