Prior to the recession, small and mid-sized businesses consistently presented tremendous growth opportunities for equipment finance players prepared to effectively and efficiently serve this unique market. And while many businesses failed or experienced significant contractions in borrowing needs during the economic downturn, today many find themselves ready to invest in equipment. This resurgence in borrowing demand is partially the result of pent up equipment needs, as well as the fact that small and mid-sized companies cut overhead expenses and debt levels significantly over the past four years, leaving them more efficient and leaner than ever. The result is this sector again needs equipment financing.

Marlin Business Services Corp. provides equipment financing for small to mid-sized businesses by creating point-of-sale finance programs offered through manufacturers, suppliers and resellers nationally. Lending to small and mid-sized companies utilizing a vendor model requires a clear understanding of this market segment, and for a fresh perspective of this world, we turned to Daniel Dyer, Chief Executive Officer and Co-Founder of Marlin Business Services Corp.

Delivering a High-Quality Experience for Customers

Marlin adheres to a unique business model according to Dyer. “Our business model is built upon a platform that focuses on value and service. You can define that in many ways, but what we deliver is a high-quality, convenient and consistent experience for our customers which include manufacturers, dealers, distributors and borrowers. That’s a simple statement to make, but not so easy to execute.”

Most equipment finance professionals would agree that consistently delivering service in the vendor market is not always easy. And most would also agree that the execution of a successful vendor relationship has never been an elementary undertaking for any equipment finance entity – bank or commercial finance company. The role of the vendor finance company is seemingly simple – facilitate the sale of equipment for manufacturers and dealers by providing strong financing programs for their customers. But in reality, there really is nothing simple about this role.
 
The vendor finance relationship can be complex and requires a true partnership in order to be successful. Dyer agrees, saying, “Let’s start with the dealers, for example. They’re in the business of selling equipment, not financing it. We need to be available for them day in and day out because they need a partner who understands their business, and can deliver results in a consistent fashion.”
 
But Dyer also believes finance companies must consistently monitor and adjust to the changing expectations of their customers, especially in the small-ticket environment. “We spend a lot of time evaluating our customers’ experience by polling them and assembling feedback groups. We learn from that process and get better at what we do. This need to constantly improve is engrained into our culture and is among our core values and is a key to our success,” says Dyer.

And success is what Marlin is experiencing in the small-ticket market, posting strong loan and lease originations growth over the past two years. In 2010, Marlin’s loan and lease originations increased 51 percent from $88.9 million in 2009 to $134.0 million. And through the nine months ended September 30, 2011, originations totaled $160.6 million.
 
According to Dyer, “Our growth is a testament to our business model, and our ability to take business from competitors and alternative finance providers like community banks. I don’t believe our growth is a reflection of what anyone would call a robust economy. But we are benefiting on the demand side, because businesses have been holding on to equipment for so long and there is a need to replace aged equipment. So, our growth is a combination of all these factors.”

Marlin is also not hindered from achieving its growth goals because the company is not saddled with portfolio or balance sheet problems, according to Dyer. This freedom allows the company to be focused upon and invested in growth. The focus on growth is evidenced in the number of sales representatives currently on staff at Marlin, which almost equals the number of sales representatives who were on staff when the company was at its peak in originations prior to the recession. To this point Dyer stated, “The combinations of our strong balance sheet, effective business model, and the strength of our sales and processing organization, allow our company to focus on growth with no distractions.”

A 21st Century Approach to Industry Specialization

Marlin employs a focused approach across its business. “We have a segmented strategy which we call a channel focus strategy.  We have dedicated groups within specific sectors,” says Dyer, adding, “And while the overarching value proposition is the same across all channels, we do run each business differently.” And, according to Dyer, Marlin has a clear understanding of the shades of differentiation between each business focus.
 
Marlin’s business channels include:

•    Office Technology
•    Manufacturing/Industrial
•    Healthcare
•    Food Services
•    Information Technology
•    Surveillance and Security
•    Telecommunications
  
The company primarily utilizes an inside sales model where sales representatives are available nationally via telephone versus the more traditional “feet on the street” model. Dyer believes this allows them to reach many customers and provide quality service more effectively than field sales representatives can provide. “We do certainly also have a field sales presence, but if you believe that customers want quality and consistent service, we believe we can serve them best by being available for them by phone. So we’ve developed a model that starts with the quality of people we hire, the extensive training we provide, and the systems we provide our people to be successful. Our sales representatives have the technology at their fingertips that allows them to be highly-effective partners for our customers.”
 
Effective use of technology is critical to Marlin’s model, according to Dyer. “We take a 360 degree view of how we can best use technology to create operational efficiency that spans across our entire business including sales, credit, collections and all our departments.”
 
A Strong Company Culture Delivers Results

Dyer believes Marlin will continue to grow above industry averages due to its commitment to providing superior and consistent customer service in a highly-efficient manner. He also feels strongly about the difference the Marlin team brings to their customers’ experience, saying: “We have a very strong culture with a strong sense of management cohesion and leadership which is valued. We take great pride in what we do every day and we have a very solid team up and down the entire organization that focuses on a common mission and purpose. This culture is what has allowed us to consistently grow through the years, work our way through the downturn and now grow at the pace we are growing.”  

Rising Tides Will Not Float All Boats

Dyer also feels better days are ahead for the equipment finance industry. He described the industry as resilient, saying, “I think [the equipment finance industry] will continue to evolve. Some shakeout will continue, but I think we are in the eighth inning of the big shakeout on the credit side.”

We also asked Dyer for his thoughts on risks the uncertain economic conditions can present to the equipment finance industry. According to Dyer, “Economic risk is very real for everyone. But, our growth going forward is built around the fact that we have a better model, we are focused, and have the ability to take market share. If equipment finance companies think they are going to get volume organically, they are not going to be as sharp as they need to be on the execution, service and value sides. So we believe that in order to succeed in a low-growth environment, you really need to sharpen your strategy. If you think a rising tide is going to float all boats, you cannot succeed. So we are not banking on a big improvement in the economy as a driver for our growth.”

Dyer also believes there will be new entrants to the equipment finance industry, resulting from the fact that traditional loan growth is hard to come by for banks. To this point he added, “It’s hard for banks to generate loan growth, and commercial lending to small to mid-sized businesses is basic blocking and tackling, which is how a lot of companies were built in this industry. I think more and more banks will be attracted to our segment of finance, but whether or not they can succeed is yet to be seen.”


Daniel P. Dyer is the Chief Executive Officer and Co-Founder of Marlin Business Services Corp. The company, founded in 1997, is a nationwide provider of equipment and software financing solutions primarily to small businesses. Additional information regarding Marlin Business Services Corp., its products and services can be obtained online at www.marlinleasing.com.

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