Opportunities Still Ahead?

With the year coming to an end, it’s time to analyze what direction the industry is going in. Some professionals in the industry are feeling optimistic despite macroeconomic pressures and there’s a reason for that.

Gerald Watson, Founder and President of The Watson Group, said with the latest Employee Retention Tax Credit (ERTC), his company has been on a steady incline. The tax credit was designed for companies affected by Covid in 2020-21 as a refund against payroll taxes they’ve already paid and that’s where Watson comes in because it can take a while for business owners to actually receive those funds, as long as 6-12 months, he said. With the help of funding partners, Watson can make an advance to business owners on the ERTC upfront. Watson’s core business has always been factoring but when he saw this opportunity, he went for it.

“I think maybe looking ahead as we get into 2023 next year, I think the industry is going to be continuing to look for ways to expand its product base, and I think it’s likely that we’ll see more and more maybe of your larger lenders moving into things like some form of factoring, for example,” said Watson.

On the fintech side, CRO at Encapture Tyler Barron says he’s noticed a shift this year regarding certain lines of business but that their product has historically performed well regardless, even if the deal sizes get a bit smaller. Encapture is a platform that sells automated programs to financial service companies – primarily big banks – and they’ve noticed large, regional, and community banks investing more in technology, specifically ones that help them automate and cut costs.

“What we’ve kind of seen over the past year is, there’s definitely been a pullback, as it relates to certain lines of business, like anything related to mortgage this past year has completely dried up,” said Barron. “But we are still seeing financial institutions, both fintechs, large banks, regional banks, and community banks invest in technology.”

Back at Broker Fair in late October, Pooja Nene, Broker Relationships Manager at Balboa Capital, told deBanked that she thought the industry was going in a good direction.

“I think with a lot of issues that we’ve had since 2020 our industry’s been holding up really well and there’s a ton of opportunities out there to get involved in different types of financing…” said Nene.

Overall, the demand for the products should continue.

“One thing about our industry is that people always need money; good times bad times, high interest rates, low interest rates,” said Gerald Watson. “There’s always going to be a demand for what we do.”