Thoughts on Purpose, Partnership and Profits

After returning to our in-person ELFA Annual Convention this October, I was marveling at the friendships I have forged across many varied companies. Our industry is composed of lenders large and small, focused on every market niche, with service providers that deliver levels of skills, technology and scale that can’t economically be replicated by a single lender. It is precisely this diversity that enables our industry to weather the amazing challenges we’ve seen in our lifetimes. From the global financial crisis to the global pandemic, the equipment finance industry soldiers on, providing the capital essential to enable businesses to invest in the equipment that powers our economy. My company believes the world is a better place when small business succeeds. This mantra guides our decision-making every day. I am proud to see how our industry shares that purpose, helping small businesses thrive in their communities.

When looking at our industry’s rich tapestry of lenders and service providers, I can’t help but compare it to other financing industries, including residential mortgage finance, consumer credit cards and auto finance. According to a 2020 Nilson Report, the top five credit card companies represented a 60% market share by outstanding balances. These industries have seen decades of relentless consolidation, where the economies of scale have driven smaller providers to sell out to the behemoths who can provide homogenized services at the lowest cost. What about our industry is different?

Part of the continued diversity in our industry stems from the broad variety of markets we serve, from railcars to point of sale machines, from restaurants to law firms. Understanding these varied markets requires specialized knowledge of both sales channels and market dynamics that makes it difficult to homogenize. 


In the past, we have relied on deep expertise, whether in market and equipment, underwriting or vendor relationships, to overcome major differences in origination, funding and servicing costs. Today, more data and improving analytics are turning what was once an art of underwriting into a science. Lenders are building pricing models to generate superior risk-adjusted yields. Banks taking deposits and independents employing securitizations create lower funding costs. Borrowers are demanding online access to their account information and want to interact with lenders on their own terms. Providing efficient, effective servicing and portfolio management requires deep focus and investments in technology, process and talent development. These trends will expose those differences even more.

What will it take to survive and profit given these increasing demands? The key is to really understand what you do best. Find creative ways to minimize any disadvantages you may have based on your size or market position by leveraging our industry’s support network. When you invest time and resources into something that is not a source of advantage, you are leaving money on the table. From funding sources to providers of technology, data, analytics and servicing, our industry has built a thriving network of suppliers and partners that help you gain many of the benefits of scale. By elevating your strategy, you can compete and prosper. Together we can serve small businesses and vendors by celebrating our industry’s purpose and focusing on our strengths, while using partnerships to deliver world-class financing solutions.