1. 30 • monitor • MAY/JUN 2015
C
ompetition was the reoccurring theme of the 14th Annual
Equipment Leasing and Finance Association/Information
Management Network (ELFA/IMN) Investor Conference,
which was attended by more than 300 industry professionals on
March 12, 2015 in New York City. With a flood of new players
entering the space, another large focus of the conference was the
emergence of alternative lending, high demand for equipment ABS
and lending to startups.
“I see 2015 as being a really phenomenal year for independent
finance companies,” said Andrea Petro, Wells Fargo executive vice
president. “I see equipment finance as probably having the most
favorable trends of almost any sector that we finance currently.”
Petro cited two main reasons for her positive outlook. First, since
banks are having a more difficult time delivering capital to small- and
medium-sized businesses due to regulatory constraints and cost of
compliance, this role is now being assumed by independent leasing
companies. Second, small businesses — a market segment that was
hit disproportionately hard by the Great Recession — have finally
recovered and small business confidence has reached an all-time
high since the recession.
Ralph Petta, COO of the ELFA, presented another encouraging
trend during an overview of the equipment finance sector, in which he
examined the cycle of the asset class since 2008. “We have reached
a recovery point and have hit our bottom in terms of charge off and
ELFA/IMN Investor Conference:
High Investor Demand Breeds Competition,
Innovation and Consolidation
BY RITA E. GARWOOD
Spirits and confidence in the equipment finance sector were high at the 14th Annual Investor Conference
where panelists concurred that equipment — no longer an “esoteric” asset class — has reached a new level
of familiarity and desirability with investors. While high investor demand is creating a competitive landscape
and fueling innovation, many investors cautioned that competition could lead to loosening of standards.
Stephen Whelan, partner with Blank Rome, shares a legal perspective in a panel focused on securitization reality vs. perception where he shared the stage with
Evan Wilkoff of Ascentium Capital, Steven Day of GE Capital, Karandeep Baines of Moody’s Investor Service, and Teresa Davidson of Volvo Financial Services.

2. MAY/JUN 2015 • monitor • 31
delinquency,” he said, referencing recent stability and
slight peaking in receivables.
From a ratings perspective, Du V. Trieu, senior director
of Fitch Ratings also presented a positive outlook for the
industry. “Going forward, the equipment leasing space is
relatively strong,” he said. “There’s potential for growth
there. From an assets perspective we have a stable
outlook.” However, Trieu reminded attendees that any
setbacks within the economy or any significant increases
in interest rates may impact ABS performance.
Competition Brings Looser Standards
Trieu also discussed the increasing amount of competi-
tion within the industry, referencing the resurgence of
small leasing companies tapping the ABS market. While
this trend is promising overall for the sector, he cautioned
that increased competition could create a loosening of
underwriting standards, which could result in weaker
asset performance.
BMO Capital Markets director Jeff Merchant also
mentioned concerns regarding the growing market. “Some
structures can be construed as more liberalized,” he said,
adding that rating agencies continue to be diligent in struc-
turing and rating these transactions to ensure the struc-
tures adequately mitigate deterioration and underlying
credit performance of the assets.
“Banks are becoming less conservative in their under-
writing of debt for equipment loan and lease companies,
but are obviously still making prudent decisions on the
heels of the financial crisis,” Merchant continued. “But
there is definitely a loosening of underwriting terms.”
Chuck Weilamann, DBRS senior vice president,
concurred. “We’ve seen a loosening of standards,” he
said. “It’s something we’re trying to be vigilant about.”
Weilamann noted that this trend, coupled with demand
from the term side and additional growth in originations
that some parts of the industry are experiencing have led
him to wonder if the industry is at a very important preci-
pice for ensuring that the view on risk is consistent with the
actual risk in the transactions.
Regulatory Updates
Bob Rinaldi, CEO of Commercial Industrial Finance briefly
discussed the non-economic, external factors that could
be a cause for concern within the industry, including tax
reform, impending changes to lease accounting and regu-
lation. He stressed the important role the ELFA plays in
monitoring and reporting on these issues.
Providing an overview of regulatory developments,
Tom Howard, partner with Chapman and Cutler, explored
the three major initiatives of Basel III: risk-based capital
requirements, leverage ratio requirements and liquidity
ratio requirements. Howard also addressed small differ-
ences in adoption of Basel III in the U.S. and Europe,
noting foreign banks may have an advantage when dealing
with highly rated products since ratings are not taken into
account in the U.S. Howard believes that, over time, the
differences will become increasingly normalized. > >
“I see 2015 as being a really phenomenal year for
independent finance companies. I see equipment finance
as probably having the most favorable trends of almost any
sector that we finance currently.”
— Andrea Petro, EVP, Wells Fargo

3. 32 • monitor • MAY/JUN 2015
Figure 1, reprinted with permission from
BMO Harris, demonstrates the growing
number of new players that have entered
the equipment ABS market since 2012.
Figure 2 provides a snapshot of recent key
investments made within the equipment
finance sector and significant industry
trends revealed by each acquisition.
Source: Bloomberg, IFR Markets as of 3/6/15.
Equipment ABS New Issue Volume by Sponsor ($ in MM’s)
Seller / Servicer 2009 2010 2011 2012 2013 2014 2015 2009 - 2015
CNH Capital America 2,385 2,703 2,687 3,377 3,558 3,022 800 18,532
General Electric Capital 1,272 727 2,390 2,588 2,468 2,025 564 12,034
John Deere Credit 1,477 708 1,106 2,062 1,743 2,043 996 10,135
CIT Group 954 667 - 753 750 750 - 3,874
MassMutual Life Insurance 829 - 755 705 732 728 - 3,749
VFS US LLC (AB Volvo) - 616 - 642 685 701 - 2,644
GreatAmerica Leasing 454 - 362 376 375 424 - 1,991
Navistar Financial - 1,209 - 502 - - - 1,711
LEAF Capital Funding / Commercial Capital - 384 386 420 325 - - 1,515
Macquarie Equipment Finance - - 285 258 - 286 - 829
Kubota Capital - - - - - 300 500 800
Dell Financial Services - - - - - 722 - 722
Ascen um Capital - - - 118 - 202 330 650
Commerical Credit Group - - - - 194 265 - 459
Direct Capital Corpora on - - - - 344 - - 344
Na ons Equipment Finance - - - - 153 173 - 326
Axis Capital - - - 98 131 - - 229
Balboa Capital - - - - - 152 - 152
Navitas Lease - - - - 92 - - 92
Marlin Business Services - 81 - - - - - 81
Total $7,371 $7,095 $7,971 $11,899 $11,550 $11,793 $3,190 $60,869
INVESTOR ELL
Integrated 4 separate
verticals; followed by
successful public offering
Illustrates that banks
are still interested
Business mix and
competitive advantages can
still make an investment
attractive to a competitor
Market position and
relationships can drive
franchise value
Potential for steady (double
digit) returns can still
attract long term capital
FIGURE 1
FIGURE 2

4. MAY/JUN 2015 • monitor • 33
Positive Outlook for Capital Markets
In a panel on capital markets and funding, Merchant said the ABS
market is off to a fast start this year. For equipment specifically in
2015, ABS issuance volumes are projected to be between $13 billion
to $14 billion. He explained that more issuers are accessing the market
more frequently and many new issuers have entered the space over
the past few years. In fact, nine new players have come to the market
since 2012 (see Figure 1) and new names are expected to join the list
this year, particularly in the large-ticket space, as newly established
platforms have begun to season and are looking to diversify their
funding sources. This increase in supply is anticipated to be met with
an increase in demand from the investor community. “Familiarity with
the asset class has definitely bred some additional comfort which as
translated into additional demand,” he added.
“We’ve seen demand outpacing supply and a search for yield,”
Weilamann added, noting that the equipment sector was no longer an
“esoteric” asset. “The investor base is growing and they’re very hungry
for these assets.” Demonstrating this demand, Weilamann discussed
several key investments made in the sector recently, and the important
takeaways from each acquisition (see Figure 2).
Many presenters concurred that the equipment asset class has
gained in popularity with investors in recent years. Weilamann cited
that the increasing role of private equity in financing equipment
has helped to firm up the sector as viable and essential to the U.S.
economy, which has reengaged banks and gained access to capital
markets. He explained that private equity has been attracted to the
sector due to stable returns and relative value proposition.
“The intermediate term of the bonds fills a gap and a need,” Petro
added, speaking of investor appetite for ABS bonds. “It appears that
there’s certainly a volume of longer-term assets that are securitized …
that intermediate term — the five to ten years — there isn’t a significant
amount of alternatives to equipment.”
A panel moderated by Matthew Perkins, senior managing director of
Guggenheim Securities, with panelists Stephen Whelan, partner with
Blank Rome; Evan Wilkoff, EVP of Capital Markets with Ascentium
Capital; Teresa Davidson, VP, Legal and general counsel with Volvo
Financial Services; Steven Day, SVP of Investor Development with GE
Capital; and Karandeep Bains, VP and Senior Analyst with Moody’s
Investors Service, discussed securitization perception versus reality,
specifically addressing the viability of securitization as a funding tool
for issuers, the relative value of the commercial ABS sector for investors
and the major risk factors that should be considered when investing.
Alternative Financing — Here to Stay
The keynote was presented by Angela Ceresnie, co-founder and CFO
of Orchard Platform, a technology company that enables loan origi-
nators to distribute their loans to a diverse set of institutional inves-
tors through marketplace lending. Ceresnie discussed the ways that
marketplace lending can add significant value to businesses by adding
efficiency to funding sources (see related sidebar).
In a panel devoted to alternative financing strategies, Charles B.
Wendel, president of Financial Institutions Consulting, explained that
alternative lending opportunities abound today because banks have
narrowed their credit boxes due to credit crunch, regulatory compliance
and capital concerns. New competition has also entered the space from
companies like Amazon and PayPal, who have better relationships
with customers. “Companies with insider knowledge of the activities
of their customers are lending to these borrowers,” he said. “The bank
never gets to see the deal because these companies are anticipating
the need and soliciting … it’s a very powerful position to be in.” > >
“Banks are becoming less conservative in
their underwriting of debt for equipment loan and
lease companies, but are obviously still making
prudent decisions on the heels of the financial
crisis. But there is definitely a loosening of
underwriting terms.”
— Jeff Merchant, Director, BMO Capital Markets
“We’ve seen demand outpacing supply and a search
for yield. The investor base is growing and they’re very
hungry for these assets.”
— Chuck Weilamann, SVP, DBRS

5. 34 • monitor • MAY/JUN 2015
Affirming that alternative lending is now part of the permanent landscape,
Wendel discussed the rapid evolution that is occurring as lenders pivot from
one lending area to another. While this makes it more difficult to chronicle what
lenders are doing, he said, “It is also indicative of the amount of energy and
activity going on in this space.”
Wendel noted two factors that will affect the alternative space in the future.
First, while the government has ignored this business so far, he indicated that
it could play a “devastating role” in the future. Second, there is not enough
volume to be generated cost effectively to support all the players in this space,
so he anticipates that there will be fallout ahead as the playing ground changes
and consolidation increases.
Rana Mitra, principal with Atalaya Capital Management, discussed the six
verticals of alternative financing as well as products that might appeal to those
in the equipment industry, including merchant cash advance, direct loans and
peer-to-peer financing.
Tom Carter, founder and managing partner of Fountain Partners discussed
sustainability within the alternative lending space, identifying the costs of
acquisition and funding delivery as numbers that will become unsustainable
if they become too high. To Carter, the two characteristics of sustainability are
what he calls “skin in the game and cycle,” referring to an originator’s carried
interest and the importance of natural cycles. He stressed the importance of
incentivizing borrowers to minimize risk instead of just “just hanging your hat
on the asset itself.”
Vibrant Environment for Startups
Miles Herman, president of Leaf Commercial Capital, moderated a panel that
focused on measuring the potential of startups. Bill D. Allen, president and CEO
of LeaseDimensions, presented statistics from an ELFA study indicating that
businesses are projected to purchase an estimated $1.5 trillion in equipment
this year, which creates a vibrant environment for startup activity.
According to Allen, today’s entrepreneurs fall into three major categories:
brand new startups on the margin of the traditional equipment finance space,
captives or spinoffs launched by existing parent companies and old line manu-
facturing companies coming to the market with new products. Allen said that
while each set of businesses have their own challenges and values, many are
technology-based and are focused on customer experience and creating new
sales channels. He added that many companies on the margin of the industry
are coming to a scale that suggests that they are normalizing, so they will not
be on the margin much longer.
Charles Stuard, vice president of Commercial Banking with Genpact,
discussed sources of competitive advantage for startups from a strategic
perspective including customer experience, market expertise and cost. He said
that creating a streamlined customer experience is a main area of focus for
many startups because they have the capability to make the application process
easier using new integrated technology.
Matt Tallo of Capital One Commercial and Specialty Finance continued the
conversation on startups, focusing on key areas to investigate before financing
a startup company including: the vision of the company, target markets, type
of collateral they are financing, competitive advantage, and the entrepreneur’s
level of experience and past performance. Tallo also urged investors to look
at the company’s existing capital structure and to discuss the anticipated exit
strategy to ensure that the lending relationship is built upon a foundation of
clear expectations for each party.
Adding a “real live entrepreneur” perspective to the panel, Charles Anderson,
CEO of Enverto, said that his company believes that the equipment industry is
ready for change. Discussing modernization seen by other major asset classes
such as subprime auto and mortgage financing, he said, “They’ve gone from
the paper world to a paperless world, they’ve gone from offline to online …
it’s inevitable that our industry follows that as well.” Anderson said the world
ORCHARD PLATFORM: DIVERSIFICATION
THROUGH THE MARKETPLACE MODEL
BY ANGELA CERESNIE
I
had the opportunity to present the keynote at the 14th Annual Investors’
Conference on Equipment Finance, which focused on how traditional
lenders — including equipment finance companies — can fund their loans
through marketplace lending.
My presentation centered on the benefits of the marketplace lending model,
which is enabled by access to loan-level data such as credit history and loan
performance. Originators that lack proprietary technology infrastructure can still
access the diverse funding sources offered by the marketplace lending strategy.
Marketplace funding has the capability to address much of the capital
concentration risk that became an issue during the financial crisis. Originators
can achieve diversification of capital sources by using the marketplace model.
Marketplace lending can be scaled up and down quickly and is applicable to
a wide range of assets.
In 2014, the annual origination growth rates of major marketplace lenders,
like LendingClub and Prosper, on average was 168% with both parties
originating billions in loans. Loan originators who are intrigued by the
marketplace lending model, but who are not in a place to devote the
resources to building out a distribution infrastructure can work with a
technology partner like Orchard to access the marketplace funded loans.
Rob Snow, chief credit officer of Mainspring Funding—an equipment lending
company that recently announced a partnership with Orchard—joined me
on stage at the end of the keynote. He explained the primary benefits of
distributing at the loan level: Originators gain a better understanding of what
investors want to buy and the model helps to deliver what investors want
with minimal operational difficulty.
Angela Ceresnie is co-founder and CFO of Orchard Platform, a technology
company that brings the transparency, diversification and scale of marketplace
lending to a variety of global consumer and commercial asset classes.
Editor’s Note: For a more in-depth discussion of the marketplace funding
model, stay tuned for an article by Ceresnie that will appear in an upcoming
issue of Monitor.

6. MAY/JUN 2015 • monitor • 35
of equipment finance is moving online because people want a more
intuitive, simple process.
Todd R. Plotner, partner with Chapman and Cutler, provided an
overview of entrepreneurial challenges, noting that there are three
things that really matter: relationships, beginning with the end in mind
and diversification of capital. He encouraged startups to build multiple
relationships and multiple lines of credit, to start doing securitization
or marketplace funding, to diversify capital sources and to create an
exit strategy.
The final panel of the day, focused on improving the U.S. trans-
portation infrastructure and increasing efficiency, was moderated by
Stewart Hayes, SVP of Wells Fargo Capital Finance. Bradley Sohl,
senior director with Fitch Ratings, provided an overview of the trans-
portation ABS market, which represents three distinct asset classes:
container, railcar and aircraft leases. Sohl indicated that Fitch’s outlook
for the market is generally stable, with some increasing issuance over
the course of the year, primarily driven by customer demand for yield.
Performance was expected to be stable as the trends of competition
and yield compression were being continuously monitored. Sohl
discussed substantial competition on the aircraft side, with much of
the activity being led by Chinese leasing companies that will accept a
lower yield on investment.
Sohl also outlined trends in the transportation ABS market, such
as the order backlog and replacement risk associated with aircraft, and
DOT regulatory compliance for tank cars in the rail class. He also indi-
cated that fuel prices have the potential to affect each class in different
ways, being better for airlines and shipping companies, but potentially
negative on the rail side. “If fuel prices are low enough that crude by
rail users are eventually stressed, that could create an asset supply glut
and greater default risk to some of those transactions that carry large
concentrations of tank cars,” he said.
Craig Zimmerman with PNC Equipment Finance Corporate
Finance Group discussed the transportation assets held by banks like
PNC. He noted that transportation and energy are the two segments
that are seeing growth.
Wrapping up the panel, Michael Ruehlman, operating executive
of Hudson Clean Energy Partners and president of Sunlight Financial,
discussed the emerging renewable energy asset class. He expects an
increase in interest from utility companies in the future as an “incred-
ible turnover” in the infrastructure in this country is expected to occur
as coal is phased out and the grid becomes smarter and more stable.
Although the rapid growth seen recently is expected to slow, he antici-
pates the industry to remain strong despite the fact that solar tax incen-
tives have disappeared at a state level and will be phased out on the
federal level by the end of 2016.
Looking Ahead
Although the general consensus of the conference was positive, some
lingering doubt remains. “Regardless of what the Fed does, the busi-
ness cycle is here,” said Petro. “So all of us who have long memories
and long careers in this business always are looking for those signs
in terms of when does the next downturn happen?” Petro added that
she thinks this cycle could go much longer due to extensive manipula-
tion by the Federal Reserve. “We’ve never had this kind of long-term
manipulation of interest rates,” she said. “No one knows where that’s
going to end, so I’m sure we’ll have some interesting times within the
next five to ten years.” m
RITA E. GARWOOD is editor of Monitor.
Miles Herman, president of Leaf Commercial Capital, moderates the panel, “Ready,
Set, Not Just Yet! Measuring the Potential Future of Startups” which explored today’s
entrepreneurs and and key factors to consider before partnering with them.
Todd R. Plotner, partner with Chapman and Cutler, enjoys a lively discussion with two conference
attendees at Monitor’s booth after the session on startups, where he served as a panelist.