The Equipment Leasing and Finance Association’s 60th annual convention was both a return to form and a new experience. After a year and a half without live events, the convention, which was held Oct. 24-26 in San Antonio, was a hybrid conference that featured options for both in-person and virtual attendees. Just as the convention had to be re-imagined for this new reality, the ELFA had to make adjustments.
To kick off the convention, Ralph Petta, president and CEO of the ELFA, provided a rundown of the association’s work since the start of the COVID-19 pandemic to “remake” itself, including retooling content to be more digitally focused and using its communications and research arms to expand the information the ELFA provides to its members.
“These are not easy challenges, and they require that leaders show up in a different way,” Petta said. “They require that leaders know how to build connection.”
Remaking and building connections through leadership was a fitting theme for the conference, especially with DeDe Halfhill, a leadership expert and retired U.S. Air Force colonel, providing the convention’s kickoff keynote address. Halfhill emphasized the importance of bringing in the human element and using every choice to provide effective leadership.
As-A-Service at Your Service
Following the “remake” trend, Brian Bjella of GreatAmerica Financial Services, James Cress of Stryker’s Flex Financial, Diane Croessmann of The Alta Group and Cameron Krueger and Joseph Pulicano of Accenture looked at implementation requirements for as-a-service offerings as well as the opportunities and challenges they present for end-users, lessors and funders.
As Croessmann explained, one of the key mistakes organizations make when entering the as-a-service game is rushing to the finish line. Croessmann said companies must complete an extensive list of operational readiness activities before jumping in, including marketing analysis, value proposition analysis and risk valuation.
“Oftentimes, service providers or OEMs who have their services organizations, they try to move a little bit too quickly; they’re very eager to launch these programs. And they skip over some critical activities and that just sets them up for either a lot of re-do later on or potentially even failure in the program,” Croessmann said.
Thorough due diligence is necessary because as-a-service structures are inherently complicated from inception to asset management, according to Pulicano. Companies must also weigh factors such as outcome-based pricing and risk sharing with challenges such as legacy systems and expensive fixed costs, according to Cress. From a funder’s perspective, while Bjella said “lenders are getting more comfortable” with as-a-service models, the “bigger challenge is the alignment of incentive and the alignment of risk.”
During the same time slot, the ELFA also offered a review of the capital markets and the funding side of the industry as well as an examination of the emerging use of artificial intelligence and how it may reshape the equipment finance industry. In addition, Mary Abbajay, president of Careerstone Group, kept the focus on leadership by outlining strategies to improve performance.
Regulations, Bankruptcy, the UCC and … Cannabis?
During the convention’s legal panel on day one, moderated by Paul Bent of The Alta Group, industry experts dove into current and future topics that will define the next decade in equipment finance.
Robert Cohen of Moritt Hock & Hamroff and Moorari K. Shah of Sheppard Mullin dealt with everyone’s favorite topic: disclosure law regulations. Cohen focused on recent updates to New York Senate Bill No. 5470, which has a tentative effective date of Jan. 1. According to Cohen, regulators will not look for compliance within the first six months after the effective date, although the nexus for New York’s regulation remains unclear. Shah then discussed California’s regulations, which currently have a similar effective date and a clearer nexus, although regulators in the Golden State have not committed to the same six-month burn-in period as New York.
Shah also went over the looming implementation of Section 1071 of the Dodd-Frank Act. With recently proposed regulations still in flux, Shah said implementation will take place in 2023 at the earliest, but that this will be a “huge systems challenge” regardless of how soon they take effect.
Debra Devassy Babu of Darcy & Devassy then provided insight on Subchapter V of Chapter 11 of the Bankruptcy Code. Devassy Babu said the subchapter is meant to “streamline” the bankruptcy process, making for some important considerations for creditors, especially due to a 90-day filing window (rather than 300) and no requirement of acceptance from impaired creditors. This means creditors must move quickly and be vigilant about monitoring correspondence (most of which is done by mail).
This subchapter will likely change over the next decade, according to Devassy Babu, who said more frequent virtual hearings, additional subchapters, less reliance on paper mail and more developed case law are among the trends to watch.
From there, Edward Gross of Vedder Price and Stephen Whelan of Blank Rome discussed attempts to modernize the Uniform Commercial Code for technologies like digital assets, intangible money, chattel paper and bundled transactions. Gross said there is a desire to add an Article 12 that would cover digital assets, while an expansion of the definition of chattel paper and the introduction of hell or high water treatment for bundled transactions could provide clarity for these types of deals.
To close out the panel, Whitney Hodges of Sheppard Mullin looked at cannabis-related regulations at the state and federal level and what they mean for financial providers, particularly national banks. Hodges specifically pointed to the pending Secure and Fair Enforcement (SAFE) Banking Act as one that could be beneficial.
“As of right now, there are no major national banks that will knowingly and willingly bank cannabis,” Hodges said. “For our institutionalized banks, I know that in talking with them they’re champing at the bit to get in this industry.”
The legal panel occurred at the same time as three other panels addressing a variety of topics, including diversity, equity and inclusion; fleet modernization and preparing for the digital future. The afternoon sessions were preceded by a lunch hosted by the Equipment Leasing & Finance Foundation, which featured a keynote by Dr. Robert Wescott of Keybridge Research on the state of the economy and a panel of industry leaders who discussed the Foundation’s new report on the future of equipment finance.
The second day of the convention started with addresses from outgoing ELFA board chair Kris Snow of Cisco Systems Capital and incoming board chair Michael DiCecco of Huntington Asset Finance and a keynote address from motivational speaker and futurist Erik Qualman about digital leadership and transformation.
The breakout sessions during the second day’s first half covered trends in the small business economy, intrapreneurship, cybersecurity and financial technology innovation.
In the panel on intrapreneurship, Alexandra Dressman of Huntington Asset Finance, Jacob Fahl of Mitsubishi HC Capital America, RJ Grimshaw of UniFi Equipment Finance, Martin Klotzman of Ivory Consulting and Kara Miyasato of Stryker’s Flex Financial discussed this important aspect of company culture that encourages employees to be entrepreneurs within their own organizations. Panelists shared their own experiences and how having autonomy and open communication is important to cultivating intrapreneurial thinking.
Meanwhile, in a panel on the small business economy, Quentin Cote of Orion First Financial, Barry Ripes of Equifax and Robert Wescott of Keybridge Research commented on the current trajectory of the U.S. economy. Although the panelists noted that “consumers are on solid ground,” negative trends in the labor market and the supply chain are creating difficult challenges for small businesses. In addition, data supplied by Equifax showed small business lending has declined somewhat after a strong start to 2021, although delinquencies and defaults are decreasing.
In the final block of sessions, Patricia Voorhees of The Alta Group moderated a panel examining the intersection of environmental, social and governance initiatives and the circular economy.
Voorhees began by previewing the results from an Equipment Leasing & Finance Foundation study designed to help ELFA members better understand ESG concepts. The study, whose results will be released in Q1/22, found that 78% of companies have an ESG focus, although 44% did not have well defined measurements or a framework in place. Voorhees said that most companies are approaching ESG from a “culturally organic” perspective and despite challenges like standard inconsistencies and high costs of implementation, there are sizable potential benefits, including for recruiting and vendor partners.
From there, Cortland Brady of Aspen Financial Services touched on the evolution of equipment inspections and how expanding into the use of remote and artificial intelligence-powered inspections can create cost and ESG benefits. Michael Dow of Womble Bond Dickson spoke about financing renewable energy projects, which are primarily conducted through partnership flips or sale/leasebacks. Dow also pointed to emerging trends, particularly the impact of pending infrastructure legislation, which would, among other things, create direct pay of investment tax credits associated with these types of projects. Brett Reed of Cohealo discussed how the sharing economy creates ESG benefits while allowing healthcare systems to save money and deliver better care. He also said the COVID-19 pandemic hammered home the viability of equipment sharing, especially as ventilators have been in such high demand.
The concurrent sessions during this block covered another varied range of topics, specifically addressing the transition from LIBOR, discussing the impact of millennials and honoring this year’s Operations & Technology Excellence Award winner, Chicago Freight Car Leasing.
Phil Neuffer is senior editor of Monitor.
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