Inside Alerus Financial’s new equipment finance division

Community bank Alerus Financial Corp. launched an equipment finance division as it aims to expand its specialty lending capabilities, according to a June 10 company release. 

The publicly traded regional lender wants to grow its commercial and industrial (C&I) portfolio, Brian Scott, 25-year equipment finance veteran and managing director of equipment finance at Alerus, told Equipment Finance News.

“If you’re looking to grow your C&I business, there’s not a better tip of the spear than equipment finance,” he said. “What I mean by that is to generate new accounts, enhance relationships and strengthen current relationships because everybody needs it. Having these products within the bank is a great way to grow that C&I-type business.” 

Alerus’ equipment finance team includes Scott and senior credit officer Daniel Littlefield and operation manager Michael Ryan, both 20-year financial service veterans; the three are looking to build the business with the embedded support of Alerus. 

“With everything at Alerus, we are going through the due diligence between us and them, but to me, one of the key drivers is [that] we are embedded within the business,” Scott said. “We are 100% embedded within the business, tied in with the bank and bankers, to help drive that business and those relationships.” 

The relationship between Alerus and the equipment finance team, as well as the company culture, played a key role in the creation of the division and the recruitment of the team, Scott said. 

Equipment finance strategy

The Alerus equipment finance division will start around syndication and buying loans before looking to building out the portfolio by working with Alerus bankers to loan to the bank’s customers and even out the portfolio, Scott said. 

“My goal is that five years in that split will be 50/50,” he said. “Initially it’ll be heavy syndication and as we get our feet up underneath us, develop the internal relationships, and build that trust, which you got to do, we’ll see that needle move.” 

The lender intends to initially target equipment agnostic, middle market transactions between $1 million and $25 million, with a “sweet spot” between $5 million and $15 million, Scott said. Alerus’ equipment finance division also sees the B to B- credit space as an area of opportunity in the market. 

“As a regional bank versus the big banks, we’ll have a little more flexibility on creativity, which the regional banks have to do, so we’re probably playing in that B, B- space, and take advantage of the gap between the big institutional banks and then the finance companies,” he said. “There is a gap there, and there’s a need within the market for a bank “rate,” and the flexibility for that credit quality,” 

Alerus sees equipment finance as a growth opportunity, even as interest rates remain elevated, Scott said. 

“From the rate perspective, that affects all the industries, not just commercial equipment finance,” he said. “What happened last March with the liquidity crisis within the regional banks, equipment finance became even more important.”