Engs Commercial Finance was founded in 1952 and is one of the oldest lenders to the truck and trailer industry in the U.S. Previously family-owned, ECF was acquired through a business partnership by long-term colleagues Craig Weinewuth and Jim Freund and a large New York-based private equity partner. Weinewuth, president & CEO, and Freund, executive vice president of Sales and Marketing, have been a part of the commercial finance industry since the beginning of their careers — with a slight twist. While the two were business majors in their undergraduate years, they both went on to study law as a way to expand their careers.
In the late 1980s, when they joined Transamerica Commercial Finance as lawyers, they were initially focused on the legal side of the transactions, providing the foundation upon which to build their careers. “Transamerica had numerous business units that we worked for on the legal side,” explains Freund, “and we gained great experience in all areas of commercial finance.”
When Transamerica decided to sell one of its business units, Weinewuth and Freund left to work with a private equity partner to put together an offer to purchase the business. They were outbid, but with that private equity experience, they were able to go on to raise the necessary equity to start a de novo transportation equipment leasing and finance business that was ultimately sold to American Express.
Largely serving the West Coast for most of its 60-plus years, ECF lends to small- and mid-sized businesses in the transportation industry. The company has survived and thrived through many economic cycles, and now finds its place among the top 100 equipment leasing and finance companies in the country. Weinewuth & Freund believe this success and longevity are directly attributable to the company’s specialized lending approach.
“The company has always been focused and committed to providing financing solutions to the transportation industry, a market that the company knows very well,” explains Weinewuth. “One of the things we liked about the ECF platform is the strong belief in being a specialized lender. This is a philosophy that Jim and I believe strongly in and have always incorporated into the businesses we have led. We apply this specialization not only to the markets we serve but across all our functional disciplines. Having this detailed knowledge of the collateral and industry allows us to better serve our vendors and customers. Firms that tend to do better through changing economic cycles are firms that are specialists in what they do.”
Weinewuth says the company’s prolific success is also manifested in the company’s consistent and dedicated approach to underwriting. “The organization has always had, and continues to have, a disciplined underwriting approach,” Weinewuth says. “So, as economic cycles come and go, the company doesn’t find itself in a position where it has extended credit to higher risk parties at overly aggressive structures.”
The now Chicago-based leasing and finance company’s solid West Coast presence gave Weinewuth and Freund the platform to expand nationally. “The company has really flown under the radar, and that’s the way it operated,” Freund says. “We knew Engs Commercial Finance was a terrific and well-respected competitor, going back to when we were running other business units. We admired their platform, respected the way they approached the market, and realized ECF was the best platform to buy and nationalize. And that’s exactly what we’ve done over the last two years.”
Weinewuth and Freund describe ECF as a prime rated lender focusing on small to mid-size transportation companies with credit profiles of A to C. The company, with regional sales offices throughout the country, focuses on transaction sizes that range from small ticket ($25,000) to mid-ticket ($5 million-plus) with an average exposure of a few hundred thousand dollars per customer. “We’ve been able to take what was a very attractive receivable pool, acquire it and, we believe, enhance it significantly,” Weinewuth explains. “I think our banking partners would echo this position as our receivables have become much more diversified geographically and by customer.”
The move to Chicago was not necessarily a move away from the West Coast necessarily; rather, it was a strategic decision to better reach other areas of the U.S. “It’s much easier to run a national brand from a Midwest region,” explains Weinewuth. “You’re in the Central Time Zone. You can service the East and West Coast quite effectively. You can travel easily to any part of the country. And the opportunities that we’re sourcing from our regional sales teams located throughout the country are very well diversified and balanced across all the country’s regions.”
Weinewuth describes the company’s approach to the marketplace as “very much vendor centric.”
“When we talk about a customer, most people think about the end user,” Freund adds. “Our primary client is the dealer, the one who sells the trucks and trailers and related equipment. That’s who we look to as our primary focus. We’re servicing the end user on the dealer’s behalf; that’s the way we approach the market.”
An overall 123% year-over-year volume increase placed ECF in the top five performers in year-over-year new originations. The biggest increase occurred in the vendor channel, which was nearly three times higher in 2013 than what the company reported for 2012. According to this year’s Monitor 100 survey data, ECF is forecasting an increase in year-over-year new business volume of 28% with an anticipated 38% increase in portfolio size.
“That’s the nationalization process that we brought to the company,” Freund says. “Our experience is vendor-based and encompasses both the platform and financing tools. What we did when we purchased Engs is introduce a vendor philosophy. From day one, we began generating vendor-dealer originated new business.”
Expanding ECF’s product offerings is also on their minds; however, Weinewuth and Freund stress that their focus will remain on hard asset classes. “We absolutely are studying and exploring ways to expand and leverage the organization’s capabilities in hard asset lending to other areas, which we would refer to as concentric circles, around the transportation industry,” Weinewuth explains. “For example, there are several other collateral types that have similar hard asset characteristics to transportation-related assets such as construction equipment, materials handling, forklift, and environmental-related products, among others. We are not spending much time analyzing financing soft collateral — things that have very low liquidity value where you’re only relying on the customer’s balance sheet.”
The ECF leadership team is filled with seasoned professionals with experience ranging from small- and mid-size organizations to large Fortune 100 companies. Weinewuth and Freund said this affords ECF with the unique opportunity to have a team that understands how to process much larger volumes of transactions but also knows how to transition an organization from a smaller regional player to a national brand.
“We have a great team,” Weinewuth says. “Everyone on our leadership team has previously worked with us, for us, or is someone we knew in the industry, so we know them all to be very capable individuals. We know their underlying work ethic and approach to the marketplace will deliver exceptional results.”
Among the team members is John Engs, the grandson of the founder, who has worked at ECF since 1997 in various roles, and assumed the role of president and CEO in 1999. He continued in those roles until the acquisition of ECF in 2012. Engs continues to be part of the organization and supports the business in a variety of roles.
“John Engs is someone whom Jim and I have known in the industry for a dozen years,” Weinewuth says of his long-time friendly competitor. “And when we saw the opportunity to make an acquisition in the marketplace, we immediately thought about ECF because we knew John Engs, we knew the history of the business, we knew the approach to the marketplace and we liked the strong foundation.”
Weinewuth and Freund noted that the company draws upon its 60-plus years of experience in underwriting and delivering lease and finance solutions to its clients. However, they say what sets ECF apart is the fact that experience enables it to be a credit and collateral lender, as opposed to being primarily a credit-based lender. “Our long tenured industry experience with this collateral allows us to feel very comfortable ascribing value to collateral in our transactions, which often times helps us get deals done when our competition cannot,” they said.
Freund explains further, saying, “The company’s long tenured experience in the hard asset and transportation sector gives us the great advantage over much of our competition, because we have reams of data available at our disposal and credit performance up and down through troughs and peaks of the economy. Because of that experience, we are in a very strong position to make an intelligent credit and collateral-based decision, which I think is unique in the current market.”
Overall, Weinewuth and Freund feel the industry is in a good place and, absent an unforeseen negative economic event, they fully expect the company to move along — expanding its reach and growing its portfolio.
“We absolutely have succeeded in casting a much wider net than we did two years ago,” Weinewuth says, “but there’s still significant room for us to continue to expand our product offerings. We will continue to provide complete and compelling financing solutions to all geographic regions of the country. It is our mission to be the best independent commercial finance company in the markets we serve, as measured by returns to our investors, market share, and customer and employee satisfaction.”
Megen Donovan is an associate editor for the Monitor.
No tags available
