Globally GE Commercial Finance has grown at 20 percent+ per annum over 25 years to become one of the largest corporate lenders in the world with loss levels much lower than those of its competitors. In Australia and New Zealand, our experience has been even stronger.
GE's success in growing its corporate lending business across cycles and periods of rapid change is driven by its own approach to managing change in multiple businesses and its focus on financing customers whose needs are driven by change. More specifically, GE's culture and people, our approach to understanding and knowing our customers and their business, and our willingness to innovate are instrumental in achieving sustainable growth.
GE, its culture and people
As the largest conglomerate in the world, GE owns and operates a lot of businesses. While it reports as 11 business units, GE operates in many more. A strong corporate culture and a common operating system around strategic planning, budgeting, human resources and risk are the "glue" that holds these different businesses together.
Central to the GE culture are the GE values which include innovation, problem solving, growth, leadership and accountability. These values apply to financial services as they do to the industrial businesses. GE thinks big but organises small. Knowing that they have the power of a AAA company behind them, GE leaders are granted autonomy and accountability to run their own businesses locally, yet each small business fits neatly within a much larger business and ultimately GE. GE people move around. The transfer of ideas and values from the industrial businesses has been critical to GE�s success in financial services. GE Commercial Finance is not a bank; it is a financier that treats the business of financing like any business in which GE participates.
Understand a business first
At GE Commercial Finance the mindset of not collecting a loan is as unpopular as not collecting a sale in the industrial businesses. Therefore we don't organise our risk processes like a bank. Risk underwriters who approve or recommend transactions spend their time in the field with sales people, structuring deals and understanding the businesses we lend to. This way our risk organisation is able to get comfortable first hand with the business plan, the people and the business infrastructure before we lend.
GE doesn't follow fads when deciding which businesses to lend to. GE prefers to lend to businesses on their merits rather than black banning industries. GE lends to businesses it understands which either make money, or should make money, based on strong business plans, people and infrastructure. We would much rather lend to a good business in a bad industry than a poorly managed business in a strong industry.
Stay close to the customer
Each corporate lending customer is managed by a specialist account manager who has no more than 10 accounts. A strong relationship certainly helps when things aren�t going well. Through the provision of regular information account managers generally get to see issues before they become problems. They sit down with our customers, understand the issues and how they plan to solve them. By understanding and becoming comfortable with the turnaround plan ahead of time we are able to monitor progress and see it through to a successful conclusion without kneejerking as lenders often do.
For one Australian customer where the integration of an acquisition was not going well, GE worked with the customer to provide liquidity to aid the turnaround plan. The business has subsequently generated significant cashflow and GE is currently financing capital expenditure to support the company's growth plans.
Innovate and re-engineer
GE Commercial Finance typically lends to companies undergoing change with specific needs and often with challenged credit characteristics. Sometimes a highly structured solution is the only way that GE is able to mitigate the risks yet meet the customer's needs.
The willingness to try something different is accepted within GE because of the high degree of up front "in the field" underwriting and ongoing processes around account risk management. Take the example of a rapidly growing wine company that had never made a profit. GE took an innovative approach by providing the working capital debt needed on the basis that if sales growth did not occur, shareholders who were also suppliers to the business would get paid less for their grape supplies.
Ultimately, success in financial services should be driven by factors no different from industrial businesses. No matter the size or nature of the business, getting close and staying close to your customers can ultimately drive sustainable growth.