Leaf Financial – Gaining Momentum
Crit Dement, Chairman and CEO, LEAF Commercial Capital
Vince Faino, Senior Vice President of Sales LEAF Commercial Capital
LEAF Commercial Capital, Inc. (LCC) has had a busy and memorable last few quarters. Not only did the company boast substantial growth, it completed a recapitalization, secured new debt financing and added personnel to its sales team, most notably Vince Faino as senior vice president of sales.
LCC was formed in January 2011 as a subsidiary of LEAF Financial Corporation (LFC) in order to bring in outside investment into its lease origination and servicing platform. LFC was started in late 2001 in Philadelphia by Crit DeMent, chairman and CEO, and Miles Herman, president and COO, as a subsidiary of Resource America, Inc. (RAI). Both Herman and DeMent were part of the group that established Fidelity Leasing for RAI in the late 1990s. Fidelity was eventually sold to European American Bank (EAB), which was subsequently sold to Citi Bank. Shortly after Citicapital purchased the company, both retuned to RAI and subsequently formed LFC.
LFC initially was established as a small-to middle-ticket lease origination business focusing on the vendor. “At the same time,” DeMent says, “as a part of RAI, we had an expanded model. RAI is an asset management company that raises capital through a variety of investment vehicles including limited partnerships that are marketed through the independent broker dealer channel. LFC really wore two hats throughout the last decade in that we were a lease origination company, and we were also the general partner that managed portfolios of leases on behalf of several investment funds.”
In late 2010, DeMent and Herman determined that they wanted to “bring in some additional capital for the leasing business,” so the lease origination and servicing platform was transferred to a new company called LEAF Commercial Capital. As of the transfer, LCC is the leasing business and LFC continues to be the general partner and asset manager, DeMent explains.
More recently, in November 2011, LCC secured an additional $125 million in capital, consisting of a $50 million equity investment from Eos Partners, and $75 million in an expanded warehouse facility with Versailles Assets the CP conduit of Natixis. As of the investment, the company is no longer consolidated with Resource America. DeMent notes that the additional investment, “allows us to build on our business plan, grow our portfolio and provide strength to our platform so that we can continue to service the partnerships to their benefit.” The investments came from a number of sources and is a joint venture among the original parent, RAI, Resource Capital Corp., Esos Partners and Guggenheim Securities.”
Following the investment, the company announced the hiring of Faino in mid-December. After earning a degree in Business Administration with a concentration in Marketing from Penn State University, Faino started his career in equipment leasing and finance in 1982 when he was hired as a Philadelphia area sales representative for American Equipment Leasing (AEL), a small-ticket leasing company. He spent 18 years there, and earned a MBA from St. Joseph’s University. AEL was acquired by EAB, a unit of ABN Amro, in 1996, and the next year he was named president of AEL.
It was under the EAB umbrella that Faino first began working with DeMent and Herman. “Although I had known Crit and Miles previously since our careers developed within the same circle of competitors, once their predecessor company, Fidelity Leasing, was also acquired by EAB, we were, for the first time, on the same team.”
When Citicapital acquired EAB in 2001, Faino was named executive vice president, director of Citi’s independent dealer operation within the business technology finance division. In 2007, CIT acquired the division, and Faino left the company to join Textron Financial’s Vendor Finance business as its president and relocated to Atlanta. Because of the restraints in navigating the financial crisis, Textron had to reduce the scope of its operations. As a result, in 2010, he rejoined CIT as senior vice president, global business development.
That led to an interview in late 2011 with DeMent and Herman in Philadelphia. “I was impressed by their vision of the small-ticket, lower middle-market landscape. We talked about the importance of systems, productivity enhancements and related metrics, and the need for focus on the task at hand and not on all the politics,” Faino says. “We also talked about the distinctive competency of fluid decision making and especially about exceeding the expectations of every LEAF constituency from investors and employees to vendor partners.”
Calling his decision to join LCC a great one, he adds that DeMent and Herman also made it an easy one. “From my perspective, the culture was perfect for me. It was in some ways entrepreneurial and extremely customer focused, and I think that’s what drew me to LEAF more than anything else.”
DeMent notes, “We are looking to grow our business and take advantage of all the opportunities … but we also want to do it in a very prudent and very professional manner. We think Vince’s background is perfect for that. He has made a tremendous impact just in the couple of months that he’s been here as far as keeping the growth spirit alive, while really giving some discipline and structure to our overall sales process.”
With LCC’s new structure and the addition of Faino, the company is extremely well positioned to take advantage of the very real opportunities in the marketplace. Faino explains, “I think LEAF is very well positioned for the present and future. We have assembled a really strong group of people. If you interact with our dealers program partners, manufacturers and distributors every day like I do, the feedback you would hear is that, number one, we get it, and number two, we deliver a significant brand of customer service. We are well positioned and the timing is right for LEAF. Our product suite excellence and our value proposition are very strong right now.”
LCC’s value proposition to the marketplace goes beyond just providing financing for its customers, it is to become partners in the marketplace. Faino explains, “The LEAF value proposition is really multi-faceted and has a lot of components in it… We strive to elevate equipment leasing and finance with our program partners beyond simply offering some sort of occasional financing solutions. We have a very intense focus on the small-ticket equipment finance marketplace and our core competency is our ability to work very closely with dealers, resellers, manufacturers and distributors in order to really maximize financing as a revenue-generating strategy, which is much more than just a financing method.”
He notes that the company’s LEAF 360° Solution “enhances our customers’ ability to generate, to qualify, to close and to service customers, which makes LEAF a total financing lifecycle resource, and I think that’s an important distinction. We are a vital part of our customer’s team. We go to market with them every step of the way.”
Along with its headquarters in Philadelphia, an office in Tustin, CA, and various sales offices, LCC also houses its Dealer Solutions unit in Moberly, MO, an area with a broad history for leasing companies run by such organizations as Chase, GE, Citi Capital and others. LEAF’s entry into the Moberly market comes upon the acquisition of Dolphin Leasing.
Because Moberly has been established in the leasing industry for decades, another bonus comes from integration into the territory: a very experienced pool of potential talent. “There is a fairly deep pool of folks in Moberly that have the experience in our business to call on as we grow and they just know what they’re doing,” DeMent says. “We’ve made a fairly significant investment in technology and other types of sales automation to really bring it up to where it’s a state-of-the-art operation center out there with probably some of the best people in the leasing business, so we’re very excited to have it as part of our team.”
The investment in the Moberly area and the operations center has paid off for LEAF. In its report for the quarter ending December 31, 2011, LEAF disclosed that lease originations grew to $48.2 million. And that trend continued in the last three-month period ending March 31, 2012, as originations were up 21% from the previous quarter and 256% and from the same quarter of 2011. LCC also reported that it added 94 new dealers in the last quarter.
DeMent notes the growth is a boost that many in the industry are currently experiencing. “It’s a little easier to show expediential growth when the business has been somewhat subsided as it was over the last couple of years with the credit crisis and the recession…”
In response to the growth and new hires, Faino comments, “What we’re seeing is a culmination of a lot of very smart steps in 2011 and a focus on the customer. From my perspective, when a customer begins to use LEAF as a partner in their finance strategy, we have a tendency simply to grow that business because we do what we do very well. I think that attributes to some degree to the growth that you have seen … and I see no reason why that’s not going to continue and expand as we move forward.”
Looking into the foreseeable future, mainly the rest of 2012 into 2013, DeMent states that the company expects to see growth from sales. “We will continue to grow at a very healthy pace throughout 2012. I think that we’ll reach a size that at that point, you can’t see the same type of expediential growth in 2013, but still some steady growth.” However, other than the numbers, other very important growth that DeMent sees on the horizon is in the company’s initiatives that Faino is putting into place.
According to Faino, LCC is focusing on innovative methods to work with program partners “in the financing of total solutions that include services and access to software as well as different variations of cost per products,” which LEAF recently announced as a new offering, the LEAF 360° CPU system, in mid-April, which the company expects will take hold and expand in the next year and into 2013.
Another focus in the immediate future is the company’s continuing ability to become a better partner to its customers. “The other thing that I think we’re getting better at every day is strategic targeting of the manufacturer and vendor operations that we solicit and become part of their selling process and their selling strategy,” Faino says. “That will help us significantly throughout the balance of 2012 and 2013.”
And that’s part of what Faino sees trending in the vendor finance space in the near future. “We believe we’re going to see this trend … of vendors of all types expanding the scope of service and services-related solutions that include all different types of hardware, software, access to software, access to services, supplies and maintenance. The growing expectation is that by doing so, vendors engaged in providing managed solutions will better secure their customer and the likelihood of timely upgrades. We expect to see that continue….”
DeMent adds that a great focus on marketing and marketing offerings is another trend he sees through the company and in the space. “I think that one of our real strong points as an organization is our marketing. A lot of people have good, strong sales, but we really feel like we are a marketing company and the approach we take with our business partners is that we’re there to help them market their product, sell their product and make it more appealing to their end-user customers.”