driving forces – current dynamics in key equipment sectors · isfied with what they get out of...

Equipment Finance Sector Issue | May/Jun 2016

DRIVING FORCES – Current Dynamics in Key Equipment Sectors

'Old School' Lessons in Credit Underwriting

Equipment Loan Workouts: Some Rules to Remember

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May/Jun 2016 NEWSLINE 1


May/Jun 2016Volume 8 Number 3

FEATURES14SELLING IN THE NEW HEALTHCARE ARENA REQUIRES NEW SKILLSAs the winds of change sweep across the sea of medical equipment selling, GreatAmerica’s Chris Adams advises new rigging is required to thrive in the new environment.By Chris Adams

16NEW FORCES CHALLENGE MUNICIPAL EQUIPMENT FINANCING PROVIDERSWhen it comes to municipal finance, lessors that can find innovative ways to finance managed services rather than tangible assets will gain a distinct advantage in the sector. By Amy Gross

18CONSTRUCTION OUTLOOK: HEADED IN THE RIGHT DIRECTIONAs the spring season brings new construction projects, all things point to positives in the construction equipment sector.By Jim Peach, CLFP

20MAJOR DRIVERS IN TODAY’S TRANSPORTATION FINANCE MARKETPLACENewsline speaks with Robert Otto, President of Automotive Finance at Hitachi Capital America Corporation who weighs in on today’s financing marketplace for medium- and heavy-duty trucking assets.

22WRAP UP: FACTORS IMPACTING TOP EQUIPMENT FINANCE SECTORSNational Funding’s CEO Dave Gilbert speaks to the positive economic impact to the U.S. economy and the important support our industry provides to keep businesses functioning. By Dave Gilbert

2 NEWSLINE May/Jun 2016

NEFA Newsline ©2016 is published bi-monthly by the National Equipment Finance Association. All rights reserved. The opinions and views expressed in this publication including all editorial and advertising content are not those of the National Equipment Finance Association and/or Equipment Finance Advisor, Inc. Reproduction, duplication or redistribution in whole or in part is not permitted without express written permission of the National Equipment Finance Association and Equipment Finance Advisor, Inc.

NEFA HeadquartersP.O. Box 69Northbrook, IL 60065-0069847.380.5050 Main847.380.5055 [email protected]

NEFA Executive Director & CEOGerry [email protected]

NEFA Senior Association CoordinatorKim [email protected]

Newsline Design & ProductionEquipment Finance Advisor, Inc.d/b/a Advisor Publishing Group975 Mill Road, Suite GBryn Mawr, PA 19010

Editor-in-ChiefMichael [email protected]

Executive Editor Stuart [email protected]

Director of Sales & MarketingDenise [email protected]

14

22ALSO INSIDE...3 From NEFA’s President

4 From NEFA’s Executive Director

5 In the News…

25 neFACTS

29 NEFA Pictorial

DEPARTMENTS25 CREDIT

Consider ‘Old School’ Lessons in Credit UnderwritingWith today’s primary credit underwriting focus on developing and implementing technologies for determining creditworthiness, increased efficiencies and the like, sometimes old school relationship skills get lost in the mix. By Terry Wood, CLFP

27 WORKOUTSPlaying Workout Roulette: Some Rules to RememberUnfortunately, there is no exact blueprint to working out a loan or lease collateralized by equipment. Turnaround expert Ken Yager offers things to consider when your borrower spins the roulette wheel with its equipment usage.By Ken Yager


A Message from NEFA’s President

NEFA – Are you involved in your Association?

In my last Newsline letter, I wrote that one of the core underpinnings of NEFA is the fact that this is a volunteer-driven associ-ation. Your Board of Directors believes strongly that a key differentiator is that our members drive the real value of the Association. Therefore, what lies at the heart of your membership is your engage-ment in NEFA.

The easily achieved and tangible value that many of our members receive is coming to NEFA conferences and events. NEFA events are a great value and in fact, they are how most of members are introduced to our warm and open professional trade group. That said, those members that become engaged and involved in NEFA are the ones getting much higher ROI on their membership. They are members who, by virtue of knowing more of their community on a deeper level, are able to extract greater value, and more informa-tion, contacts and bottom line dollars from NEFA. In my conversations with many NEFA members, those that become involved and engaged are much more sat-isfied with what they get out of their asso-ciation. As the old saying goes, “you get out, what you put in”.

Personally, I believe NEFA (and any asso-ciations, for that matter) has marginal value if you come only to sit in a trade booth or see a half dozen business part-ners. Every member I’ve talked to that has generated the real and tangible value available from their membership has, at some time, been involved beyond being a conference attendee. They’ve volunteered

to be on a conference panel, organized a local meeting, participated in creating aspects of a conference and served on various committees within NEFA.

The good news for all our members is that we had nearly 40 volunteers attend the newly invigorated committee meetings at our Spring Conference. That’s about 40 more than we’ve had the past several years and was about 20% of the attendees at the conference … that’s fantastic participa-tion! As a result, we have numerous newly engaged committees for you to become involved with by giving only a little bit of your time.

One of Gerry, Kim and the Board’s pri-mary objectives in 2016 is to help orches-trate this renewed and organized commit-tee effort to accomplish several short and long term initiatives. These committees are just getting underway, so if you’d like to participate in any particular aspect of growing and improving YOUR associa-tion, give Gerry, Kim or any of our Board members a call.

We promise -- you will get far more out than what you put in!

Thanks for your support.

Gary SouvereinNEFA President

EXECUTIVE COMMITTEE

presidentGARY SOUVEREINPAWNEE LEASING CORPORATION

vice presidentSTEPHANIE HALL, CLFPBRYN MAWR FUNDING

treasurerGREG NAPPIDDI LEASING, INC.

secretaryMIKE COONAXIS CAPITAL

immediate past presidentTARA AASANDLEASETEAM, INC.

board of directorsKIP AMSTUTZ360 EQUIPMENT FINANCE

DENNIS DRESSLERDRESSLER & PETERS, LLC

DOUG HOULAHAN, CLFPMAXIM COMMERCIAL CAPITAL

BRYAN INMANGREAT AMERICAN INSURANCE

GABE JARNOT, CLFPNORTHLAND CAPITAL FINANCIAL SERVICES, LLC

MARC KEEPMAN, CLFPKLC FINANCIAL, INC.

DARYN LECY, CLFPSTEARNS BANK

NICK ROSS, CLFPBANK OF THE WEST

2016 BOARD OF DIRECTORS


A Message from NEFA’s Executive Director

Community. Education. Professionalism. More than just a mantra, these three words sum up both the identity of – and contin-ual aspirations of – today’s NEFA members as well as other equipment finance pro-fessionals who could or should be NEFA Members.

NEFA Members are professionals who want to connect with other achievement oriented professionals. They’re also by

nature always learning and teaching. They strive always to exemplify the very highest standards of our industry, to each other and to everyone they do business with.

Community. Education. Professionalism. All three were in abundance at this year’s National Equipment Finance Summit held in early March in the French Quarter in New Orleans. Full of top-flight education and engag-ing discussions of best practices, the Summit brought NEFA’s largest group of equipment finance professionals ever together to do business and enjoy all the entertain-ment and camaraderie that New Orleans is famous for.

It’s meetings like this where the foundations of a strong community are built – one handshake, or one smile, or one candid conversation at a time. It’s meetings like this where the education/knowledge base is enlarged and passed from generation to generation. And it is meetings like this where members encourage each other by show-ing that if you believe in being the best you can be, you’re not alone, you’re one of us.

In today’s hyper-connected world, where “connections” has come to mean simply long lists of names in the electronic equivalent of what we used to call rolodexes, NEFA conferences are the very best way to filter, find and focus on the cream-of-the-crop. They’re the best way to create that “go-to” subset of contacts you know you can count on because you know they stand for what you believe in.

That’s why NEFA puts on and supports so many events. From our two large conferences and the NJ Expo the staff

puts on, to the host of local and regional events NEFA volunteer members put on with NEFA staff support, our NEFA Community both stands out and stays connected.Around the time you’re reading this, we’ll just have had our long running Crab Feast in Baltimore. This summer there will be a California Angels baseball game event; hopefully our first ever Kansas City event; and most likely another Lake Minnetonka cruise or similar event.

In the coming weeks you’ll start hearing about this year’s Funding Symposium too. Chairperson, Jim Peach of Stearns Bank, has a team planning a terrific lineup of education for it. As for the fun of it, we’ll be at the unique Radisson Blu Hotel attached to the Mall of America just outside Minneapolis.

Minneapolis is one of the easiest cities to fly to and our hotel offers free shuttle service to and from the airport. The Mall of America is the largest shopping mall in the United States with restaurants, bars, a comedy club, bowling, a full amusement park, and much, much more. As for shopping; there’s lots and lots of shopping. It’s a destination in and of itself, and it is just down the hall from NEFA’s 2016 Funding Symposium!

Mark your calendars – but mark them correctly! In order to accommodate folks participating in some other indus-try events and some religious holidays, this year’s Sympo-sium will run Thursday through Saturday kicking off on October 6th and wrapping up on October 8th. That’s a slight change from recent NEFA conferences.

Better yet, simply go to www.NEFAssociation.org, click on the Calendar of Events to find the 2016 Funding Symposium, and download the details directly into your Outlook or other calendar. Be sure to categorize it as: Community. Education. Professionalism.

I look forward to seeing you there!

Gerry EganNEFA Executive Director & CEO

in the NEWS


PERSONNEL ANNOUNCEMENTS

National Funding Appoints First Female President in Alternative Lending

National Funding announced that Torrie Inouye has been named the company’s pres-

ident. Inouye will report directly to Founder and CEO Dave Gilbert.

National Funding has experienced a 172% revenue growth surge over the past three years, bringing into focus the need for a leader of overall business operations. Inouye was promoted from EVP of Data & Analytics. The company’s management team saw Inouye as a natural fit for president as she has already taken on a major leadership role within the company.

“Torrie has played a critical role in our success to date, and her appointment as president is a natural extension of the work she has already taken on,” said Dave Gilbert, chief executive officer, National Funding. “As our Big Data capabilities and services evolve, National Funding is uniquely poised to strengthen our position in the FinTech industry. We trust Torrie to lead our company through its next growth phase.”

Blue Chip Leasing Appoints New Co-Presidents & CFOBlue Chip Leasing Corporation announced the appointment of Marcelle Newstadt and Ramon Chait to the position of Co-Presidents. Newstadt and Chait have extensive experi-ence in the equipment leasing industry including long tenure with Blue Chip. Newstadt co-founded Blue Chip’s predeces-sor company Enable Capital in 2002 while Chait joined Blue Chip in 2008. With ongoing responsibility for operations and business development, respectively, Newstadt and Chait will continue to drive Blue Chip’s focus on customer service, expanding product lines and growth.

Blue Chip also announced the appointment of Jenifer Cua to the position of Chief Financial Officer. In addition to her role as Assistant Director of Finance for Chesswood Group Limited, Cua brings her valuable experience to the Blue Chip team. She is a CPA in both Canada and the United States. Blue Chip Leasing is a wholly-owned subsidiary of Chesswood Group Limited.

Ascentium Capital Adds New VP of Sales, Petroleum DivisionAscentium Capital announced that Tony Zieglar has joined the company to develop their expanding petroleum finance divi-sion. Zieglar brings over seventeen years of business financing expertise including nearly ten years within the petroleum niche.

As Vice President of Sales, Zieglar will be responsible for busi-ness development efforts within the petroleum division and other specialized niches. Len Baccaro, Senior Vice President of Sales at Ascentium Capital stated, “Our strong growth in the petroleum market and the increasing demand for our financ-


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Adding additional depth to the finance department, Blue Bridge Financial also welcomed Scott Rosenheck as Senior Accountant. With previous experience as staff accountant at HSBC, Chiampou Travis Besaw & Kershner, and Beacon Federal, Rosenheck brings with him a collection of skills in accounting, financial analysis and auditing.

National Funding Expands Middle Market Lending TeamNational Funding announced the expansion of the National Funding Middle Market Lending team with the addition of Janice Ibey. She brings more than two decades of experience in commercial finance, advisory and management roles with finan-cial services companies and regulated financial institutions.

Ibey will be responsible for developing new middle-market lending relationships with bankers, ABL lenders and trusted advisors to lower and mid-market CEOs and CFOs located primarily in Orange County and Southern California. The middle-market lending team targets medium-sized businesses that are in need of financing from $250,000 to $1 million.

Key Equipment Finance Names Licardi Leasing Manager, Industrial DivisionKey Equipment Finance announced that Steve Licardi has joined the company as leasing manager for its industrial divi-sion. In this role, Licardi will be responsible for growing new and existing vendor relationships in the industrial market.

“Steve has more than thirty years of captive and vendor leasing experience, which will be invaluable as we strive to deliver our flexible equip-ment financing solutions to a wider vari-ety of vendor partners in the industrial sector,” said Toni Larson, senior vice president of Key Equipment Finance’s industrial equipment division. “This market is an important part of Key Equipment Finance’s overall strategic direction, and I look forward to having a seasoned sales professional like Steve as part of our team.”

Marcoe Joins Orion First as Chief Technology OfficerOrion First announced that Paul Mar-coe, formerly Vice President Informa-tion Systems & Security at Financial Pacific Leasing, has joined Orion First as Chief Technology Officer.

“Mr. Marcoe is a great addition to the Orion First leadership team,” said David T. Schaefer, CEO of Orion First. “Paul is a talented Information Technology exec-utive with proven industry experience. His robust skillset, numerous successful projects managed and overall IT vision make him a perfect fit to lead technology initiatives here at Orion.”

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National Equipment Finance Associationing programs have led us to expand our specialized salesforce. We are excited to have Zieglar help drive our 2016 sales ini-tiatives.”

Blue Bridge Financial Adds Two Finance ProfessionalsBlue Bridge Financial announced the addition of Greg Brown, CPA, as Controller and Scott Rosenheck as Senior Accoun-tant, both working at the company operations center in Buf-falo, New York.

Bringing more than ten years of accounting experience, Brown previously held the positions of Associate Vice President and Financial Analyst with Citi, and Accountant with Rich Prod-ucts Corporation. In his new role, Brown will be responsible for all oversight of Blue Bridge’s financial activities including internal and external reporting, accounting and treasury man-agement.

Speaking on the new opportunity, Brown said, “I am excited about joining Blue Bridge Financial, already a recognized national leader in the small business lending industry and the fastest growing company in the Western New York area. I look forward to contributing to our collective goal of positioning Blue Bridge as one of the fastest growing companies in the specialty finance industry across the United States.”

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“The experienced staff at Orion delivers significant value to their customers,” added Marcoe. “I’m thrilled to add my years of IT and financial services experience to Orion’s wealth of industry knowledge. I’m looking forward to working as a team to bring new technology to market that will further deliver value to Orion’s customers.”

Jackson Joins Alta M&A Advisory PracticeThe Alta Group has expanded its merger and acquisition (M&A) advisory services to the equipment leasing and asset finance industry with the addition of James R. Jackson, Jr. Jack-son has extensive expertise in turnaround management, M&As, and executive leadership for equipment finance companies. He most recently served as senior vice president and chief financial officer of MicroFinancial Incorporated, based in Burlington, MA.

Alta CEO John C. Deane announced that as a new Alta director, Jackson joins Bruce Kropschot, senior managing director and M&A Advisory Practice leader, and Alta Director Patricia Voor-hees in providing services for buyers and sellers in North America. Alta M&A experts have decades of experience arranging more than 200 equipment leasing and specialty finance business acquisitions, locating funding sources and additional capital for companies, and completing formal valuations. “We welcome Jim Jackson to our M&A Team. Alta is experiencing substan-tial growth in M&A activity, and Jim’s diverse background in several equip-ment finance segments will be of great value to our clients,” Kropschot said.

Sheffer Joins LeaseTeam as Account ManagerLeaseTeam announced the addition of Elizabeth Sheffer to its Account Man-agement team.

Sheffer brings with her extensive expe-rience working alongside clients to pro-vide strategic recommendations, help-ing streamline business objectives and achieve goals throughout the software implementation process. In this posi-tion, she will be responsible for man-aging existing account relationships, including creating and maintaining account strategies for new products and services, based on account growth plans and business needs.

“We are very excited to bring Elizabeth on to our growing Account Manage-

ment team,” said Bryan Hunt, director of sales at LeaseTeam. “Her proven experience growing relationships and acting as a customer advocate will enable her to immediately make an impact for our customers.”

INDUSTRY NEWS

Ascentium Capital Surpasses $2 Billion in Funded VolumeAscentium Capital announced that it surpassed $2 billion in funded volume since its inception on August 4, 2011.

“Less than five years ago, we created a new type of indepen-dent financing company to meet the changing needs of small

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businesses. We’ve had success creating a brand that represents fast and flexible financing and our continued success will be driven by our processes, people and proprietary finance plat-form,” commented Tom Depping, Ascentium Capital’s Presi-dent and CEO.

Chief Sales and Marketing Officer, Richard Baccaro, com-mented on how the company positions itself for growth. “Our mission is to be the financier of choice in the markets we serve. This requires us to constantly evaluate, evolve and execute ser-vice levels that exceed client expectations.”

Blue Bridge Selects ASPIRE From LeaseTeamLeaseTeam announced that Blue Bridge Financial, LLC has selected ASPIRE as its end-to-end lease and loan management platform.

Recently recognized as the fastest growing company in West-ern New York, Blue Bridge provides simple lending alterna-tives to traditional funding. The company has grown more than 300% in the previous two years and was in need of a seamless technology solution to support its continued growth. ASPIRE was chosen following a thorough search of integrated

front- and back-end systems because of its immense scalability and customization.

“With our aggressive growth, it was vital that our new core system not only keep up with our current level of success, but also support the expected exponential expansion of our busi-ness,” said Blue Bridge Founder and CEO Mark DeBacker. “ASPIRE’s configurability lends itself well to our strategic ini-tiatives, from both a product support and volume scalability perspective.”

“As Blue Bridge has shown by achieving such a remarkable level of growth in such a short amount of time, consumers are eager for alternative ways to obtain financing in today’s mar-ketplace,” said LeaseTeam Executive Vice President Jeff Van Slyke. “We’re excited to partner with Blue Bridge and provide the technology to help make their forward-thinking business strategy a reality.”

Lease Corporation of America Among Fastest-Growing Independent Leasing CompaniesLease Corporation of America (LCA) rose to 14 on the Moni-tor’s Top Private Independents list of private independent leas-ing companies, up from 19 the previous year.

Based on new business volume, LCA was the fifth fastest-grow-ing company to take part in the survey, reporting $148.5 mil-lion in new business volume in fiscal year 2015 for an increase

of 26.2% from the previous year.

“Two years ago, LCA’s leadership decided to grow our companies with a five-year investment plan of adding skilled, experienced and dedicated peo-ple to our workforce and state-of-the-art automation tools to enhance our administrative, marketing and sales efforts,” said LCA Chairman John B. Kemp. “These investments have already produced exceptional results, and LCA will remain committed to these efforts to ensure we are providing the highest level of service to our business partners and customers.”

As of the end of February 2016, LCA has booked, accounted for and reported on more than 86,000 leases since 1988, with lease volume over $1.2 billion. The company plans to increase its salesforce and overall workforce by as much as 40% and 20%, respectively by the end of November 2016.

Odessa Technologies Integrates DocuSign Into LeaseWaveOdessa Technologies announced it has partnered with DocuSign, Inc. (Docu-Sign®) to help enterprise customers

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go fully digital to transform their business. DocuSign helps organizations of every size, industry and geography eliminate the hassles, costs, and lack of security inherent in paper-based processes to transact business 100% digitally.

LeaseWave®, the lease and loan management solution from Odessa, manages the full lifecycle of assets and the underly-ing contracts on a workflow-based framework. The DocuSign integration leverages LeaseWave’s workflow to fully automate document management, significantly reducing time to com-plete loan paperwork and approve loans. The addition of dig-ital signature capability represents an important new dimen-sion to LeaseWave’s digital transaction management strategy.

Allegiant Partners Chosen as HydraMaster’s Financing PartnerAllegiant Partners has been selected by HydraMaster Corpo-ration to provide equipment financing solutions for Hydra-Master customers. Allegiant Partners will be providing financing solutions for the entirety of HydraMaster’s avail-able products, including but not limited to their class leading truckmounts, self-contained portable extractor units, as well as hose and wand accessories.

“The opportunity to partner with such a forward thinking market leader like HydraMaster is very exciting for our team,” stated Mike Helder, Senior Vice President of Business Devel-opment and Sales of Allegiant Partners. “Our financing pro-grams have been designed to work hand in hand with Hydra-Master’s catalog of equipment and provide the industry’s best financing options for their customers in need of equipment.”

Channel Partners Capital Wins Top 100 Best Companies to Work For Award Channel Partners Capital announced a new award won for being a part of Minnesota Business magazine’s selected top 100 best companies to work for. This award recognizes Min-nesota's top companies and determines which companies excel in the areas of work environment, employee benefits and overall employee happiness, making them the 100 Best Com-panies to Work For.

“Great people make Channel Partners Capital a ‘best place’ to work,” said CEO Brad Peterson. “I couldn’t be more proud of the people I get to work with every day and it’s wonderful that Minnesota Business recognizes us as a best place to work.”

“We are proud to salute these 100 companies who realize their most important assets are their employees,” said Minnesota Business Editor-in-Chief Steve LeBeau. “This instills such a heartfelt loyalty, that these employees proclaim their compa-nies to be the best.”

All companies nominated were internally vetted and emailed a survey to be completed by each of their full-time employees. The results of these anonymous employee surveys were then tabulated with the 100 winners revealed based on the best of those results.


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Ascentium Capital Launches Merchant Finance Division Ascentium Capital announced that it is now offering a special-ized financing program to Independent Sales Organizations (ISO's) and to their clients, retail merchants.

"The creation of our Merchant Finance Division is an exciting opportunity to fill a void in an underserved market," com-mented Tom Depping, Chief Executive Officer at Ascentium Capital. "We will be able to drive substantial business for our ISO partners and enhance their merchant relationships with the expert leadership that has joined our company and with our broad product offering."

The Merchant Finance Program has a streamlined approval and financing process for both the ISO's and the merchants. Appli-cation-to-funding occurs the same day. Additionally, merchants are able to finance nearly anything including countertop to tab-let-based POS equipment as well as have access to small business loans to meet working capital needs and other financing and leasing options for business equipment and technology.

The new division will be managed by Bob Neagle, President and General Manager of Merchant Finance, who recently joined Ascentium Capital from First Data Global Leasing. Neagle brings over 12 years of expertise in the merchant

in the NEWS


finance segment and over 30 years in financing. "Bob's expe-rience will help drive this new initiative and we look forward to the opportunity to help our ISO partners grow their busi-nesses. Ascentium's financial products and simplified process will enhance the offering that is currently available to this niche," remarked Richard Baccaro, Chief Sales and Marketing Officer at Ascentium Capital.

Brocade Capital Solutions Selects Odessa Technologies’ LeaseWaveBrocade Capital Solutions, the financing arm of Brocade Communications Systems, Inc., has selected LeaseWave from Odessa Technologies to provide end-to-end financing automa-tion. LeaseWave will enable the seamless integration and auto-mation of Brocade Capital’s hardware and software assets from deployment to contract maturity.

As a leader in storage and data center networking, Brocade dif-ferentiates itself in part through creative and flexible financing programs, including Brocade Network Subscription. Brocade Network Subscription delivers network-as-a-service enabling customers to scale their Brocade solutions up or down and upgrade at any time.

“We compete on the creativity and flexibility of our programs. LeaseWave will help us scale our unique selling propositions while helping to ensure automation, compliance and con-trols,” said Lisa Paquette Nelson, Senior Director of Brocade Capital Solutions.

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Key EF Provides $3MM Loan for Elizabethtown College Solar InstallationKey Equipment Finance announced it provided a $3 million loan for the Elizabethtown College 2.6-megawatt DC ground-mounted solar photovoltaic system by Community Energy, Inc., a nationally recognized renewable energy developer.

The solar loan from Key Equipment Finance was structured to allow Community Energy to build and own the project and qualify for the solar investment tax credit. The project, the largest higher-education-sited solar array in Pennsylva-nia, was made possible by a $500,000 Pennsylvania Energy Development Authority (PEDA) grant.

“Financing enables innovative solar projects like the one at Elizabethtown College to make it across the finish line,” said Doug Beebe, vice president, energy finance for Key Equip-ment Finance. “By using a solar loan to enhance purchasing power, Community Energy is helping achieve energy cost savings for the college, environmental benefits for the com-munity and a clean energy learning lab for students.”

Elizabethtown College is a private coed institution located on a 203-acre campus in south central Pennsylvania. The col-lege has executed a 20-year Power Purchase Agreement (PPA) with Elizabethtown Solar LLC, the wholly owned subsidi-ary of Community Energy Solar created to hold the project assets.

ECONOMY

U.S. Small Business Lending Decreases, PayNetThe March 2016 data release of the Thomson Reuters/PayNet Small Business Lending Index (SBLI), which is a leading eco-nomic indicator of GDP, decreased from 138.9 in February 2016 to 135.3 in March 2016. Compared to the same month one year ago, the index is up 4%.

The small decrease in the SBLI comes one month after a 17% jump in February, the largest monthly increase in the Index's history.

“March data confirms the economic stall. Private companies aren’t willing to take on risks right now,” stated William Phelan, president of PayNet, Inc. “In this risk-off posture, GDP will remain moderate and below its long-term potential.”

In the aggregate, private companies are maintaining produc-tion capacity by investing in replacement levels. However, most industry sectors are reducing investment reflecting their bearish outlook for the economy. Construction remains the only major sector driving this economy at 9.2%.

Finances for private companies mirror the modest invest-ment activity. The Thomson Reuters/PayNet Small Business Delinquency Index (SBDI) 31-90 days past due held steady at 1.21% from February 2016 to March 2016. As compared to one year ago, delinquency decreased 3 bps; this is the 10th consecutive month of year-over-year decreases after 12

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straight months of increases. Transportation delinquency is up 5 bps to 1.28%, its 13th consecutive monthly increase and its highest level since April 2013. Agriculture delinquency is up 3 bps to 0.63%, its sixth consecutive monthly increase and its highest level since August 2011. Health Care and General delinquencies each decreased 1 bp.

NAM Survey: Business Leaders Remain Anxious in First Quarter The National Association of Manufacturers (NAM) issued the first quarter results of its 2016 Manufacturers’ Outlook Sur-vey. The report shows a continued decline in sentiment among manufacturing executives and anxiety over the faltering global business climate. In fact, more than 70% of respondents felt that the U.S. Federal Reserve should wait until the economy improves before considering additional rate hikes.

“In spite of improved overall economic data of late, the manu-facturing sector remains challenged,” said NAM Chief Econo-mist Chad Moutray. “With discouraging data — from declin-ing manufacturing production to a downshift in demand and shipments — it’s no wonder manufacturers remain anxious.

“Our challenges are far from over, and this survey’s data make it clear that global headwinds and inaction in Washington on

in the NEWS


pro-manufacturing policies continue to hamper manufactur-ers’ outlook. In terms of policies that will help to turn around the manufacturing sector, business leaders will continue to embrace pro-growth initiatives, such as those outlined in the NAM’s “Competing to Win” document, especially in this all-important election year.”

CERTIFIED LEASE & FINANCE PROFESSIONAL FOUNDATION

CLFP Foundation Adds Eight Members in MarchThe Certified Lease & Finance Professional (CLFP) Founda-tion added eight members during the month of March.

• Skylar Crane, CLFP – Celtic Commercial Finance, National Accounts Manager

• Brent Dunbar, CLFP – Celtic Commercial Finance, National Accounts Manager

• Don Ferguson, CLFP – Celtic Commercial Finance, Vice President/Team Director

• Andy Horne, CLFP – Provident Leasing, Regional Vice President

• Mark McKissick, CLFP – Banc of California, Director of Small Commercial Lending

• Korie Nicholson, CLFP – Provident Leasing, Territory Manager

• Mike Seyal, CLFP – Diagnostic Institute of Imaging, President

• Evan Zoller, CLFP – Provident Leasing, Territory Manager

Mark McKissick, CLFP, Director of Small Commercial Lending at Banc of California stated, “Just like an MBA, Ph.D., or CPA, the CLFP designation reflects knowledge and professionalism in a very prominent industry. It allows me to gain the credibility, integrity and trust among colleagues and customers alike - setting myself apart from others. It truly does set the standard of excel-lence, and I made it my personal goal to achieve that standard.”

The CLFP designation identifies an individual as a knowledgeable profes-sional to employers, clients, customers, and peers in the equipment lease and finance industry. For more information, call Executive Director Reid Raykov-ich, CLFP at (206) 535-6281 or visit www.CLFPfoundation.org.

LCAF_NEFA-3rd page ad_Q4.indd 1 12/11/2015 4:28:02 PM

Please send your company's news items to [email protected]


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In 2010, the Affordable Care Act, known to many as Obamacare, was enacted into law. One of the goals

of the new law was to lower healthcare costs through efficiencies gained from the creation of

Accountable Care Organizations (ACOs). These organizations streamline patient processing from their

generalist to a specialist without redundant testing. This is accomplished in a number of ways including the reduction

of Medicare and Medicaid fees paid to private practices and the move from fee per service to fee per outcome. The success of this

program is the subject of daily debates, but one outcome is certain: Obamacare has had a major impact on the sales process of medical device

manufacturers.

An intended consequence of ACA was to drive more patients to hospitals which would give the hospitals greater negotiating power with insurance providers as we

Selling in the New Healthcare Arena Requires New SkillsThe winds of change are sweeping across the sea of medical selling, and you are going to need the right rigging to thrive in this new environment.By Chris Adams


head towards capitation. Recognizing this push, hospitals began acquiring private practices and subsequently their patients in a giant land grab. The greater the number of patients a hos-pital has in their system, the more money they are eligible to receive from insurance companies when negotiating the cover-age-per-patient contracts. A Physicians Foundation survey of 20,000 U.S. doctors reported that 62% of doctors described themselves as independent in 2008, followed by a drop to 49% in 2012, and another drop to 35% in 2014. This trend was also found in an Accenture study from 2012 where the num-ber of independent physicians dropped from 57% in 2000 to 49% in 2015. Accenture predicts that in 2016 this number will drop even further to 33%!

This shift from private practice to hospital systems and med-ical networks has changed the way medical device salespeo-ple approach a potential customer. When calling on a private practice, the sales process was relatively linear. Step 1, knock on a door; Step 2, get past the gatekeeper; Step 3, convince the doctor to schedule a demo in the near future; Step 4, demo the device with the doctor(s) and office manager; Step 5, close the sale. Private practices welcomed the hard-working, feature sharing sales person to run fast and close business through a volume based approach. As the old adage goes, “If you ask enough people, someone will say yes. And the best part was, sales reps were always dealing with the decision maker.

Today’s selling environment is more complex and no longer linear. The sales person must still follow the same steps out-lined above to gain clinical buy-in, but now integrate more complex processes that involve department heads, financial decision makers, and the dreaded capital expenditure (CAPEX) budgeting process. Additionally, the sales person has lost some control of the process as there are multiple people involved in the process through the Value Analysis Team (VAT) and heavy competition for budget dollars from other departments within the hospital system.

This requires a new skills portfolio that wasn’t necessary in the past. Medical device companies must now retool and retrain their sales team or replace them with more agile and strategic thinkers. A big area of weakness in most standing sales forces is their inability (and unwillingness) to engage and interact with the financial team in hospital systems and medical networks. A traditional private practice sales person may be able to sell the features/functions/benefits of their product, but how com-fortable are they with in-depth conversations about practice finances, ROIs, potential impact to P&Ls, and the basic eco-nomics of today’s ACA playing field? Contract negotiations, which involve the VAT team within the hospital system, scares many sales people. Negotiating prices are very familiar, but negotiating terms and conditions on contracts is like speaking a foreign language.

Medical device companies that made the successful transition from the private practice model to the hospital and medical net-work system have invested in their sales forces with appropriate training and education. They have armed their sales people with the confidence and tools to have meaningful conversations with

purchasing managers, controllers, and CFOs. For example, an effective training curriculum would include ROI model-ing. This is critical for purchasing and financial departments as they compete for capital budget dollars. The salesper-son must demonstrate the bridge between the equipment and its ability to make the most money for the hospital.

Another sample curriculum item would be basic training on how to read profit and loss statements and balance sheets. Sales people should learn how to read these financials, quarterly reports and annual reviews to best under-stand where the hospital is financially and what measurements are most critical to their future. Knowing this can help position the product to achieve those objectives. It also puts the sales per-son in the position of a trusted advocate who can be a behind-the-scenes coach and supporter of their particular departmental interests.

When it comes to gathering intelligence in the field, perhaps the most critical exercise is to ask the right questions of the right people. In the procurement/purchasing areas, you certainly want to ask:

• “How do you typically acquire capital?”

• “What type of contracts can departments sign versus a central buying system?”

• “How do rental agreements and supply agreements get pro-cessed?”

• “What is the budgeting cycle timing and process?”

• “What is the spend limit to avoid the VAT process?”

These questions can help a sales person uncover acquisition methods that allow the department to move through the pro-cess faster or avoid the capital expenditure discussion altogether. It’s not uncommon for hospital systems to allow short term contracts, rental agreements under a certain threshold, supply agreements, and operating leases to be signed at the department level instead of sending it through the corporate procurement system. This benefits both the department and the hospital as it allows for equipment and supply acquisition on smaller items to be processed much more quickly without tying up limited resources at the corporate level.

In this brave new world of centralized buying within the hospi-tal system, medical device companies that aren’t spending mean-ingful time training their sales people on the financial side of selling to the procurement system are sending their sales people out to sea without a compass. They will eventually be successful, but the process can be much faster with the right tools. Be ready for the sea change and take the helm with experienced hands!

ABOUT THE AUTHOR | Chris Adams is Vice President and General Manager for the Health Care Group at GreatAmerica Financial Services Corp.

Chris AdamsVice PresidentGreatAmerica Financial Services Corp.


According to a recent report from Onvia, an organi-zation that provides data, business intelligence and analysis on government purchasing activity, state, local and education spending is poised for growth. The report shows that state and local procurement activity increased by a full 4.6% in the fourth quar-ter of 2015, increasing nearly as much in that quar-ter as the market fell during the fourth quarter of 2014. The report also predicts a year of growth in 2016.

This is good news for lessors, vendors and the economy in general. But while all signs point to an increase in spending, and state and local entities have pent up demand for equipment and services, budgets still remain tight.

At the same time, lessors are facing increased reg-ulatory scrutiny and fierce competition, especially on pricing, when it comes to working with state and local entities. The state and municipal finance market is a mature one, with more and more banks entering the market and adding tax-exempt financ-ing services.

Three main factors are driving both the opportu-nities and the challenges associated with state and local government finance: a crumbling infrastruc-ture and shift toward smart cities; the increasing use of technology and demand for financing managed services; and an aging population.

There is ample opportunity for lessors that are adept at navigating the complicated and multi-faceted government finance landscape. At the same time, adapting to the evolving financing needs of tax-ex-empt clients will require new solutions delivered in new ways; and in some cases a cultural shift that must come from the top down.

New TechnologiesFrom roads and bridges to energy and wastewater, it’s no secret that our nation’s infrastructure is in dire need of repair. As state and local governments

strive to address these needs, many are looking for “smart city” solutions to help increase efficiency, sustainability and capacity.

The core tenant of the smart city movement is to improve quality of life for citizens through better use of technology to improve services and better meet the needs of residents. This can include major investments in electronic and digital technologies such as predictive modeling, remote monitoring, cloud-bases services, the use of “smart” devices including smart meters, cards and phones, and much more. In fact, according to a recent Onvia blog post, the global smart cities movement is expected to generate a total of $41 trillion in new spending over the next 20 years, averaging $2.05 trillion per year and transforming how government makes investments in technology and infrastruc-ture.

According to a recent article in WaterWorld maga-zine, U.S. water utilities, for example, lose an esti-mated 30% of water to leaks in their distribution systems – a problem that can easily be detected by advanced metering infrastructure technology. Studies show that U.S. water utilities will spend $2 billion on smart metering infrastructure through 2020, saving the average water utility up to $2 mil-lion a year.

This type of technology investment provides sub-stantial business opportunity for lessors because municipal utility providers often look to tax-ex-empt financing as a low cost funding alternative with which to meet the urgent demands of our infrastructure crisis. Unlike a traditional loan or tedious and restrictive bond initiative, features like fixed payments and attractive rates make financing compelling to municipal decision-makers. At the same time, financing expedites the construction of critical systems and accelerates revenue recapture.

In addition to being an immediate source of capital, tax-exempt financing also offers greater flexibility

Amy GrossSenior Vice President Key Government Finance

New Forces Challenge Municipal Equipment Financing ProvidersLessors that can find innovative ways to finance managed services instead of tangible assets, will have a distinct advantage in the municipal sector over the coming months and years. By Amy Gross



for municipalities, which means greater opportunity for les-sors. For instance, leveraging an operating lease bypasses the roadblock of a strapped CAPEX budget, as it creates the abil-ity to include provisions for managed services solutions, when desired. Plus all project costs, ranging from procurement, installation and maintenance plans to customer service and asset management functions, can be bundled into one pay-ment schedule.

Regardless of the size or scope of the project, financing helps municipalities and their suppliers realize both short- and long-term profitability through a host of additional benefits and fea-tures, which opens up ample opportunities for lessors to have the equipment finance discussion with municipal customers.

New Payment MethodsAs the conversation shifts toward solutions for smart cities, it also shifts toward one of nonstandard financing. Earlier this year, the Equipment Leasing & Finance Association (ELFA) included the increasing use of non-standard financing agree-ments on its list of the Top Ten Acquisition Trends for 2016, as well as the trend toward more flexible managed service agree-ments is certainly apparent in the state and local government sector.

This shift creates both challenges and opportunities for les-sors. The same Onvia report that shows an overall increase in state and local spending also shows the largest increase is in the technology sector. Onvia reports that in the fourth quarter of 2015, technology spending was up more than 11% over fourth quarter 2014, compared to a 2.8% increase in spending on operations, maintenance and transportation.

The increase in technology spending comes with increasing demand for flexibility. Although financing agreements that enable organizations to bundle the complete cost of a tech-nology solution, including equipment, services, software and training, have been around for a long time, we’re seeing increased interest in these and other “full service” financing packages across all market sectors. In fact, in many cases, today’s customers are demonstrating a preference toward a consumption model, where they just pay for what they use rather than owning the assets themselves.

Although non-standard financing is an important business strategy for lessors competing in the municipal space, there remains a significant amount of uncertainty around the model that requires financing companies to offer bundled services and payment variability that can include everything from usage-based payment plans to early cancellation.

At the same time, non-standard financing is more than just a new product or service offering. Traditional finance compa-nies that plan to offer non-standard financing must undergo a cultural shift that includes moving away from the mindset of product financing to a “consumption” or “solutions-based model.” This means consulting more closely with customers to identify their needs and pulling together a complete team to address concerns related to risk, legal and accounting issues.

New DemographicsThe nation’s infrastructure isn’t the only thing providing both challenges and opportunities due to aging. With more than 10,000 Americans retiring each day for the next 16 years, the aging population of American workers is also having a sub-stantial impact on state and local government spending.

Pension programs are one of the most concerning issues fac-ing today’s state and local governments, and they are one of the biggest contributing factors to government entities’ cur-rent budget constraints. In fact, according to a recent Moody’s analysis of 56 U.S. public pension programs, funding deficits are expected to grow by hundreds of billions of dollars in 2016 alone. Moody’s analysts, industry experts, researchers and oth-ers predict that many of America’s largest states and cities are facing budget cuts, tax increases, and more severe measures that may include reductions in workforce and the elimination of services.

At the same time, the nation’s aging population also means an increasing need for health care facilities and services. As demand continues to grow and providers continue to consol-idate, the health care industry provides one of the most sig-nificant market opportunities for smarter debt management and for lessors operating in the state and local government space. Hospitals provide a particularly appealing opportunity, in some cases opening an entire new wing and financing every-thing in it.

Due to current market conditions, however, hospitals have many options when it comes to refinancing existing debt or financing new capital projects through tax-exempt private placement bonds that may be a more attractive option to tra-ditional bond financing. Not for profit organizations, in par-ticular, desire a low cost of funding with flexible terms.

Moving Forward in MunicipalAlthough there are many variables to take into consideration for companies providing financing solutions to state and local government organizations, there is – and will continue to be – a strong need for tax-exempt financing solutions, particularly as governments face mounting pension pressures and their subsequent budget constraints.

Lessors that can adapt to the evolving needs of state and local governments, and particularly those that can find innovative ways to finance managed services instead of tangible assets, will have a distinct advantage in the municipal sector over the coming months and years. Being a full service, experienced and reputable financing partner that can execute is critical to success in the municipal marketplace. ABOUT THE AUTHOR | Amy Gross is Senior Vice Presi-dent of Key Government Finance.



Many economists agree that 2016 will be a year of slow, but steady growth in the construction indus-try. The first quarter started out promising, with spending reaching a near eight-year high in January. Current trends indicate that residential construc-tion will see slightly higher growth in the com-ing year than will commercial construction. This is promising news for equipment manufacturers, dealers, and rental yards. While things are looking up, there may still be unforeseen factors that can push the market one way or the other. For exam-ple, job growth has been stalled in markets directly affected by the oil crash and other markets that are closely related. Low energy prices means less work and fewer opportunities for employment in those geographic regions tied to energy. The lack of work has, in turn, affected the residential construction industry in those same areas. With no workers mov-ing there to work in the oil fields, new home con-struction has come to a grinding halt. The upcom-ing election, as well as the uncertainty surrounding both the markets in the first quarter and the Federal Reserve and interest rates, all come into play when it comes to new equipment purchases and rentals.

Financing StructuresIn 2015, we witnessed a sharp increase in the number of requests for high residual leases on new

equipment purchases. This trend carried over into 2016 and continues to be a popular option. Histori-cally, our construction customers almost exclusively financed their purchases on Equipment Finance Agreements (EFAs). There are a number of rea-sons why high residual leases are gaining traction in the construction market. One reason is that due to demand from their dealer networks, many man-ufacturers have implemented high residual subsidy programs for their equipment. These programs are attractive to equipment dealers and buyers alike. Dealers are able to offer a lower payment than under a traditional loan or EFA, and customers, in turn, are better able to spread out cash flow and based on their situation and structure, potentially gain ben-efits of a true lease. Subsidy programs paired with the high residual also increase the chances that the customer will return to the dealer when the residual comes due, and possibly trade in their equipment towards a newer, updated model. This helps out three sectors at once. The dealer creates a new sale, the customer gets newer equipment, and custom-ers in the market for used equipment have a larger selection to choose from.

While high residual leases are gaining popular-ity, we are still seeing a large portion of customers going with the traditional EFA. This has been most

Jim Peach, CLFPEquipment Sales Manager, Stearns Bank

Construction Outlook: Not Dazzling, But Headed in the Right Direction

The beginning of spring construction projects, along with the increased availability of new equipment and competitive financing, all point to positives in the construction equipment sector. Although growth won’t likely match that of 2015, things do appear to be moving in the right direction. By Jim Peach, CLFP


common with used equipment purchases because the resid-ual amounts that are offered by lenders are typically capped at 10% to 20% based on model year. We are also finding that some equipment buyers simply prefer the idea that they will own the equipment at the end of the term without worrying about an additional balloon payment.

Anticipated BidsThis past winter proved to be a mild one for many states as compared to the prior few years. This was especially true for the Northeast, where 2014 brought record breaking snowfalls and temperatures. While the snowfall was welcomed by pri-vate contractors who offered snow removal services, the cities and counties in those areas became concerned as they watched their snow removal budgets deplete rapidly. I have spoken with equipment dealers in the affected areas and they are confident they lost potential sales in those years. The affected cities and counties were forced to reduce their spending, to cover the excess snow removal costs, and many had to push off summer projects and maintenance that may have led to new equipment purchases. These same dealers are hopeful, coming out of the mild winter we had, that possible budget surpluses may result in municipalities finally making the equipment purchases they have been putting off. While local budget surpluses may help to drive up the purchases of equipment, another factor may be the Federal Appropriation Bill that was signed into law by President Obama in December of 2015.

The $1.1 trillion appropriations bill allocates a total of $38.3 billion to the Department of Housing and Urban Develop-ment as well as $18.7 billion to the Department of Transpor-tation in 2016. While not all of these funds will be used for construction related projects, a substantial portion will be. Contractors will be attempting to win bids on a number of sponsored projects, such as highway and bridge construction/repairs, constructing and maintaining passenger and freight rail, and construction of affordable housing. Equipment AvailabilityThe availability of new construction equipment in the first quarter of 2016 is substantially better than during the same time period of 2015. In speaking with a number of equipment manufacturers and dealers, many are reporting lead times on new equipment have decreased to weeks, versus the months it had been taking in 2014 and 2015. After the economic crisis of 2007 and 2008, equipment manufacturers, like most, were forced to tighten their belts and conserve what they could of their capital. Rather than filling their warehouses with excess

inventory in anticipation of orders, many manufacturers reverted to a “made-to-order” concept. They kept a smaller supply of machines on-hand and filled orders as they came in. As the economy slowly started to become more stable, deal-ers saw the demand for new equipment begin to grow and manufacturers were unable to produce the new pieces quickly enough to meet the increased demand. The relative stability the construction market experienced in 2014 and 2015 gave the manufacturers the confidence, and capital, to once again build up their inventory and decrease the lead time from manufac-turer to end customer. The same can be said for many equip-ment dealers who often kept a limited number of machines on their lots after the economic downturn. With the increased demand for equipment, dealers are once again preordering a larger number of machines in order to have equipment more readily available for their customer base.

Rental SegmentBeyond increasing inventory to keep up with their dealer net-works, equipment manufacturers were forced to consider the needs of their rental yard relationships. Rental yards have long been utilized by municipalities, contractors and do-it-your-selfers alike. They allow the users to obtain necessary equip-ment without a three to five year payment commitment and many times solely for the few months necessary on a short-term project. Rental yards have witnessed steady growth year-over-year since the recession, as many contractors chose to rent machines as needed versus purchasing the equipment and committing themselves to the payments. Some of these contractors, who may have rented during the recession out of necessity, found the benefits of it, and have continued to do so. The American Rental Association (ARA) projects that the equipment rental industry’s revenue will grow by 6.7% in the U.S. this year, which is consistent with the slow but steady growth of the construction industry in general.

SummaryThe beginning of spring construction projects, along with the increased availability of new equipment and competitive financing, are all positives as we head into the second quarter. Although growth in construction likely will not match that of 2015, it does appear to be moving in the right direction.

ABOUT THE AUTHOR | Jim Peach, CLFP, is the Equip-ment Sales Manager at Stearns Bank.


While high residual leases are gaining popularity, we are still seeing a large portion of customers going with the traditional Equipment Finance Agreements.


Major Drivers in Today’s Transportation Finance MarketplaceNewsline speaks with Hitachi Capital’s Robert C. Otto to understand the important factors driving capital investments in medium- and heavy-duty transportation assets.


Newsline: From your perspective, how dynamic is the trans-portation finance marketplace these days?

Robert Otto: Let me begin with saying that our company has been in a growth curve specifically in the commercial truck and trailer financing end of the business this year. Hitachi Capital provides commercial retail and wholesale (dealer inventory floorplan) financing. From our perspective, the industry cycle in this particular market has been continually strong since the last recession hit. The industry cycle is normally approximately five years, but we’re now entering the seventh year in experi-encing an uptick for our financing business in the marketplace.

I attribute our ongoing steady increase in business volume to the market conditions and buyer’s reaction that previously occurred during the economic recession. When the recession hit, we had a couple of years where buyers weren’t doing much in terms of acquiring new or replacement trucks. Once buyers felt that the economy was more stable, they needed to replace aging assets. This year, we’re seeing forecasts predicting the Class 8 marketplace as being down from where it was. At the same time, the forecast for the medium-duty marketplace is slightly up.

Newsline: What are the factors influencing these forecasts?

Otto: I think it’s because there is still an uncertainty of the economy in general … my sense is people are taking a “wait and see” attitude and they aren’t investing in new equipment as quickly as they previously did in the past few years. We may have hit a peak where end-users have all the new equipment they need and are focusing more on maintaining that equip-ment.

All of this goes hand-in-hand with what we are hearing from the dealers themselves. We recently attended the NTEA show in Indianapolis, which is the largest medium-duty show in the United States. The confidence level is still good on the medi-um-duty side and those dealers still feel as though 2016 sales will remain strong. By contrast, the heavy-duty truck dealers have some questions about the future. I’ve heard projections anywhere from 8% - 13% in terms of business being down in that segment.

For the Class 8 market, one significant thing that is happening is freight is down and the carriers have experienced a reduc-tion in their hauling business as in the past. I’ve noticed over the years that when the rail shipments are down, freight ship-ments are traditionally down as well.

Newsline: Are there any positives to help offset this down-ward trend?

Otto: One good thing is the price of diesel fuel has been down tremendously on the Class 8 side … gasoline has been down as well, so that’s helped people maintain their buying cycles. But again, things can get to the point where they say, “let’s wait and see what happens here.” As for the carriers, many of them have replaced their equipment and to a certain extent, I think that’s impacting things as well.

Newsline: Is there anything on the regulatory side that might be hindering expansion investment in these assets?

Otto: Yes. In fact, there are new emissions standards coming out and that has an impact, especially on the diesel side as manufacturers are trying to meet these standards. These emis-sions standards are getting tougher and tougher for the manu-facturers … especially when it comes to meeting the standards set by California.

Newsline: Are telematics impacting the marketplace in gen-eral and in particular, the useful life of this equipment in any way?

Otto: Telematics are picking up a lot of steam, particularly in the medium-duty segment. The manufacturers that we deal with – Isuzu, Mitsubishi and Hino – have all jumped into this and are offering telematics to their customers to provide reports on engine issues, drivers’ habits and so forth. It’s cur-rently a big selling point for them.

Newsline: From your perspective, what is the movement toward equipment rental having on the transportation finance marketplace in the current environment?

Otto: At Hitachi, we do not work directly with rental compa-nies from a financing standpoint, but we are seeing a great deal of interest from the dealer-owned rental companies that we finance. At our last count, we currently support approximately 2,700 U.S. dealers and an additional 200 in Canada. I can certainly tell you that the overall majority of dealers that we do business with are all looking to set up dealer-owned leasing operations, as well as dealer rentals. Establishing a rental oper-ation is currently seeing a big push.

Newsline: Please share your observation on the used truck market.

Otto: The Class 8 used truck market is getting over-saturated right now. Many dealers are seeing these trucks sell and they are pulling back in buying used Class 8 trucks. They are also lowering their trade-in amounts when their customers bring them in.

As we look in the direction of the transportation sector, Newsline speaks with Robert Otto, President of Automotive Finance at Hitachi Capital America Corporation. In the following interview, Otto weighs in on today’s financing marketplace for medium- and heavy- duty trucking assets. Here Otto addresses issues ranging from the general dynamics of today’s marketplace to other important topics such as the latest emissions standards and the rising use of telematics.



Everyone and every sector from trade workers, con-struction firms, medical practices to restaurants and bars depend on our profession. By leasing the equip-ment they need to maintain a competitive edge in the marketplace, businesses of all shapes and sizes benefit by staying up to date on the latest equip-ment models and improving their profit margins.

Currently, confidence remains strong in this sec-tor of the economy. The Equipment Leasing and Finance Foundation's March 2016 Monthly Con-fidence Index for the Equipment Finance Indus-try reported that the overall Confidence Reading among respondents increased to 51.6, up 3.3 points from February's reading of 48.3.

However, since they play such a big role in the econ-omy, the macroeconomic factors that impact equip-ment leasing play out in the individual sectors most reliant upon financing the cost of machinery and equipment. As new trends appear and old ones fade away, companies need to have the ability to react quickly to position themselves for success in the future. Leasing equipment provides businesses with this option to remain agile in a constantly shifting economy.

Even though the average small business lease is rela-tively small at $30,000, this is not a product banks really focus on due to the lower return. Traditional banks rely on larger loans so they can make more money, and therefore small business equipment leasing is at the bottom of their priority list.

By utilizing alternative lenders for all their equip-ment leasing needs, small business owners can get their leases structured so they use capital funds rather than operating funds. This lets owners reduce or even eliminate capital budget delays.

Trade WorkTrade work such as carpentry, plumbing and roof-ing requires a host of specialized tools and equip-ment that many laborers are unable to afford. Many of these companies are small operations, consisting of either a few employees, or are merely self-em-ployed subcontractors. Profit margins are slim and the availability of contract work can be stuck in a cycle of feasts and famines.

Having such an irregular capital flow can create sig-nificant obstacles to obtaining the tools and equip-ment necessary to maintain a competitive edge in an increasingly crowded sector. Thankfully leasing equipment lets owners and managers preserve cap-

Dave GilbertFounder & CEONational Funding

WRAP UP – Factors Impacting Top Sectors Utilizing Equipment Finance

Equipment financing is a major driver of the U.S. economy, accounting for $1 trillion of the economy and helping to keep small businesses functioning. Businesses from a wide range of industries rely on the flexibility and financial savings offered by equipment leasing options. By Dave Gilbert


ital since companies do not have to pay the entire upfront cost of new equipment or machinery, and can instead make smaller, regular monthly payments.

Most leases are structured with built-in flexibility that takes into consideration the seasonal nature of many types of trade work. This lets subcontractors and other trade workers better manage their payments during busy months and pay smaller amounts during slower periods. Ultimately, this frees up capi-tal that can then be reallocated as higher wages for hiring indi-viduals with greater skill sets or reinvesting in the business in other ways.

ConstructionFollowing the Great Recession in 2008 and 2009, the con-struction industry was probably the most hard hit as compared to other sectors. During this time, many firms shuttered their doors to due to lack of demand and a market oversaturated with units. Access to capital was almost nonexistent, both for companies and owners looking to build.

Now, with the construction industry finally crawling out of the nadir and reaching pre-recession levels, those firms that did survive the downturn must operate at maximum efficiency. With access to up-to-date equipment, construction firms can remain flexible and agile in their markets, allowing for greater growth opportunities.

Medical practicesPerhaps no industry requires more specialized and expensive equipment than the medical field. Doctors, dentists, chiro-practors and optometrists would be unable to successfully practice medicine without these crucial machines. Unfortu-nately, the upfront cost of much of this equipment can prevent a lot of medical professionals from starting their own practice or expanding their current facility.

Since customers and patients seek out medical professionals with the state-of-the-art facilities, it's vital that doctors, den-tists and other practitioners keep their equipment and machin-ery as modern as possible.

Further, many equipment financiers provide training sessions for all new machinery. This allows employees and other staff members to learn how to accurately and effectively utilize this complex equipment, thereby ensuring maximum efficiency and reduced administration errors.

TransportationAccording to the most recent data from the Federal Motor Car-rier Safety Administration there were 10,597,356 large trucks on the road in 2013. Collectively these vehicles compiled

approximately 275 million miles driven in the U.S. alone.

Small business owners operating in the transportation industry can lease a significant amount of equipment to assist with daily operations. This includes the actual semi-trucks, semi-trail-ers, big rigs, flatbeds and tractor trailers that transport goods across the country. Even the other supplementary equipment required to support these trucks, such as GPS units, scissor lifts, forklifts, logistic software, warehouse racks and much more, can all be leased.

By building up a solid relationship with equipment lenders and lessors, transportation companies, especially in the truck-ing sector, can ensure they maintain access to quality chassis for their fleets.

Restaurants and BarsAlthough a lot of companies in the hospitality and service industry – particularly restaurants and bars – rely on tradi-tional methods of running their businesses, the inability to incorporate updated equipment can stymie growth potential for these very same enterprises. According to a recent article in Full-Service Restaurant Magazine, due to the high costs associ-ated with installation and training, 63% of restaurants still do not utilize a point-of-sale system. These shops instead rely on outdated pen-and-paper ordering and charging systems.

Relying on this old-fashioned method means these stores can very easily be miscalculating, miscommunicating or simply misrepresenting orders and costs. Servers can forget to include a cost at the point of sale or transactions can be incorrectly handled. Although costs are the main deterrent for installing an electronic POS system, not updating this system will ulti-mately lead to missed opportunities to make money.

A lease is ideal for equipment that needs to be upgraded con-stantly, such as a POS system. By providing the freedom to update these electronic devices on a regular basis, companies can ensure they’re using the most advanced options available. Further, most equipment leases provide training for workers and other staff members, so these individuals know precisely how to utilize these machines.

Equipment leasing offers a cost-effective means for compa-nies in any industry to find the best equipment and ultimately reducing operating costs. By leveraging these benefits, small businesses can find more growth opportunities.

ABOUT THE AUTHOR | Dave Gilbert is the Founder and CEO of National Funding



nefacts

2016 NEFA PARTNERSAS OF 4-21-16

PLATINUMBank of the WestChannel Partners CapitalLeaseTeam, Inc.Pawnee Leasing Corporation

DIAMONDECS Financial Services, Inc. Financial Pacific Leasing, Inc.FORA FinancialMarlin Business BankStearns Bank

GOLDBeneficial Equipment Finance Corp.Bryn Mawr FundingFunding CircleGreat American InsuranceNavitas Lease Corp.North Mill Equipment FinanceRapid Advance

SILVERArvest Equipment FinanceDakota Financial, LLCDedicated Commercial Recovery Inc.Maxim Commericial CapitalOrange Commercial CreditRed Bridge CapitalYES Leasing

Bayard Business Capital and Consulting • Broker/LessorFirst Community Financial Bank • Broker/LessorFirst Utah Bank • Funding SourceLynch Capital • Broker/LessorThe Loan Resource • Broker/LessorWest Bay Financial • Broker/LessorWright Law Group • Service Provider

WELCOME NEW MEMBERS!

2016 FUNDING SYMPOSIUM SPONSORS AS OF 4-21-16

Bryn Mawr Funding • Hotel Key CardsChannel Partners Capital • Saturday Networking LuncheonECS Financial Services, Inc. • Welcome Reception Drink TicketsFinancial Pacific Leasing, Inc. • Welcome ReceptionFORA Financial • Friday Networking BreakfastGreat American Insurance • Pocket BrochureLeaseTeam, Inc. • Conference GiftOrange Commercial Credit • Presidents Reception, • Presidents Reception Drink TicketsPawnee Leasing Corporation • Name Badges, • Friday Networking Luncheon & Annual Business MeetingRapid Advance • Registration Packets

2016 FUNDING SYMPOSIUM EXHIBITORS AS OF 4-21-16

Bryn Mawr FundingChannel Partners CapitalDakota Financial, LLCDedicated Commercial Recovery Inc.ECS Financial Services, Inc.Financial Pacific Leasing, Inc.FORA Financial Funding CircleGreat American InsuranceLeaseTeam, Inc.Orange Commercial CreditPawnee Leasing CorporationRapid Advance

INDUSTRY EVENTSCALENDAR

Baltimore Crab FeastJune 2, 2016

Nicks Fish House & GrillBaltimore, MD

Angels Baseball NetworkingJune 23, 2016Angel StadiumAnaheim, CA

Kansas City Royals Baseball Networking

August 18, 2016Kauffman StadiumKansas City, MO

Atlanta Networking LuncheonAugust 18, 2016Ansley Golf Club

Atlanta, GA

Funding SymposiumOctober 6 - 8, 2016

Radisson Blu Mall of AmericaMinneapolis, MN

EXPO NJ Super RegionalNovember 13 -14, 2016

Teaneck Marriott at GlenpointeTeaneck, NJ

Atlanta Networking LuncheonNovember 17, 2016

Ansley Golf ClubAtlanta, GA

To learn more about the benefits of NEFA membership, contact Gerry Egan at

[email protected]

For Sponsorship / Exhibit opportunities, contact Kim King at

[email protected]



Consider 'Old School' Lessons in Credit UnderwritingBy Terry Wood, CLFP With today’s primary credit underwriting focus on developing and implementing technologies for determining credit worthiness, increased efficiencies and workflow processes, sometimes what gets lost in the mix are critical, old school relationships.

Without a doubt, our industry has made tremen-dous advances through the use of new technologies specific to our marketplace. We would be unable to keep pace with the volume, and remain competi-tive within the ever-changing commerce, without the speed and agility technology affords us. While our systems and applications are critical for our industry’s successes, some of us may have lost focus on one of the essential origins of our core business – the relationships with our customers. Some of this old school wisdom pertaining to things like building rapport and the continued nurturing of relationships may have taken a back seat to tech. It’s imperative that we strike and maintain that balance between our humanistic and technological relation-ships.

We have wide-ranging customers in this industry and all of them require various levels of servicing and attention. Some of the most critical may be the end-user/obligor or it may be the Credit, Sales or Funding teams with whom you are communicat-ing. We have found that the Credit and Sales teams must take an old school approach – and operate very cohesively – with a clear and concise understanding of the customers’ wants and needs.

The sales team is such a critical piece of the credit underwriting puzzle. In order to perform efficient credit analysis and underwriting, the sales represen-tative must know and understand their customers’ current and anticipated challenges. For example, what equipment or capital may be needed to pre-

pare themselves? What financing options are avail-able to them right now?

Creating a meaningful and mutually entrusted business relationship, in order to gain a greater understanding of their current financial health and future needs, is an absolute must. The closer the relationship, and greater the trust between the sales representative and their customer, the more infor-mation the customer will be willing to share in order to better understand their credit needs, quali-fications and options.

On the technology side, a question we need to ask ourselves is how can we apply the technology piece without losing the customer experience, relationship building and that all-important personal touch? We must create dynamic technologies/websites/apps/etc. that contain question and answer areas, in order to understand our customer better without being overly intrusive to the point where the customer loses interest and abandons the process. In the case where the customer does walk away, there must be triggers that result in automated or personal contact with that customer. They had an interest to begin with; so why lose that potential customer? Send that email, make that telephone call and follow-up on that lead using technology automations and old school telephone rapport.

Accurate information is crucial and will streamline the credit underwriting process immensely. Analyz-ing poor and inaccurate data leads the credit ana-

Terry WoodVice President, CreditMintaka Financial, LLC

CREDIT


lyst down a vicious cycle of dead-ends and creates unneces-sary credit questioning. This is a colossal waste of time and resources. It creates frustration and may drive a wedge between the credit and sales team – and ultimately the debtor/customer – with repeated and mostly and many times, unnecessary com-munications resulting in delays.

A detailed interview with the customer up front will express to the debtor that the sales representative is professional, compe-tent in their field, and attempting to gain the utmost favorable credit approval tailored to fit their needs.

The sales representative, armed with accurate information, then will submit for credit analysis with a short, but concise and accurate, description of the proposed transaction.

It is essential that both credit and sales clearly understand that both are on the same team and share a common goal. Sales is the primary contact with the customer and the gatherer of accurate information. Credit must analyze that data, under-write, and return the most amicable approval in the most accu-rate, timely manner while remaining conscious of the teams’ common goal – to ultimately close the sale.

Everyone understands that time is of the essence. The first to return to their customer with the most favorable terms has the greatest opportunity to close the deal. Today’s customers want a stress-free credit application experience, to provide informa-tion once, and receive a response quickly and accurately. Ask all of the questions up front and avoid the back and forth com-munication that can cause the customer stress and the over-whelming desire to seek out credit opportunities elsewhere.

There are competitors around every corner processing appli-cations faster and more efficiently than ever before. Processing inaccurate information in a rapid manner only leads to wasted time, resources and strains the relationships between sales and their customers, as well as the credit and sales teams. It can mean the difference between losing and closing the transac-tion.

A reliable relationship between credit and sales is paramount in order to build trust, establish expectations and streamline processes to remain competitive. These elements have a direct result on productivity for all parties involved in this process.

In today’s competitive marketplace, with technology driven application and credit underwriting processes, credit and sales must continue to improve their relationships with one another and focus on the speed and accuracy of their processes. Consis-tent, accurate communications and solid relationships remain the key to the successful and dynamic relationship between credit and sales. In short, leveraging the right technologies and always asking the right questions – while building authentic, human-centric relationships will help to close more sales due to the harmony between human and machine.

ABOUT THE AUTHOR | Terry Wood, CLFP, is Vice President of Credit at Mintaka Financial LLC.


http://www.nefassociation.org

A loan or lease collateralized by equipment is more compli-cated than the typical commercial loan, especially if the bor-rower becomes distressed. If, despite your best efforts to avoid the circumstance, you have found yourself in a situation with a troubled client, are you prepared to create a workout plan?

There is no one-size-fits-all approach to working out a loan or lease collateralized by equipment. In order to determine the path best for you, it’s best to spin the roulette wheel of options and consider the factors unique to the company, industry, and equipment itself.

Is the equipment producing products that allow the bor-rower to generate cash flow that will result in debt service? If the equipment is producing cash flow, it may make sense to support the continued funding of the business. This decision will allow the business to, on a restricted cash budget, help pay down the loan or lease. It’s also a decision that needs to be made on a forecast and cash-flow basis (vs. a historical basis) in order to quickly determine if the equipment should be shut down or immediately turned back on.

If the equipment does not seem to have use in producing cash flow, consider turning it off and pursuing an alternative source of repayment.

Keep in mind; there are expenses and risks to turning the equip-ment off…

• If your equipment is so specialized the only people who can run it are the people with the skills to do so. Can you risk losing them?

• If you decide to turn the machines back on, will you incur a loss in productivity and waste due to inefficiencies?

• What is the risk of injury to the unskilled employees who may now need to operate these machines?

…and there are expenses to powering the equipment back on.

• High energy consumption upon start up

• Will customers still be around to buy the output?

• Are there environmental issues with turning off equipment (E&P)?

If the equipment stays on, can it produce for other compa-nies in a way that will create cash flow?Certain industries have a practice of offering tolling arrange-ments or "toll processing", where one company with specialized equipment processes materials or goods for another company. This is common in industries such as the newspaper industry. For example, the daily paper will also produce weekly maga-zines.

The incremental cost of a tolling arrangement is beneficial to the manufacturer because other companies may have capacity constraints or they may simply not want to run their equip-ment all the time. The income earned from a tolling arrange-ment can be used as debt service to pay down debt to the lender.

What is the impact of turning the equipment off?If there is uncertainty in being able to sell through production or in the cost of turning the equipment on and off, the com-pany may consider a tolling arrangement with another manu-facturer. While there will be a loss of control over the produc-tion schedule, the company won’t have to carry the cost of the equipment. Once the equipment is taken off line, the cost of running that equipment is eliminated, thereby providing the

WORKOUTS

Playing Workout Roulette: Some Rules to RememberBy Ken Yager Unfortunately, there is no exact blueprint to working out a loan or lease collateralized by equipment. And as your client spins the roulette wheel with equipment usage, there are a number of ways the business can affect your collateral and ability to collect on the debt!


ADVERTISER INDEX


Bank of the West Equipment Finance 13Boston Financial & Equity Corp. ..............5ECS Financial Services, Inc. ........................6Ferns, Adams & Associates ......................11Financial Pacific Leasing, Inc. ......................5

GreatAmerica Portfolio Services ...........9 Great American Insurance Group .....11LCA Financial, LLC .......................................12LEAN ....................................................................7LeaseTeam, Inc. ..............................................BC

Leasing Solutions LLC ...................................9NEFA .......................................................... 10, 26Odessa Technologies ................................. IFCStearns Bank .......................................................8

company with additional funds to pay back the lease or loan, keep the doors open, etc. In turn, this allows the company to pursue a longer time to market and sell the excess equipment with the hopes of avoiding a forced liquidation scenario where sale proceeds may not be maximized.

Additional questions to consider.• Is the equipment fit for its current purpose? Does it do what

they say it will do, and is the company using it how you thought they’d be using it?

• Has the company materially modified the equipment to make it do what they want it to do? Has the equipment been damaged or so radically modified that its market value is diminished?

• Does the company track maintenance? Do the logs show that maintenance is on pace or has maintenance been deferred?

• Is the “brain” (software) of the equipment functioning or has it been so modified – or conversely, is it such an out-dated version of the software – that it’s no longer usable by an outside party?

If the answer to any of these is yes, you may have a prob-lem with the sale of the equipment. You may also have main-tenance challenges: if the equipment has not been properly maintained, depreciation accelerates. The accountant’s amor-

tization will need to adjust and you may find the equipment is not worth what you think it’s worth on the open market. At that point, you will need to decide if you let the borrower continue to use it as collateral or make them give it back to you before it gets worse.

Unfortunately, there is no exact blueprint to working out a loan or lease collateralized by equipment. And as your cli-ent spins the roulette wheel with equipment usage, there are a number of ways the business can affect your collateral and ability to collect on the debt. Since an equipment inspection is not always a practical option, invest in time with management to understand what’s going on in their thought processes. A thoughtful examination of the management team will lead you to uncover the state of the business and guide you to a work-out plan that will maximize your debt recovery.

ABOUT THE AUTHOR | Ken Yager is Founder and President of Newpoint Advisors Corporation, a turnaround consulting firm dedicated to improving troubled and financially underperform-ing businesses.


The incremental cost of a tolling arrangement is beneficial to the manufacturer because other companies may have capacity constraints or they may simply not want to run their equipment all the time.


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March 2 - 4, 2016 New Orleans, LA

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driving forces – current dynamics in key equipment sectors · isfied with what they get out of...

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