A growing number of brokers are looking to seize the opportunity to capitalize on growing demand in the equipment and equipment finance industry.
American Financial Partners (AFP) and other equipment brokers have experienced an “interesting” shift since the pandemic, Chief Executive Amy Wagner told Equipment Finance News.
“During the pandemic, a lot of businesses pulled back on spending and focused on cash flow, but since then, we have seen demand pick up,” she said. “Now, more companies are reinvesting in new equipment or updating what they have, which is driving a lot of volume through our space.”
AFP holds transactions in niche industries that it has served for many years, representing a broad mix of equipment financing deals, from $10,000 to $5 million, Wagner said. The broker and lessor covers the software, construction equipment, creative services, woodworking and high-end manufacturing tools industries, offering financing products such as equipment finance agreements and operating leases, which benefited from industry growth.
The equipment finance industry grew to an all-time high of more than $1.3 trillion in 2023, according to the Equipment Leasing and Finance Foundation’s (ELFF) Horizon Report, released Oct. 28. ELFF estimates that 82% of buyers use some form of financing to pay for their equipment and software, opening the door for brokers to connect those transactions with lenders, Wagner said.
An estimated 15% to 20% of equipment finance transactions are broker-originated, based on the Equipment Leasing and Finance Association’s Aug. 23 Survey of Equipment Finance Activity.
“It is like a wave of modernization, and the equipment finance industry overall has surged back,” Wagner said. “It’s clear businesses are optimistic about growth and are ready to make big investments again.”
Growing broker presence
Wheatland, Wyo.-based C.H. Brown is one equipment lender that is growing its broker mix, recently adding five brokers to the more than 500 to whom it markets most of its finance offerings, Kit West, business development director of broker relations, told EFN. C.H. Brown also is on the receiving end of deals from 120 brokers a year on average, he said.
Still, the equipment broker space includes thousands of brokers, Steven Geller, owner of equipment finance intermediary and management consulting firm Leasing Solutions, previously told EFN.
With so many brokers, the breadth and depth of options results in tailored solutions for almost every equipment segment, AFP’s Wagner said.
“Equipment finance brokers are everywhere these days — and for a good reason,” she said. “We bring a unique advantage to the table by connecting businesses with tailored financing options that suit their specific needs.”
ELFF also estimates a 2.7% growth in real GDP and a 4.4% growth in real equipment and software investment for 2024, according to the foundation’s Q4 industry snapshot. With more growth expected in the equipment finance sector, the demand for broker transactions appears set to grow.
Finding success in brokering
Part of finding success as a broker comes through active networking and relationship building, so AFP stays “very active in the broker space,” Wagner said.
“We stay close to both vendors and customers, making sure we are available when they’re ready to buy and guiding them through financing options that actually work for them,” she said. “It is a hands-on role that makes a real difference for our clients.”
Coordination among brokers, dealers and lenders is critical for completing transactions efficiently and effectively, C.H. Brown’s West said.
“Everything is about speed, trying to get deals in and trying to get deals out, and one thing — when you start hitting speed — is you start missing the little things,” he said.
“We will miss them, our brokers will miss them or our dealerships will miss them, and it’s those little things that we need to focus on because those will end up slowing the deal down or even killing the deal in the end. Or if we addressed it early on, then we could fix it early on and still move forward.”
Broker communication
Poor broker communication and poor deal submissions often result in brokers being left out by lenders, Sean McDonald, vice president at Socotra Capital, said Sept. 23 during the B2B Finance Expo in Las Vegas.
“If you get enough submissions from a broker that don’t go anywhere, they get downgraded, even if it’s conscious or not,” he said. “Those deals can close, but they’re a lot of work, and they’re a lot of strain and, as deal flow increases, which I think we’re all kind of expecting, those deals don’t get worked on, because you only have so many hours in the day.”
Engaging with clients and industry partners helps AFP maintain a strong presence and understanding of the market, Wagner said.
“We are seeing more activity in sectors like construction and creative services, where companies need advanced, often costly equipment to stay competitive, so, we are focused on those areas to meet demand with financing that makes it easier for businesses to invest,” Wagner said.
Investment growth in construction machinery, medical equipment, railroad equipment and trucks appear set to shrink over the next six months, according to ELFF’s snapshot. Should a slowdown in some market segments occur, it’s important for both brokers and lenders to remember that the equipment industry remains in flux, West said.
“All the industries that we’re involved in, from the yellow iron to the trucking to the brokers to the lenders, it’s always changing,” he said. “People have to understand that when they get into this, that there’s always going to be change, as we’re always going to be at the trends and the mercy of the markets, where they’re going to go, and politics, not just here, but the global politics.”
Market outlook amid broker rise
In terms of politics, any change in the regulatory environment will play a role in broker operations, Jesse Carlson, executive vice president and general counsel of independent financier Kapitus, said Sept. 23 during a presentation at the B2B Finance Expo.
“Regulators tend to make the providers who are larger more visible and easier to find responsible for the actions of the companies that they do business with. And this is seen throughout the financial services ecosystem,” he said.
“Bank examiners and the bank regulatory authorities make the banks responsible for the behavior of their vendors, so as you see more regulation in the commercial space, you’re going to see non-bank providers start to look at controlling the people they do business with and have higher standards for the people they do business with,” Carlson said.
Ultimately, liability will remain at the provider level, and the impact will trickle down to brokers, Carlson said.
“Providers will ultimately weed out people they don’t want to do business with and are going to be concerned about reputation and vicarious liability, because the regulator isn’t going to go try to chase down every rep and every broker who may lose representation,” he said. “They’re going to leave that liability with the provider, and so they are going to take actions to protect themselves.”
Still AFP projects steady growth in the equipment finance space for brokers in 2025, Wagner said.
“Companies are facing more pressure to modernize and adopt new technology, and flexible financing is key to making that happen,” she said. “We think brokers will play an even bigger role, helping companies navigate all these financing options and find solutions that align with their business goals.”
