Independent lenders benefit as banks continue pullback

HUNTINGTON BEACH, Calif. — Independent equipment lenders continue to grow their operations as banks continue to pull back from the market. 

Independent lenders, while not immune to the overall market conditions, experience the concerns differently and can gain share amid bank tightness, Richard Hickmon, VFI Corporate Finance’s vice president of intermediary relations, said today during a panel discussion at the National Equipment Finance Association’s spring conference. 

 “We weren’t as impacted when the big banks got a little skeptical and shut down some of the funding sources or some of the banks are closing down, it just opens up new avenues and windows for us because we’re not going in the same direction,” he said. 

With interest rates remaining high, independent lenders can present more personal offers to customers, Jason Zeager, president of Pacific Business Funding, told Equipment Finance News. 

“The bank rates now are around 10%, and an SBA [loan] is at 10% to 11%, so … when people see that, they don’t really flinch so much when the rates are a little bit higher and they’re more accepting of it,” he said. Pacific Business Funding offers rates anywhere between single digits and low double digits, with 0% intro financing available for certain lines of business credit, Zeager said. 

When Hawaii-based Pacific Business Funding provides “the background on what’s happening in the banking world like banks going down, banks having liquidity crisis right now, they’re not lending very much, and they’re going to be very strict on you, that makes sense” to customers, he said.

More troubled waters ahead 

As banks continue to tighten credit standards and lending habits, the possibility of more tightening exists as interest rates remain high, Zeager said. 

“Banks are closing people’s lines of credit, not renewing them, or they’re becoming more restrictive over time, and it’s been this way for over a year now,” he said. “It’s just going to keep going down that path, we’re going to see more bank failures, so banks are going to keep tightening up and customers need to go somewhere to get their equipment deal or working capital funded, so they need people like us.” 

While banks lend less, independents such as Pacific Business Funding and Salt Lake City-based VFI Corporate Finance continue to prepare for more market opportunities. VFI Corporate Finance, for example, turned to the asset-backed securitization market to get more money for equipment financing, Hickmon said. 

“As a non-bank, we’re not bound by the same criteria, so we have a lot more flexibility and freedom to offer things, and we’re a source that can still be very competitive,” he said. “We’ve fortunately, at the same time, completed our second securitization last year, which fused a lot of capital back into our company, and our cost of funds continues to go down. We were creeping a lot into the banking space anyway, and that helped fill that business a little bit longer, a little bit better, a little quicker.” 

VFI closed a $174.8 million asset-backed securities transaction on Oct. 27, known as VFI-2023-1, according to the Kroll Bond Rating Agency. 

Registration is now open for Equipment Finance Connect, the nation’s only dealer-centric equipment lending and leasing event, which will take place May 5-7 in Nashville, Tenn. Learn about the event and free dealer registration at EquipmentFinanceConnect.com.