When Steven Orenstein, head of HVB Equipment Capital, first met with Hudson Valley Bank CEO Stephen R. Brown in early January 2014, he initially assumed they were simply exploring the option of expanding the bank’s portfolio into the equipment finance industry. However, by the time mid-March rolled around, Orenstein was on board; and so HVB Equipment Capital’s launch came to fruition.
“We think that equipment financing is a very nice fit for our business plan,” Brown says. “We have been looking to diversify our loan portfolio, as well as expand our geography in certain lines of business. Equipment financing allows us to do that very well.” Brown explains that the bank had previously provided limited equipment financing to its small- and mid-sized clients, but this expansion gives the bank a greater ability to further meet the needs of existing customers, as well as new clients.
“Equipment financing adds value,” says Orenstein. “Most all businesses finance something commercially, so it’s a product that every commercial account is going to use. Aside from servicing existing clients, this is a product that will attract additional clients to the bank.”
HVB Equipment Capital is going to be a far-reaching equipment lender, focusing on equipment classes, including healthcare, IT, telecommunications, manufacturing, graphic arts and trucks/trailers, among others. “We are going to do a little in a lot of different industries,” Orenstein says.
With the company’s day-in-day-out “sandbox” ranging from $50,000 to $1 million, Orenstein notes that HVB Equipment Capital is a credit lender first. “The collateral is important but it’s secondary,” Orenstein explains. “We want to know that our customer has the ability to meet the terms and conditions of the equipment finance agreement.” However, he says HVB Equipment Capital will certainly “entertain larger, more complicated deals.”
In general, the type of clientele HVB Equipment Capital is looking for to expand its portfolio includes investment grade, lower to upper middle market and small businesses. “We are not only looking for diversity in our product size and equipment finance transactions, but also diversity of credits. Hopefully, with a balanced portfolio and approach, it will minimize potential risks down the road,” concludes Orenstein.
Orenstein and Brown highlight the group’s goal of utilizing a balanced portfolio method in their go-to-market strategy. Initially, the sales staff will be based along the East Coast; however, Orenstein notes that their physical location will not hinder their national reach. “It’s different than it was 20, 30 years ago. You can be sitting in an office in New York City and be doing business in Alaska — effectively, I might add,” Orenstein says.
In addition to the company’s direct sales force, Orenstein and Brown are exploring opportunities to create an indirect originations capability. These individuals will call on the key players in the industry who are looking to sell portfolio opportunities, as well as deal with over lines or exposure issues with different programs they might have. “This strategy fits nicely into our balanced portfolio approach,” Orenstein adds.
Through the direct and indirect sales forces, Orenstein says what will set them apart from the competition is the desire to serve the lower middle market. He explains that HVB Equipment Capital’s peers aren’t necessarily focused on the $200,000 to $400,000 deal size range; rather, they move “upstream” to tackle the larger deals.
“They will do fewer, but larger deals,” he projects. “It comes back to not only a competitive advantage but also a balanced portfolio approach both in credit and transaction size — we want to bite off manageable pieces initially. We think having the staff to accommodate $200,000 to $400,000 in average ticket transactions and doing a variety of small and large [transactions] will help set us apart from not only tier banks and finance companies, but some of the larger players in the marketplace, who are not effectively doing vertical marketing.”
Those manageable pieces are more than just another deal. “As an institution, we are very focused on service,” Brown says. “We don’t view business as a series of transactions; we view it as a relationship.”
Orenstein notes that the relationship between the bank and the equipment group will be complementary — “one hand is going to wash the other” — where both will present one another with business opportunities as a means to follow through with their service-oriented philosophy.
“We’ll be more responsive by offering a complete solution to small- and mid-sized commercial clients,” Brown says. “We try to respond to the needs of the market to present effective business solutions. Our clients have made it clear to us that this is an area that they would like us to present a solution. We need to have the right products, the right platforms, and we need to offer competitively designed and structured solutions.”
Joining Orenstein in the equipment group is Leonard Imperiale, who has spent 35 years in commercial banking, particularly in small business lending and equipment finance. Orenstein says Imperiale is a valuable member of the team in not only operations, but also in helping build the equipment finance group’s market. “We have created an efficient and well-balanced team so that we can keep up with our capacity to originate and turn deals in a timely manner,” Orenstein says.
Some other key hires include industry veterans who have hailed from GE, Citicorp, Newcourt, EverBank, Citi Capital and People’s Capital, bringing more than 50 years of collective industry experience to Hudson Valley Bank. “We each are bringing to the table best practices,” Orenstein explains, “and we’re going to incorporate that not only into our philosophy, but also in our policies and procedures and the way we approach our day-to-day business, and try to deliver the best possible product to our clients, as well as our lending and financial partners.”
The Hudson Valley Bank platform offers Orenstein and the equipment finance group a solid foundation upon which the team can expand its current clientele base. “We’re a financially solid, public company,” he says. “Being the new guy on the block can be challenging in a competitive market. Hudson Valley Bank helps bridge some credibility gaps as we go to market. Additionally, Hudson Valley Bank and Steve Brown have made it abundantly clear that they are ready to do business — and that’s important.”
Brown notes that the bank has been working for about a year and a half to capitalize the balance sheet and garner sufficient liquidity to fund new and future business initiatives they are exploring. With risk management platforms and credit administration in place, Brown says they are anxious to launch the business, and will do so aggressively.
“We’ve made a commitment as an organization to expand the lines of business to better address demands from both clients and the market, as well as to move into areas of opportunity,” Brown says.
Brown and Orenstein’s short-term goals center on readying the platform to be able to book quality business between now and year end. Long-term, however, they seek to become a meaningful, major player in the lower middle market and small-ticket equipment finance segment.
“We want to be taken seriously; we want to be a player,” Brown says. “We want to be known in our marketplace for this type of business. We want to be able to establish ourselves in niches within a broader geography in the U.S. Our expectations are that this line of business will make a meaningful contribution to our growth over the next few years.”
As the economy slowly but surely strengthens, Orenstein and Brown note that companies that have been sitting on the sidelines are beginning to come back into the market in order to be competitive. This trend further solidifies their feeling that Hudson Valley Bank’s entrée into the equipment finance arena is not only good timing, but also a very advantageous and strategic business move.
“I think it’s great that a bank like Hudson Valley Bank has confidence in the economy and the opportunities in the equipment finance industry,” Orenstein says. “I think there are too many players in the industry that continue to move away from core business because they can’t think of ways to make up the volume that they were enjoying years ago. For a bank such as Hudson Valley Bank to enter [this niche] is refreshing and very opportunistic at this time.”
Megen Donovan is an associate editor of the Monitor.
