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Interview with Jim Cretella, Chair of Otterbourg’s Alternative and Specialty Finance Practice Group
By Eileen Wubbe
In March, Otterbourg P.C. announced that James M. Cretella was named Chair of the firm’s Alternative and Specialty Finance Practice Group. A member of the firm’s Finance Department, Cretella represents lenders, factoring companies and other finance companies, as well as borrowers, in a variety of transactions.
Cretella has practiced at Otterbourg for his entire career and his experience encompasses financial transactions across a broad range of industries, including staffing, technology, transportation, oil and gas, and government contracting. His areas of focus include asset-based lending, supply chain finance, trade finance and specialty finance. He often acts as “outside in-house counsel” to finance companies and specialty lenders.
Cretella is a 2016 winner of the Secured Finance Network’s 40 Under 40 Awards.
Here he discusses his role and how the industry has evolved since he started.
Congrats on your new role as chair of Otterbourg’s Alternative and Specialty Finance Practice Group. Can you provide some background on your career?
Jim Cretella: I started as a summer associate in 2003 and I returned full time as a first-year associate the following year, right after graduating law school. I began my career working for Jon Helfat, SFNet’s co-general counsel and a senior Otterbourg partner, in our firm’s bankruptcy and restructuring group. I gained experience quickly because Jon demanded a lot and set a very high bar for the attorneys that worked with him. Jon’s business sense is second to none and learning from Jon in the workout and restructuring environment prepared me very well for a career as a front-end finance lawyer. I think all young aspiring finance attorneys could benefit from workout and bankruptcy experience. Working in the back end gives a unique perspective into what issues are most important on the front end.
As chair of the Alternative and Specialty Finance Group at Otterbourg, what does that entail?
Cretella: The Alternative and Specialty Finance Group is comprised of attorneys who are creative and highly experienced in drafting documents and negotiating transactions to meet the emerging trends in today’s financial markets. The commercial lending landscape is changing. In the not-so-distant past, the majority of commercial borrowers under an asset-based revolving credit facility sold widgets and the typical borrowing base provided for availability against those widgets and the resulting receivables. Today, by contrast, many commercial borrowers are increasingly service-based businesses with a variety of traditional and non-traditional business models, such as, for example, software as a service or subscription-based business models. Part of our focus in the alternative and specialty finance space is on those evolving areas of lending. Specifically, helping lenders structure and document credit facilities for the commercial borrower with a non-traditional business model.
So that’s part of our focus. Another part of our focus is on credit facilities for the borrower who might not qualify for a traditional asset-based lending product. For example, some of them might be start-ups or might be too small or simply might have not the best credit profile. Despite these challenges, lenders are often attracted to these opportunities, whether because of increased competition in the market generally or because of the potential for larger yields. Of course, lending to these types of borrowers comes with more challenges for the lender. However, that’s quite frankly where my prior workout experience is very helpful. Growing up in the workout space, you get an appreciation for what’s more likely to turn into a real issue down the road and what’s not.
What are some memorable deals or transactions that you’ve worked on over the years?
Cretella: I don’t know if there is necessarily a memorable deal per se, but in terms of the alternative and specialty finance space, what I like most about it is being on the forefront of a fast-growing, and rapidly evolving, practice area. Nothing is the same, everything is different. The lenders in this space are often willing to consider financing many different types of asset classes. I routinely get calls from current and prospective clients asking, ‘Hey, what about this type of asset, can we finance that? What about a software as a service business, can we lend against that? How can we figure it out?’ That is what I really like. Every time you get a call from a client looking to extend their reach into new asset categories or create a new product, it’s a lot of fun.
How has the profession changed since you first started?
Cretella: I think it has changed both for lenders and lawyers. In terms of lenders, their market is changing. There’s more money in the market for commercial borrowers to access and more entrants to the market competing for those same commercial borrowers. Twenty years ago, the alternative and specialty finance space was considered a niche generally reserved for the occasional non-traditional business model or for less-creditworthy companies. It’s not like that anymore. It’s evolving, and now the products offered by alternative and specialty finance lenders are increasingly competing with traditional lenders as a primary source of working capital for traditional and non-traditional business models of every credit profile. For example, some supply chain finance products are as attractive, if not more attractive, than a traditional asset-based lending facility as most of the SFNet audience would think of it. In order to compete in this growing space, traditional lenders will need to adapt if not expand their product offerings. And that’s what we’re doing, we’re helping them with that process.
What advice would you give to young attorneys starting out and what helped you in your career?
Cretella: The best advice I can give to young attorneys is to understand that the law is a service business. Get to know your clients, understand their goals and expectations, and then help them achieve those goals while exceeding their expectations. Customer service. I can’t stress that enough.
Another piece of advice for aspiring finance attorneys is to consider getting some experience in workouts and bankruptcies. I learned from some of the best in the industry and that’s been instrumental in helping me develop products for clients in the alternative and specialty finance space. My workout experience gives them the comfort that I can properly advise them on the legal and practical nuances of financing a borrower in that space.
When you’re not busy at Otterbourg, what can you be found doing?
Cretella: I have three young kids who all play sports. I try to help out That’s usually where you find me outside of Otterbourg, either coaching on the sidelines or being that annoying parent commenting from the sidelines, one or the other.