Independent lenders fill ‘critical gaps’ as banks pull back

Independent equipment lenders are capitalizing on their flexibility and personalized service to fill funding gaps created by banks’ growing conservatism.  

Forty percent of independent equipment financiers approved at least 81% of all equipment loan applications from January to September of 2024, up from 30% in 2021, according to the Equipment Leasing and Finance Foundation (ELFF). By comparison, 28% of banks approved at least 81% of equipment finance loans, down from 34% back in 2021.  

Banks have been steadily pulling back from the equipment finance space in recent years due to regulatory constraints, high interest rates and declining capital, with domestic bank deposits dropping $1.1 trillion, or 5.3%, from the first quarter of 2022 through the third quarter of 2023, according to the FDIC.  

Thirty-five percent of banks reported a significant uptick in regulatory demands in 2024, compared with 8% among independents, according to the ELFF report released Sept. 18.  

Filling the gaps 

As bank lending standards tighten, independent equipment financiers are filling “critical gaps” by responding quickly and offering flexibility to “businesses that may not meet a bank’s rigid requirements,” Pat Hoiby, chief executive at Fort Worth, Texas-based Equify Financial, told Equipment Finance News. Equify, founded in 2011, is an independent equipment lender that also offers lease financing, debt restructuring and working capital. 

“We’re seeing an uptick in opportunities with mid-sized and smaller companies in industries like construction, transportation and manufacturing. These businesses often need customized financing solutions that take into account their unique challenges, and our ability to structure creative deals allows us to step in where banks cannot.” 

— Pat Hoiby, CEO, Equify Financial

Bank pullback has also encouraged independents to “expand their product offerings and diversify their risk profiles,” Hoiby said. 

“We’ve deepened our focus on industries where we see consistent demand and strong collateral values, such as construction and industrial equipment,” he said. “Additionally, we’ve been proactive in sourcing more non-bank funding partnerships to maintain liquidity and manage cost of capital effectively.” 

It starts with relationships 

Independents are prioritizing relationship building, which is especially attractive to “customers who are accustomed to financing through their regional bank,” Auston Bennett, president at Vestavia Hills, Ala.-based Battle Horse Financial, told EFN. 

“That’s because these customers put a high priority on relationships, but they need a more stable partner that is less subject to the forces impacting their banks,” he said.  

Dan McDonough, president and CEO at Charlotte, N.C.-based Commercial Credit Group (CCG), an independent financier specializing in transportation, construction and manufacturing equipment, agreed.  

“If you’re a dealer and you have a couple of channels where you’re sending your paper to, and all of a sudden they’re getting tight or just acting differently, you better keep your customers happy, and you better hurry up and get other [lenders] that can accommodate them,” he said.  

Startups, higher-risk borrowers benefit 

Fifty-eight percent of equipment lenders reported worsening credit quality among borrowers in 2024, up from 49% in 2023 and 17% in 2022, according to the ELFF report. Equipment financiers denied or partially approved loans for 27% of small business applicants in 2023, according to a survey by the Federal Reserve comprising nearly 11,000 responses. 

Now, more small- and mid-sized businesses with higher-risk credit profiles are turning toward independents as banks become less likely to approve them, Equify’s Hoiby said. 

“Many of these businesses are asset-rich but may lack the traditional credit profiles or financial metrics banks prioritize,” he said. “Additionally, new and growing companies, especially those experiencing rapid growth or seasonal revenue fluctuations, are finding significant advantages in working with independent lenders. These borrowers often require speed, flexibility and personalized terms — qualities that independents excel at delivering.” 

More than little guys 

While banks’ pullback has yielded increased opportunities to finance small-ticket items for smaller businesses, it has also redirected more large transactions toward independents, CCG’s McDonough said. 

“We have a sister company, Keystone [Equipment Finance], that books small-ticket used-truck deals all day long. But for us, it’s more of those higher-end deals that are falling out of the bank space that we’re able to get versus those smaller transactions.” 

— Dan McDonough, president and CEO, Commercial Credit Group

Deals greater than $1.5 million are generally considered large for the lender, he said.  

In fact, higher-end transactions and borrowers with strong credit can help independents manage risk as they expand their portfolios, Battle Horse’s Bennett said. 

“Weak businesses have always had a hard time borrowing, so the increased opportunity we see is instead with strong businesses with track records of success,” he said. “The inclusion of these customers can actually lower the risk of an independent’s portfolio, not raise it.” 

The third annual Equipment Finance Connect at the JW Marriott Nashville in Nashville, Tenn., on May 14-15, 2025, is the only event that brings together equipment dealers and lenders to share insights, attend discussions on crucial industry topics and network with peers. Learn more about the event and register here.