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Square 1 Bank – Funding Innovation in the Early Stages

Date: Jun 11, 2014 @ 07:00 AM

It takes only a few minutes browsing Square 1 Bank’s website to recognize the Durham, North Carolina-based financial institution is anything but square … as in conventional or stereotypical. Just by viewing its geometric layout and markedly contemporary graphics, one immediately senses this may not be your typical bank. Indeed, such is the case.

At the top of this relatively flat organization sits veteran banker Doug Bowers. Bowers, a career banker, spent 29 years at Bank of America all of which were in wholesale banking. His credentials are impressive having run middle-market and large corporate banking as well as product areas such as foreign exchange, trade finance and merchant card. For his last five years, Bowers was at the helm of Banc of America Leasing, which for years has held the top position of bank-owned equipment leasing and finance companies. Prior to joining Square 1 Bank in 2011, Bowers was a managing director at Hudson Advisors, the advisory unit for the Dallas-based private equity firm Lone Star Funds.

Managing Square 1’s structured finance group is Richard Suhl, a 40-year veteran of the commercial finance industry. Suhl, who has worked for both bank-owned and non-bank commercial finance companies, has spent much of his career lending to technology companies. Suhl joined the bank in 2009.

Photo of Douglas H. Bowers - President and CEO - Square 1 Financial Inc

After months of reporting on the bank’s deals, ABL Advisor thought it time to speak with Bowers and Suhl to find out more about Square 1 Bank and its asset-based lending business. Bowers begins by explaining, “Square 1 is a little over 8 ½ years old, and unlike most start up banks, we deal with a very sophisticated client base. Whether its investors, principally venture capital firms, or the portfolio companies in which these firms invest, both have experienced management teams. They are a thoughtful and informed group. That doesn’t make us better necessarily, but it does make us different. So in that sense, we can attract skilled bankers and a surrounding support team, whether it’s risk management, treasury management … whatever it might be.”

In fact, Bowers notes that most financial institutions would find Square 1’s client base rather difficult to finance. “We aren’t the only ones who finance these companies, but we do have a tested formula and proven track record of success. We provide them with capital, which in turn, creates opportunity, employment and prosperity. For us, that’s very visceral … we can feel the good things we provide for the various communities these companies do business in.”

And while Bowers concedes this is true of banking in general, he maintains that Square 1 approaches this higher aim in a unique way. “There’s a cultishness, if you will, in what we do and how we do it.”

As a result of this visceral appeal and cultish approach –terms not typically used by most bank presidents – Square 1 is able to attract professionals who have spent much of their careers lending to venture-related companies. Bowers adds, “We have a narrow but deep talent pool and all of this typifies the characteristics of the professionals we seek.”

After a nearly 30-year career at a mega-institution, Bowers notes the high points in terms of what attracted him to lead this institution. He says, “The first thing that attracted me was the fact that this is entirely a commercially oriented bank … it was a good fit for me. Secondly, it’s in a space that’s attractive from both a growth and valuation perspective. Also, we’re based in North Carolina and that suits me just fine. Of course, this was a great opportunity for me … we have a good story to tell.”

Photo of Richard Suhl - Managing Director Structured Finance - Square 1 Bank

The Square 1 story was compelling enough to lure Suhl back into banking from being a financial consultant in California. “I’ve been heavily involved in financing technology companies since the mid 1980s and I was contacted by Square 1 about five years ago to put together some larger loans for the bank. I knew some of the people at Square 1 since technology financing isn’t that large a world. I love the business and this was a great opportunity to get back into it.”

In terms of its offerings, Bowers notes that at first glance, Square 1 may not look all that different when compared to most traditional C&I lenders serving middle-market clients. He explains, “We offer term loans, revolving lines of credit, asset-based loans of various terms, maturities and structures. But our products are nuanced in many ways … particularly in our underwriting criteria.”

As for the structured finance group, Suhl notes, “Basically, we target institutionally backed companies, mostly by venture capital firms though occasionally private equity backed companies as well. As Doug mentioned, it’s our underwriting criteria that sets us apart from more traditional lenders.

“Even if we’re doing receivable or inventory lines, we are just as concerned with the overall business as we are with the actual collateral. At Square 1, we look at these businesses differently. For example, these companies almost always have intangible assets that we believe are valuable, and translate into overall enterprise value. We are comfortable lending based on a combination of enterprise value and collateral.  I think that traditional ABLs aren’t typically experienced in underwriting these kinds of companies.”

To sum it up, Suhl says Square 1’s ABL group seeks to do deals in the $3 million to $20 million range on a nationwide basis for technology or technology-enabled companies from which other asset-based lenders may shy away. In spite of the differences, Suhl is quick to add, “We do apply the same disciplines of field examinations, monitoring the collateral and the company overall, and managing the credit in the same way traditional asset-based lenders do.”

Starting from square one so to speak, Bowers asserts that what distinguishes it from its peers boils down to four key points. “What makes us unique is we are one of two pure play venture banks in the United States. It’s all we focus on and it’s all we do. With that distinction comes some specialized capabilities that allow us to lend to a client base that other banks won’t do, can’t do or shouldn’t do. On top of that, we only have 240 employees and that makes us very flat and nimble. We can come to decisions quickly.”

Bowers continues, “The third thing about us is for a bank this size, we are in every innovation center with feet on the street and we travel to any secondary market quite easily. The last thing I’d add to that list is our performance. We have had several years of double-digit growth across loans, deposits and net income. All of these things created the ability to successfully tap the public markets in our our recent IPO.”

Understandably, Suhl views things similarly. “Doug used the word nimble … I would agree with that. We’re a small organization and that gives us the ability to better serve the complicated businesses we deal with. Most of them are relatively immature and they stumble from time to time, but we’re able to be closer to those dynamics because of our fast response capability. That gives us a real advantage in what we do.”

In closing, we asked Bowers if there was more to share. He says, “If you can sense the passion we have for our business and more importantly for the clients we serve as evidenced by our team and the results we have put on the board, then there’s nothing more to say.” Passion and performance … that, we sense, says it all.

Senior Editor | ABL Advisor
Stuart Papavassiliou is senior editor of ABL Advisor and Equipment Finance Advisor. He has worked in publishing for more than fifteen years.

Contact Stuart Papavassiliou at 484.380.2964 or

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