There are several headwinds facing the U.S. economy including, but not limited to: geopolitical uncertainty, inflation, and rising interest rates (perhaps at a faster pace than previously expected). There have been many discussions related to how originators, sales teams, and companies can best prepare for the uncertainty. The answer to any challenge within the commercial equipment finance and leasing industry always boils down to "Quality" (quality assets, quality relationships, quality vendors, quality equipment, quality talent, etc.). The best teams and companies weather the storms by being prepared, by being focused on funding high quality assets, and by having professionals who know the difference between sub-par, average, and superior assets. Ultimately, professionals and companies are not judged by being the largest but by being the best. Long-term success is often tested in challenging times; and the commercial equipment finance and leasing industry appears to be facing a test over the coming six to eighteen months. The best organizations will thrive and will be dominate leaders in the industry. They will experience controlled growth and capture new opportunities because of their expertise and willingness to define and win quality commercial equipment assets.
At a recent industry event, a small group of industry veterans made the following observations:
The industry is currently robust - but facing strong headwinds in the near-term (6-18 months).
Savvy participants have already pivoted to aligning their risk with reward matrices (getting paid for their risk).
Rates will rise significantly to combat inflation. The industry is currently focused on the internal challenges of increasing rates; however, the real challenge will come when higher rates impact small and medium size businesses and their ability to pay outstanding debt.
The focus of industry participants will quickly pivot from growth to quality - the industry has been here before with the same reaction each time.
Participants will be reminded of many old lessons learned, and some will repeat the same misguided strategy once again in the future. We have seen the same story played out many times with each economic cycle.
There will be some participants that will not survive the upcoming challenges, while many participants that have already positioned themselves for long-term success will capture greater opportunities and become stronger because of the challenges.
The discussions reminded me of a conversation that I had many years ago with a top producing originator. He claimed that industry challenges only created greater opportunities for him and his clients. His business was based upon quality relationships that produced quality assets in all stages of an economic cycle. Therefore, he never had to participate in any downturn. There were always high-quality companies with a demand for new equipment to outperform average competitors.
The future has never been brighter for those originators and companies who focus on quality.
Wheeler Business Consulting works with banks, independents, captives, origination companies, and investors in the equipment leasing and finance arena. We provide training, strategic planning, and acquisition services. Scott Wheeler is available to discuss your long-term strategy, to assist your staff to maximize outcomes, and to better position your organization in the market.
Comments, questions and suggestions regarding are welcome.