Leasing still a Relationship Business by Christopher Menkin My first partner in 1974, Walter Muir, president of Medallion Mortgage and Dividend Development, opened a recourse line at Crocker National Bank. As soon as we signed the papers where he was full recourse, he told me to get another bank line. He said always have more than one source, in case something happens to the first source or the terms and conditions change. Eventually we had three bank lines, plus the 1973 first non-recourse bank line at Wells Fargo Bank, through their auto division in San Jose, California ( at the time, they had many auto finance division, primarily for auto dealers, not equipment.) Our partnership lasted over ten years, until a point I not only didn't need his personal guarantee, but we ended another leasing partnership that was going in a different direction than I wanted to go (it is another story.) Through this time we also established “discount” and “broker” lines for customers out of our “one hour driving distance” and those that did not fit other criteria, including when we got to $50,000 in recourse with one customer (it was a lot of money to us in 1974.) During this time the bank lines and lease lines were set up in person, as Shawn Halladay so well puts it in www.leasingnotes.com that equipment leasing is a “relationship business.” The development of the four main equipment leasing associations saw the need not only to continue relationships, but develop new ones. The growth of the top two, now both close to 780 members each, demonstrate the diversity. The two up-coming leasing conferences are prime examples of how their membership has grown. The main difference in the two leasing conferences is the relationships sought, and offered and why their members meet, one in Minneapolis, and the other in Chicago. Only three of the “funders” listed at the National Association of Equipment Leasing Brokers (NAELB) Conference will be at the Equipment Leasing Association (ELA) Funding Conference: ACC Capital, Bank of the West, Main Street National Bank. Two of the funders on the ELA list are not on the Leasing News list of funders (a bank and mortgage company who's web site show no leasing department, but may be new in this sector.) 21 of the NAELB list (excluding two well-known “SuperBrokers” otherwise it would be 23, three service companies on the list were not counted) are not on the Leasing News “funder list” (Note: this does not include ACC Capital which is not listed on any Leasing News list: 24) These observations should not be viewed as criticism, but to point out the differences between the two conferences and thus the two leasing associations. As ELA appears to becoming more a legislative advocate, NAELB this year will certainly become the largest association in number with additional significant benefits for its individual members. To further illustrate the difference, Marlin Leasing with over 300 employees today and actively expanding across the United States, including into an industrial bank in Utah, was not listed in the ELA Funding Conference presenters. Marlin's marketplace, according to its SEC filing: "the average original lease transaction was $9,032, with an average remaining balance of $6,401. ( Our average lease transaction was approximately $9,000 at December 31, 2005.Of our 296 total employees as of December 31, 2005, we employed 103 sales account executives, each of whom receives a base salary and earns commissions based on their lease originations. We also employed six employees dedicated to marketing as of December 31, 2005.) The company wishes to expand it "broker" business although it states: "The small-ticket equipment leasing market is highly fragmented. We estimate that there are up to 75,000 independent equipment dealers who sell the types of equipment we finance. We focus primarily on the segment of the market comprised of the small and mid-size independent equipment dealers." The difference in the marketplace of the funders can also be seen in the ELA literature: “If you're an equipment lessor, you're in demand. Your originations are strong, your credit quality is good, your profitability is steady, and 2006 promises more of the same. That's why funding sources want you! They need solid investments, and few could be better than leasing right now. It's elementary: You have business that needs funding. Funding sources have capital that needs to be put to work. So...Let's Make a Deal!” This appeal to larger lessors with warehouse lines who fund deals and then sell in a group or individually most often to a “non-recourse” lender. The original lessor assigns the lease and maintains the rights of the personal property, unless there is a default. Reserves and “hold backs” are not uncommon. While there are independent and smaller firms, they generally handle large ticket dollar amounts or bank/securitization lines for major corporations. ELA List of Funders at Press Time: ACC Capital go to www.elaonline.com to register. NAELB List of Funders at Press Time ACC Capital Corporation Don't delay - Register now at www.naelb.org ! Both conferences are not far from each other in major cities: Chicago, Illinois, and Minneapolis, Minnesota. Hotel rooms in Chicago appear higher than Minneapolis, and perhaps airfare is higher to and from Minneapolis than Chicago due to the city being an “airline hub port.” While there are other events, other activities, including a NAELB golf brunch and outing ($100), four paid professional speakers, marketing programs, the main thrust in this Leasing News comparison regards broker/lessors together with funders. This is more than a “funding conference.” ELA will have its “Annual Conference in the fall. This is one of a series for specific segments of the industry. The ELA approach to allows attendees to make appointments on line before the conference. It also should be pointed out that the majority of “brokers/Lessors” who attend ELA are looking at sources for daily business of $1 million to $20 million, as indicated on the Leasing News “Broker/Lessor” list of ELA members. (This evidently does not exclude, but certainly is not aimed at “Captive Vendors” and “Captive Lessors” where ELA has a separate conference for this group exclusively: April 9-11, Florida: http://www.elaonline.com/events/2006/CVF/ Cost to Attend today, March 17: ELA Members: $495 (Broker members before March 15th $100 less, in addition, NAELB gives all members $50 credit toward any one event they attend in the year of membership) Leasing News "Funder" list: |
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