WLN Columns

Seeking New Opportunities in the Leasing/Financing Industry

Our economy has been battered over the past twelve to twenty-four months. Most, if not all, industries including the finance/leasing industry have faced tremendous disruption and negatively shifting demand and supply curves. However, there are many positive signs on the horizon for the leasing/financing industry, even as uncertainty remains in the overall economy. Many originators and lessors have started to experience significant improvements over the lowest points of the business cycle. These positive trends are good news for everyone and represent a leading indicator for the entire recovery cycle. Similar to past recovery periods, leasing and alternative financing will experience significant growth in activity as the recovery progresses and strong businesses begin to acquire essential equipment necessary for growth and sustainability. My research has shown the recovery in our industry is not yet developing broadly and many in our industry are being left behind as the economy and leasing/financing industry begins to recover. The purpose of this article is to identify some of the specific actions which I have witnessed by individual originators and companies who are leading the charge and quickly gaining market share by being innovative, flexible and proactive in their marketing efforts.

During the economic boom years, leasing/financing originators could easily generate significant incomes by being financial generalists and offering commoditized products to a broad range of business clients. This same approach is becoming less effective and nearly obsolete in today’s market. Business clients are demanding their financial partners to be experts in their industries, their equipment needs, and to be able to offer financial solutions which are designed for their specific needs. Individuals and companies who are truly niche players are experiencing new opportunities as their less successful competitors are continuing to provide “one size fits all” solutions. This trend is not surprising. Our industry and other service industries usually experience specialization trends after a down turn. Specialization is a reaction to the free market demanding better services and eliminating those which are no longer providing valid solutions to meet the needs of stronger more savvy buyers. It’s important to note that the recession has affected all aspects of the economy; therefore, the weaker buyers of our services are struggling and may no longer be valid buyers. Weaker credits are no longer being chased by an abundant supply of funding. The successful originators are soliciting specific vendors and end-users which are aligned with their expertise, their products and their funding capabilities. Successful originators know their place in the market and are using targeted marketing efforts to expand their presence within a niche market. I have witnessed success by originators specializing in many different industries. The specific choice of an industry is not as important as the depth of understanding an originator is willing and capable of providing. There are significant differences between the results produced by an originator who claims to be a specialist; and the results of an originator who has developed a specialization through a pro-active process and the development of real knowledge surrounding a specific industry. Originators who are embracing the specialization transformation are excited about the new opportunities which are developing and are having fun building their businesses effectively. The process of become a niche player is not necessarily easy, but it is financially and professionally rewarding.

As originators narrow their focus into specific niches, they are also being required to expand their knowledge in all aspects of the leasing process. In order to be effective advisors in the market, originators need a comprehensive understanding of the credit process and must be able to intelligently discuss specifics regarding financial statements, cash flow trends and business leverage. Financial directors and CFOs want to converse with originators who can understand their financial challenges and can understand the financial steps which are being taken to mitigate potential weaknesses. Internal credit departments and external funders are also depending upon originators to flush out the initial financial details which are significant to the credit process. Originators who are excelling in the market are more than information gatherers; they have a thorough understanding of the credit criteria needed to fund worthy transactions. Many originators are seeking credit knowledge by pro-actively interviewing their internal and external credit departments and asking to be part of the credit process. The opportunities are limitless for the originator who can deliver both marketing and credit expertise in the market. Originators who have a thorough credit understanding have eliminated most of the personal frustrations which have hindered overall performance and production of their less knowledgeable competitors. Credit knowledge allows the successful originators to be better time managers and to concentrate their efforts on transactions and relationships which are more productive – less credit worthy transactions are quickly dismissed. Credit understanding allows the originator to provide better customer service to both vendors and end-users. The market is rewarding those individuals who know their credit capabilities and aggressively disseminate accurate information to their clients.

The greatest challenge for originators and lessors over the past year has been the supply of funds – from both internal and external sources. All operations have faced uncertainty about the supply side of their financial products – a very different environment than most have experienced during the boom years when funds were readily available for all types of transactions and all types of risk. Savvy professionals understand that the sources which fund our industry have faced major challenges in their maturing portfolios. Portfolio executives are busy collecting and managing risky pools of transactions which were originally priced with little or no margins for elevated defaults. New business is being scrutinized for appropriate and stronger risk/reward correlations. The greatest opportunities exist for those individuals and companies who have moved away from “one size fits all” request. Originators who are offering lease structures, lease pricing and terms which are properly matched to the risk of each client are funding more transactions, gaining market dominance and improving their relationships with both clients and their suppliers of funds. The market is demanding flexibility and creativity, attributes which have continuously served our industry well. As our economy recovers, businesses will need our services more than ever and those professionals who distinguish themselves with unique offerings will continue to be rewarded greatly.

Knowledge is a powerful tool in the free market. The dynamic leasing/finance industry is capable of reacting quickly to the needs and wants of growing businesses. As the economy enters an expected prolonged recovery period, leasing professionals who are focused on specific niches and who are providing superior services will maximize their opportunities, their incomes and their positions within the market. The strongest will flourish and the weaker, less knowledgeable, will perish. Many originators and companies have weathered the storm and are now beginning to investing in their futures.

Great potential lies ahead for those who are willing and capable of offering their very best in the market.