On Their Own: Mark Hafner, left, and Alexander Falo at Celtic Capital Corp.’s headquarters in Santa Monica.

On Their Own: Mark Hafner, left, and Alexander Falo at Celtic Capital Corp.’s headquarters in Santa Monica. Photo by Thomas Wasper

Celtic Capital Corp. was part of Century City’s PacWest Bancorp for just two years but that was long enough for Celtic’s executives to realize they’re lenders, not bankers.

Last month, Celtic, an asset-based lender in Santa Monica, broke off from PacWest. Executives Mark Hafner and Alexander Falo say the move frees Celtic to lend to the troubled companies they have always served, rather than the more stable borrowers preferred by banks.

“Banks look for bigger deals and lower risk, but that didn’t fit the space Mark and I grew up in,” said Falo, Celtic’s chief credit officer. “If you’re good in the niche you’re in, why change?”

With backing from a private equity group, Hafner and Falo bought the company from PacWest last month. The bank holding company had purchased Celtic in 2012 to help boost its small asset-based lending practice.

But after PacWest’s acquisition this spring of downtown L.A. lender CapitalSource, which had more than $1 billion in asset-based loans, Celtic wasn’t a priority. The Santa Monica lender has less than $100 million in loans. PacWest executives did not return calls for this article.

Under PacWest’s ownership, Celtic and two similar lenders had operated as independent subsidiaries. But now, PacWest has consolidated all its asset-based lending into CapitalSource – something Hafner said doesn’t interest him. He’s been with Celtic since 1985, three years after his father founded the company.

“We’ve always been in control of our own destiny,” Hafner said. “I’ve always looked at the business as mine anyway, no matter who owned it.”

Troubled assets

Celtic, like other asset-based lenders, offers revolving credit lines backed by a company’s equipment or its accounts receivable – that is, money owed by other businesses.

Many commercial banks offer asset-based loans, typically to clients who wouldn’t qualify for standard loans, but Celtic specializes in lending to businesses that are too risky even for a bank’s asset-based loan division. Its clients are typically losing money or have too much debt but could recover with the help of some extra cash.

“We’re looking at a company and asking, have they hit the bottom of the trough and are they on the way back up?” Hafner said.

That business proved riskier than PacWest wanted. Nonbank lenders such as Celtic don’t have federal deposit insurance and don’t answer to bank regulators, so they can make riskier loans than banks.

Soon after PacWest acquired Celtic in 2012, Falo said that the bank wanted the firm to start working with more-stable clients. But that proved difficult because of Celtic’s history.

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