Since the end of the Recession, a number of banks and newly formed independent finance companies have entered the equipment finance industry. These new entrants have been joined by a new breed of equipment lender – the closely watched FinTech companies or more commonly called Alternative Lenders. This post-recession “player expansion” and increase in equipment financing demand is also playing out in the Equipment Leasing and Finance Association’s MLFI-25 Reports with the most recent August report demonstrating new business volume growth at 6% year-to-date. Add to this the potential positive impact an interest rate hike may have in stimulating companies to act now with respect to capital equipment acquisitions, and one can understand the desire to enter the space.
In August, Med One Capital joined this group of opportunistic finance companies announcing the company’s expansion beyond its traditional medical industry focus into the general commercial leasing market targeting multiple industries and equipment sectors. This newly created Commercial Leasing Group is being built upon Med One Capital’s successful track record of providing flexible financing solutions and leasing products within the healthcare community for over 25 years.
To gain an understanding of why a lessor traditionally focused on the medical industry is expanding beyond its niche into an increasingly competitive equipment finance market, Equipment Finance Advisor spoke with Larry Stevens, President and CEO of Med One Capital. During our discussion, we quickly learned that while Med One Capital may be a medical equipment lessor, the management team and staff are not strangers to the general equipment finance market.
Larry Stevens began our conversation with an important clarifying point. “To begin, my partner and I started our tenure in the leasing business as generalists,” says Stevens. “When we started Med One Capital it was to pursue a specific niche, and this niche has treated us very well. But it’s not as if we aren’t experienced in the generalist market. Over the years, our company has grown, as has our portfolio and staff. We have individuals in our company who entered the equipment finance business in generalist environments and we see the general equipment finance market as an opportunity to add top line revenue.”
This expansion may seem like an unlikely move for a specialist in one particular sector for over 25 years, but according to Stevens, over the years Med One Capital has been presented with many transactions outside of the medical industry, and they intend to no longer pass on these opportunities. Going forward the company’s strategy is to fully capitalize on business already within its grasp. Stevens explains, “We mainly serve acute care hospitals today, but one of our core strategies has always been to fully serve our customers. In our current sales process, we run across vendors that serve more than just hospitals, and we are now reaching out to those vendors letting them know we are ready to work with companies outside of the medical sector. These financing opportunities are within our grasp, and heretofore we have been letting them get away. Now we’ll be able to take advantage of these new and exciting opportunities.”
Med One Capital is also positioned to immediately pursue these new markets with its existing lenders and funding sources. According to Stevens, the company has substantially broadened its base of capital partners and banks that provide capital for the leasing business, and each of these partners have encouraged Med One Capital’s management team to expand the company’s scope. “We are well positioned to hit the ground running as we don’t need to find new funding sources to enter the generalist market and we can be competitive,” says Stevens.
Med One Capital’s new Commercial Leasing Group is vendor program focused – targeting small to mid-sized companies with revenues of $250 million or less. In describing this new group’s go-to-market strategy, Stevens says, “We’re looking for strong deal flow from vendors that will also bring us credit-worthy customers in need of essential-use equipment. But in the generalist market, you need to keep an open mind and we are approaching this market opportunistically. So from a mining perspective, we’re looking to get as much ore on the pile as we can and then start refining it.”
A few sectors of preliminary interest for the Commercial Leasing Group include non-profits, education, professional services and in some cases, hard equipment. However, Stevens doesn’t see the group pursuing yellow iron or machine tools. Rather, this group will focus more on the services sector. Interestingly, Stevens did mentioned an offshoot of the company’s medical focus as a targeted segment explaining, “Being a major player in the medical space, we have never focused on physician offices, and this will be a target for us as well as other medical professional services providers. There are some areas within the medical world which we have not served, and now we will be able to do so.”
The Commercial Leasing Group is headed by Bryce Ray who joined Med One Capital a few years back. “Bryce joined Med One a few years ago as our chief lending officer and he possesses vast experience in credit functions in banking and general leasing. He is very well suited to spearhead this group for us and he will also continue in his role as our chief lending officer.”
The generalist group currently has two originators plus Ray and the team is focusing on the inter-mountain area for now. However, because Med One Capital’s hospital leasing company is a nationwide player, the generalist team will also be pursuing opportunities throughout the U.S. Stevens continued, “Our medical business originators are truly specialized and focused on serving the hospital world. As they become aware of vendor program opportunities outside of the medical focus, they will be passing them to Bryce and his team who will be pursuing these non-medical commercial leasing programs aggressively.”
For now, Med One Capital won’t be adding much staff according to Stevens as he believes the existing staff within Med One Capital brings a tremendous amount of synergy in many operational functions. “We will grow the staff as needed in order to be effective, but we need to clearly determine the size of this opportunity for our company. We have a lot of depth here and we can take full advantage of the expertise we have in house.”
And growth is part of the strategy according Stevens describing his long-term vision for the group saying, “Our long term vision is to start slow. We are not going to invest a tremendous amount of resources into it early. We are not under any type of mandate to achieve any predetermined numbers, but we hope to be able to achieve $50 million or more per year in bookings over the next two-three year period.”
We couldn’t leave the conversation with Stevens without asking for his outlook for the medical equipment leasing industry. “The long-term outlook is there’s a lot of demand for new equipment, but there is also a lot of cash out there,” says Stevens. “We have determined in the last year that our biggest competitor is cash retained in hospitals’ capital budgets. I was just with one of our major vendors recently who mentioned they are seeing more cash purchases than ever. I would say that as long as interest rates remain low and hospitals have cash, we’re going to see a flat scenario in the medical business. This doesn’t mean our medical business isn’t growing as we also have a very active medical equipment rental business that is growing like crazy. But the traditional 36-60 month leases are going to the cash side in hospitals.”