St. Louis-based Cass Commercial Bank has entered the equipment finance market as a middle- and large-ticket lender.
Cass Equipment Finance, launched March 28, will prioritize businesses adjacent to the customers of its payment processing and invoice auditing division, Cass Information Systems vice president of equipment finance Scott Williams told Equipment Finance News.
“That’s going to lead us down the path of trucking, telecommunications, waste management and utilities,” Williams said. “That being said, the bank has a large [commercial and industrial] origination group in St. Louis that’s mostly focused on the surrounding area, so that’ll certainly be a focus.”
Williams declined to put a specific number on the maximum or minimum transactions Cass Equipment Finance would fund, but said it will “be moving more toward a middle-market approach with the direct origination front. We’re going to be moving down a little bit in the size of the company, [but] we’re still only going to do business with companies that are ready, willing and able to pay us back.”
Optimistic about trucking
Williams said that while the trucking market is experiencing a downturn, Cass Equipment Finance remains optimistic about the opportunities in that sector.
“If you listen to people who are talking about and living it every day, a 1% to 4% increase is huge,” Williams said of interest rates. “But almost everything in the United States came on a truck at some point, so it’s not going anywhere.”
Trucking is “a long-term proposition, and the strong survive.” —Scott Williams, VP of Equipment Finance at Cass Equipment Finance
The trucking industry is cyclical, Williams added. He noted that Cass publishes a monthly transportation index that tracks utilization rates in the North American trucking sector. According to that index, as of February:
- The freight shipment index declined 4.5% year over year;
- Accounting for “normal seasonality,” the freight shipment index will fall another 1% in March, and turn positive on a YoY basis in May;
- The freight index for expenditures was down 20% YoY;
- Nationwide freight spending fell 19% in 2023 and is expected to decline another 14% in the first half of 2024 ;
- The inferred freight rates index – which tracks expenditures divided by shipments – was down 16% YoY in February; and
- Freight rates have declined by 15% to 21% for nine straight months.
What the bank won’t fund
There are some areas of financing that the new equipment finance division will not consider funding, Williams said. He listed cannabis equipment as out of the question, since it remains federally illegal. He also noted that commodity-driven markets “less attractive” to the lender.
“Whenever oil and gas, or commodity businesses hit the skids, it’s possible that there’s a prolonged down period that could drag down even a lot of your top performers,” Williams said.
He didn’t rule those out entirely though, saying that Cass Equipment Finance will keep a close eye on those markets and their associated risks.
Cass Equipment Finance is equipped to weather the storm of changing interest rates, he said, adding, “Every bank and borrower is ready for interest rates to change over time, we built that into how we do business,” he said. “Sometimes it costs more, sometimes it costs less.”
Register for the 2024 Equipment Finance Connect, which focuses on best practices in equipment finance, on May 5-7 in Nashville. Learn about the event and free dealer registration at EquipmentFinanceConnect.com.
