Increasing Vendor Approvals: Veteran Team Launches a Multi-Funder Model at Verdant
by Rita E. Garwood September/October 2018
A team of industry veterans is back in the game with Verdant Commercial Capital, a vendor finance company backed by the patient capital of a family office. Using a money-agnostic funding model, Verdant plans to meet the needs of its partners with speed and agility.
When most people think of the word verdant, rolling hills covered with lush, deep green grass might come to mind. To this seasoned team of vendor finance experts, verdant is also the color of prosperity in the form of growing wealth for everyone involved, including vendor partners.
Verdant is led by CEO Mike Rooney, who has a long history in the equipment finance industry. He initially worked for Xerox before co-founding Information Leasing (ILC), which specialized in smallticket vendor financing. After a series of acquisitions led him to an EVP role at PNC Equipment Finance, Rooney decided to focus on private consulting work.
“I thought maybe that would be how I finished up my career,” Rooney says. “I learned a lot and worked with great people in the industry, but then I started seeing how the market was changing.”
Over the last five years, Rooney watched as substantial independents were swallowed up and GE Capital was dismantled. “You have this new dynamic in the market,” he says. “The big banks are under huge regulatory restrictions, and they’re becoming less easy to do business with if you’re in the vendor space. The really small independents are essentially brokers, and the other larger independents are narrowly focused on either small or on multi-million dollar transactions. There was this big green space out there, and no well-capitalized independent was focusing on the vendor space in this market. I felt it was probably the greatest time to start a new company in that space.”
Rooney called two former colleagues, Chris Kelley and John Merritt, who serve Verdant as chief credit officer and executive vice president, respectively. “They were both ready to make a change and saw the same opportunity I did,” Rooney says.
Finding the Right Capital
Verdant had to be well-capitalized to ensure success. “Two things are important in this business,” Rooney says. “You need to have a lot of capital, and the type of capital you have is just as important as how much you have.”
The team explored their options in the market, including private equity firms, insurance companies, banks and wealthy individuals. Each option had its shortcomings to what the team was looking to build, which was ultimately to become a trusted, flexible partner in the vendor space. Then they found the family office model, an organization started by wealthy people who want an investment vehicle to diversify their capital. In addition to stocks, bonds and real estate, some family offices also invest in management teams and companies. “That was the key for us,” Rooney says.
This arrangement sounds similar to private equity capital, which typically comes with a distinct timeline, but Rooney says a family office has a much longer horizon. “Family offices are investing for the family’s grandchildren,” he says. “They don’t have a timeline that’s five, six or even seven years. They want to build value in an organization over generations, so the horizon can be way out there. That was a perfect fit for us, because we didn’t want to build something fast and then sell it fast.”
Rooney and his team wanted to build a business, similar to ILC, which was sustainable for the long haul. He says the only differences between ILC and Verdant will be structural in nature. “We started ILC with no idea about what we were going to become, but the smart thing we did was build our own balance sheet,” he says. “With Verdant, we’re doing the exact same thing, but we’re starting with an extremely strong capital partner. ILC ultimately evolved into a top industry player. We plan to do the same thing with Verdant, but with our equity partners, we can become a top player in our industry with predictable and sustainable results much sooner.”
Replacement Lifecycle Focus
Verdant focuses on technology, office products, energy efficiency, specialty vehicles and industrial asset classes.
In the energy space, Verdant supports the “green revolution” with more than its name alone. Merritt ran the energy efficiency and renewable energy finance business at PNC. “John’s an absolute expert in that industry, and we felt really excited about that market,” Rooney says. “We invest in technologies that make economic sense while also moving society to more sustainable energy solutions.”
But Verdant’s primary focus is short-lived equipment types, which are often on a predictable replacement cycle. This focus creates a repeatable and sustainable business model. “We plan to be in this replacement cycle with our vendor partners on an ongoing basis,” Rooney says.
Intech Funding Acquisition
In July, Verdant acquired Monrovia, CA-based Intech Funding, which specializes in financing and leasing for manufacturing companies nationwide. Three months after Verdant’s launch, Rooney was approached at the ELFA convention about the deal. “I said, ‘Are you kidding me? We’re three months old. We don’t even have documents yet!’”
But Rooney quickly changed his tune when he realized the company was Intech, which fits into Verdant’s industrial focus. “We have had a long relationship with Jeff Glikman and Ric Rivett at Intech,” he says. “We were one of their funding partners during our National City days. Intech has the best reputation in that narrow machine tool market. They are high performers, they do a great job, and, culturally, we already knew they would be a great fit. It took our capital partners about an hour to make the decision.”
Attracting Top Talent
The first lesson Rooney quickly learned when founding ILC with industry veterans Vince Rinaldi, Bob Rinaldi and Denny Hirt was that four guys can only take the company so far.
“We learned the only way to grow was bring high quality people in and give them a voice,” Rooney says. “Every company says they want to hire the highest quality people, but if they aren’t allowed to have a voice, they’re not part of the decision.”
At ILC, Rooney and his team encouraged their staff to propose solutions to the problems they saw in the business. “From my experience, rarely do the best ideas come from the top of the organization down,” he says. “The best ideas I’ve ever seen always come from the folks who are closest to the customers.”
Rooney is creating a similar culture at Verdant, where employees speak their minds, work hard and have fun. “We will continue to get the best people we can and give them the flexibility to do custom or more complicated transactions or programs when they need to.”
Rooney has seen many high-quality people in the industry unable to bridge the gap between what they can do for their partners and what their partners really need. “At Verdant, our goal is to find those successful people and give them opportunities to expand, to have meaningful input into the product that’s being offered — and into the solutions.”
With this mission, Verdant has a platform that is attracting talented individuals to join the company. “They liked the story we were telling, and that was a big part of it,” Rooney says. “We are creating a great space for so many high-quality people who will look over and say, ‘I’m ready to do that.’”
Rooney’s focus on people is part of what keeps him in this industry, which he says is built on relationships. Even though companies in the industry enjoy a healthy competition, Rooney appreciates their ability to cooperate. “Even though we look at each other as competitors, our true competition comes from cash,” he says. “The foundation says $1.3 trillion of software and equipment is ordered in the U.S. annually and $200 billion dollars of that is financed, so do the simple math. Our industry has only seen 15% of all the possible transactions that are out there. It’s far better for us to increase that 15% by cooperating.”
Decision Makers in the Field
Although he loves the spirit of cooperation, Rooney has a plan for Verdant to differentiate itself from the competition. “It starts with engagement and ends with speed and flexibility,” he says. “Our partners know when they sit across the table from us they’re sitting across from the decision-makers. We don’t have committee meetings every two weeks. We decide now.
“We hire experts, and we expect them to be experts. When we are in front of our partners, and they’re asking for specific things, we want our folks in the field to have the authority to say ‘yes’. I can’t overstate how important that is to our vendor partners.”
To empower those in the field with speed and agility, Verdant is building what Rooney calls a “best-in-class solution” for its partners. “We have an internally developed sales dashboard tool, which gives every partner a real time snapshot of every transaction with Verdant,” he says. “We do this in a desktop mode or a mobile application. Partners who have seen the early versions of it are pretty excited.”
A Multi-Funder Model
Rooney says vendor partners really want quick turnaround time, coverage in the field and — most important of all — approvals. “Our role as a company is to help partners sell equipment faster at a higher margin,” he says. “The way to do that is to give them the highest approval rates we possibly can.
“The average approval ratings in the industry are in the 70% range. Imagine you’re trying to sell equipment, and you’re being told 30% of the time that your customers are not qualified. Our model is different — it’s what we call a multi-funder model — we put our money at the same level as other people’s money.”
The goal of this model is to get to a 95% approval ratio for Verdant’s partners. “How do you do that?” Rooney asks. “The first thing is to be money agnostic. Our money is not prioritized over funding from very capable wholesale partners who sit all along the credit spectrum. Our goal is to find the best money that fits the requirements and credit profile for each particular situation.”
With this model, Verdant plans to grow rolling fields of vibrant green wealth for all of its stakeholders and partners.
Business leaders have largely embraced the rapid introduction of home working and digital processes as an inevitable necessity. Though the global lockdown has rapidly accelerated trends in digitalisation, seeing many asset finance businesses moving their operations entirely online in a contracted timescale, the direction of these developments is not a new concept for the industry.