Specialty Capital News & Views: June 28, 2024

This week, we experienced a flurry of economic news that we want to share with our readers. As our portfolio is primarily geared towards small businesses in the construction SIC, we always consider how housing data might impact some of our customers.

New home sales took a significant hit last month, reaching their lowest level since May. Sales of new builds fell to an annual rate of 619,000, down 11.3%. The steepest drop occurred in the Northeast, where sales plummeted by 44%. The supply of new home inventory is increasing, but sellers have been firm about not reducing their prices.

Home prices hit an all-time high last month despite low spending. With rates remaining stubbornly high, people are staying put and not moving. Our view is that as soon as rates drop a little, there will be an influx of inventory hitting the market, potentially shifting it to a buyer’s market—but that remains to be seen.

We continue to be aggressive in our offerings for plumbing, HVAC, drywall, and insulation companies.

Recently, we’ve become slightly bullish on our offerings in the Trucking SIC, as we have seen tender rejections increase coming out of the West Coast. While we remain selective due to the higher risk of defaults, we continue to provide offerings to our relationship partners. We believe it is a valuable tool that enhances customer service.

In Q2, we noticed many new funders entering the landscape. There is considerable saturation in the high-risk space, prompting more players to target the C to B- box. While some may adopt a strategy of aggressively buying paper and going deep, this isn’t our approach. We remain relationship-driven and are committed to being here for the long haul.

Happy Funding!