WLN Columns

The Next Stage of Recovery for the Financing/Leasing Originator

The originators in our industry were faced with double jeopardy during the depths of the recession. Both the demand for capital equipment and the supply of capital was greatly diminished. As an intermediary or direct originator of commercial equipment transactions, the equation was constantly going negative – less applications, less approvals, less funding opportunities. However, the trends have improved and most originators have adjusted and are well into a personal recovery mode with steady, yet inconsistent improvements throughout 2010. The demand, to date, has been mostly replacement equipment with still historically low levels of new acquisitions being generated to fuel growth or even efficiencies. The supply of capital has strongly improved from its lowest levels in mid 2009. High quality paper is being sought after by many and priced at seemingly low levels to induce quality over quantity in portfolios across the country. The transitional period has flushed out many competitors, and many of these individuals will not be returning to our industry even as the recovery continues. The demand for capital equipment will improve and additional monies will enter the market. The commercial equipment financing/leasing industry will also see steady improvements, although no one has suggested a return to the pre- recession levels of either demand or easy supply of money. Therefore, it needs to be asked; Are there enough STRONG originators to facilitate the recovery, especially originators who are willing and capable to participate in the “B” credit market – often described as the most profitable business sector of our industry, but equally the sector which requires the most knowledge, most due diligence and most creative originators.

Many veteran originators have not witnessed such a window of opportunity since the 1980′s, when national companies (GE, CIT, Associates, Westinghouse, Textron and many others) spent millions of dollars to recruit, train, and encourage hundreds of new originators to blanket the country with aggressive selling, packaging, and risk-reward pricing models to generate new financing/leasing transactions. The well trained, knowledgeable “rainmaker” will always be in great demand by employers and funders seeking to employ their funds at reasonable returns. The sought after originator will have a great appreciation for and knowledge of the needs and wants of all the appropriate stakeholders; and will focus his/her resources and efforts on transactions which are able to be funded by his employer and or funding source. The sought-after originator will be solution-oriented and will be able to aggressively point out the strengths of any transaction and conversely mitigate any weaknesses. The sought after originator will embrace the policies of the credit decision makers and additionally, become a vital part of the credit process. The sought after originator will be equally concerned with the profitability of a potential client and the profitability of his funding source (or employer), because he/she will understand the importance of both after the last downturn. Employers and funders will not be interested in mediocrity, but will be looking for strong origination partners who can deliver real results.

Originators will need to execute on their plans and consistently target, negotiate and win transactions which meet the needs of their employer and/or funding source. Knowing who you are in the market is paramount. Finding random transactions will not suffice. Originators will increase their value and improve their personal incomes by properly matching the needs of his/her clients with their funding capabilities. As the demand for equipment improves, time will be of the essence and originators who are properly positioned will gain the greatest benefits. The work and effort put forth in the coming months may very well determine an originator’s ultimate success over the next few years. Many originators are already in the process of defining their new place in the market; however, it is never too late to become more engaged in the industry, to gain greater knowledge and to improve relationships with vendors, end-users, funders and other important stakeholders which depend upon meaningful advisory services. The opportunities for strong originators are growing significantly and the future will be bright for those originators who embrace change, consistently offer superior expertise and are willing to be fully engaged with others.