Insightful Investor #69 - Bob Louzan: Asset-Based Lending, Downside Protection
May 6, 2025
Bob Louzan, Co-Founder and Managing Partner at WhiteHawk Capital Partners, brings a wealth of expertise in asset-based lending for middle-market companies. He discusses how creative lending strategies provide downside protection while identifying undervalued firms ripe for recovery. The conversation dives into the nuances of asset-based lending versus traditional methods, navigating bankruptcy risks, and maintaining capital preservation. With a focus on rigorous due diligence, Bob shares valuable insights into minimizing losses and leveraging asset values for resilient investment.
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Bob's Shift to Asset-Based Lending
- Bob Louzan shifted from cash flow lending to asset-based lending in the early 2000s after doing workouts and restructurings.
- He saw asset value as a way to recover money when cash flow disappears and started lending based on assets, not cash flow.
Valuing Assets Over Cash Flow
- Asset-based lending values the liquidation worth of assets rather than book value for loan security.
- This approach allows lending to companies with poor cash flow but valuable assets like inventory or equipment.
Underwriting for Failure Protection
- Bob underwrites loans assuming the borrower will fail and not generate cash flow.
- This removes dependence on economics or cash flow for repayment, focusing solely on asset value.