As we bring 2013 to a close, I reflect back on a year of instability, uncertainty, fear and a small amount of measurable growth in business. Given this environment, I am surprised that the industry has fared as well as it did in 2013, posting to date 5% gains in volume over 2012. Also encouraging is the continual increase in new application submissions, and a 1% year over year increase in headcount for equipment finance companies. Delinquencies continue to be at all -time low numbers. 

Projections for new business in 2014 are encouraging –- enough so that we can all feel positive going into the New Year.

Five points come to mind as we say goodbye to 2013.

1. Competition for the transaction flow that is out there is getting tougher. The space is now flooded with money -- some old players that left the marketplace when times got rough only to re-enter when the waters got calm and seemingly less risky. This type of activity creates pressure on pricing and eventually portfolio quality. I don't think I expected us to be back here so soon ... but we are. As we continue our push for new business, we all need to remember that lessons were learned in our industry as well. Let’s not forget them as we try to continue to book stronger numbers. We need to accurately price and structure transactions to be paid for the risk that is taken. It has been quite an interesting experience sitting on the front lines of the past recession. I remember thinking in September of 2008 that small-ticket equipment finance funding would become scarce and capital might not return quickly, if at all, to some arenas. My fears were completely unfounded as money has flown back to our space quickly and in full force.
2. As an independent equipment finance company, project management seems to be a strong part of what we undertake these days. More and more of our customers want us to manage the process -- negotiate on their behalf with vendors. (That sometimes seems to be one-sided in their approach to business.) They want us to fund progress payments to credible vendors, (and sometimes not so credible vendors) communicate on their behalf about delivery etc., bundle multiple takedowns into one monthly payment, and help them to manage when and how that payment gets made. My company has made a niche in this type of work –- we add value by taking some of that short term risk that our funders cannot or will not take.
3. We need expanded relationships with the funding sources with whom we transact business. I have been working in this space for over 25 years. The best of times for smaller independents occurred when originations were developed in tandem with the lenders that purchased these transactions. The parties worked together to develop product lines. For instance, those include business niches that were previously overlooked by the larger players but do provide value and diversity in their portfolios. The relationships allowed for a free flow of ideas between the participants and help build companies that could align with lenders who were looking to build originations without direct sales force additions. Most funders today have business units that work with independent contractors. We just need to strengthen and reinforce those relationships and make them more efficient.
4. We have come to “super" value the relationships we have with our customers and have worked much harder to maintain those accounts and to understand what motivates their equipment purchases. The trend this year has been more toward replacement of current business equipment that has more than run its time and replacement has been held off due to issues of uncertainty. The robust days of our industry come when companies look to add new equipment as their businesses expand. When we see that trend begin to accelerate, I will feel better about economic conditions.
5. ”Uncertainty” has been the banner ad of this year. From the Affordable Care Act to tax legislation to the implementation of Dodd Frank (I can't believe I’m still saying this), we will need to factor uncertainty into our business plans. Healthcare transactions have traditionally been a strong part of our volume -- this year was the exception as the ACA and it’s yet to be determined impacts were felt in the medical community. We know that close to 50 million new insured’s will be added to the system and that fact has doctors and medical facilities worrying about staffing and service issues -- not equipment -- at least at this point in time.

At time of this writing –- it appears that the bonus depreciation that has been a bit of a savior to business during the past few years is deemed unlikely to be as generous as it has been post-recession. That's an unwelcome bit of news!

I have always speculated that the better part of this decade would be spent sorting out the "bubble" of the last decade. This means we will see "spurts" of business activity followed by quiet periods that somehow defy what we have all come to understand and know in this industry. That is the new normal in my viewpoint.

What is on my wish list for 2014?

Congress is working hard on establishing a budget for the coming fiscal year. That act in and of itself would go a long way to allowing businesses is this country to in fact plan for the future. 

I expect that we will begin to see transaction demand at a more consistent pace as the small- to midsize business community begins to come to terms with the slower pace of recovery and the changes that are still being implemented. I don't think you can hold your breath forever.

I am certain that even more capital will enter our markets -- equipment finance still seems to be the "siren" of the lending world, promising historic lower loss rates and higher than commercial lending rate yields. I am not sure we need this capital but I welcome participation -- participation that will choose to learn the business and become a part of the industry.

My last wish is for continued strong participation in the professional associations that truly educate and advocate for our business.

I am proud to see that the associations have continued to grow and expand their missions in these last years. The equipment finance industry has been and will always be the unsung hero of our economy. Through our continued support of those that work hard to keep this industry’s interests protected – we will see the economy continue to benefit from the work we do and our businesses grow and continue to prosper.