Equipment dealers looking to expand their finance operations must focus on efficiency so lenders have the confidence to work with them.
While overall lender confidence improved in June, two months after hitting a 19-month low, just 18% of equipment financiers expect increased access to capital over the next four months, according to a June 18 report by the Equipment Leasing and Finance Foundation. New business volume in the industry declined 1.2% year over year through May and has been seesawing in 2025 amid high interest rates, tariff uncertainty and flashes of financial stress.
Improving look-to-book
Dealers seeking new lenders to increase sales in the wake of economic pressures should focus on improving their “look-to-book” ratio, Kirk Mann, executive vice president and head of transportation at Mitsubishi HC Capital America, told Equipment Finance News. Look-to-book refers to the percentage of applications that get approved.
“How many of those deals do I actually fund? And if it’s a very small percentage, it’s not good for the lender, because the lender is paying to evaluate that application,” he said. “So, if your look-to-book is very low, that lender is going to be less incentivized to work with you.”
Even for existing finance partners, dealers should try to improve their look-to-book ratio, Mann said.
“And then ask questions to your lender,” he said. “Have a meeting with them, determine where you need to make changes so that your look-to-book is better than what you have today.”
Credit approvals in the equipment finance industry have been hovering around 75% so far in 2025, according to the Equipment Leasing and Finance Association.
Moreover, Mann said equipment dealers typically fall into four categories regarding financing strategies, including:
- Price-sensitive;
- Relationship-centric;
- Structure-centric; and
- Growth-centric.
Ideally, a dealer should balance these characteristics, but financing relationships are often driven by the segment that they fit into, Mann said.
“If they’re price-sensitive, and I’ve sat with dealers who say they have 89 lenders, and that was my cue to head on out,” he said. “Because what you’ve got is a dealer who’s shotgunning a bunch of lenders trying to get the lowest price and the most favorable approval. … That impacts a lender’s look-to-book.”
Understanding lender appetite
Many dealers expand their finance operations to cater to certain credit profiles that their primary lender doesn’t meet. But as dealers grow their lender network, it’s important to be aware of what each lender “has an appetite for,” Jody Ray, relationship manager at Chicago-based BMO Bank North America, told EFN.
“An example of this is sending those customers with low credit scores or short time in business to lenders that look for prime credit and established businesses,” he said. “Conversely, when you send a prime credit customer to a lender known for sub- or mid-prime credit, the customer then gets a rate that is several points higher in interest, frustrating the customer.”
Setting clear expectations with dealers is an effective way to avoid these missteps, Ray said.
“If there is a certain credit profile or credit quality the lender is looking for, those discussions up front can manage expectations on both sides. It gives the dealer parameters to work within and it sets standards the lender is looking to keep.”
— Jody Ray, BMO Bank North America
Mann agreed.
“It really does take all of us, and it’s not pretty, it’s not perfect,” he said. “But it really starts with a great conversation with your lender to find out what it is they want, and then to do your best to give them what they want.”
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