Making a Case for Leasing & Financing Independents

by Monitor Staff January/February 2010
In this issue, we decided to chat with Bob Rinaldi, former president of National City Commercial Capital Company (NC4) Canada, and executive vice president of NC4. Here he describes what he feels is the current economic climate for the equipment leasing and financing industry and what independent lessors should be considering now that the tide is starting to turn for the better.

Monitor: Tell us a little about what you were doing at NC4, prior to the financial meltdown and subsequent sale of NatCity to PNC.

Bob Rinaldi: Actually I was doing a number of things. But in a nutshell, one of my responsibilities was strategic new business development — both organic like new business line startups and inorganic growth as in acquisitions. Other activities included our customer facing IT systems development and international expansion. The majority of my work really was focused in the vendor program (sales aid financing) side of the equipment leasing industry. That was sort of my passion — building a business model that truly enabled all facets of the vendor finance business process.

M: What is your status, what are you doing now since your departure from NC4/PNC?

BR: I am still getting used the new reality and really enjoying the extra time with my family while pondering what’s next. One part of me wants to get right back at it and the other part wants to let the future unfold a little. I am trying to keep an open mind about what I would consider doing and what I won’t. But I really enjoy this industry and the intelligent and creative people in it. I continue to meet really fascinating people there and learn new things from my many current friends with whom I reconnect at the annual meetings. This past meeting really helped me to think about some possible new endeavors that I might turn into reality. I really have always considered myself an entrepreneur.

M: On your own or with other partners?

BR: I’m not sure just yet. I am spoiled in that I was blessed with three incredible partners (friends really — 
my brother Vince, Denny Hirt and Mike Rooney) at ILC with whom I worked with building ILC, and then afterwards through three acquisitions over a total of 20-plus years. These guys are creative, brilliant and very good businessmen. It was never work and it was always fun. So rolling up my sleeves with partners who share a vision and are fun to be with is all I have known. I really like that environment.

M: What are your thoughts on the current state of the industry and economy? Since you have seen the industry through the eyes of a small independent lessor and then as a bank-owned lessor of various sizes during its evolution, what do you see happening in the near future?

BR: That’s a broad question since our industry has many facets. There is no sense focusing too much on the obvious, that being a lack of funding from the traditional banking sector to the industry along with weak demand by customers for equipment (i.e., lower new business volumes). In short, I think both of these situations will start to cure themselves over time (starting the latter half of 2010).

M: What should lessors (bank, captive or independent) be doing during this period until things stabilize or return to normal, or as they say, the “new normal?”

BR: That’s a good question. I am going to leave bank-owned lessors out of this because that is probably more than I think you want to get into for this article. I will focus instead on independents. I spent a great deal of time working with independents over the years as part of my inorganic growth portfolio. I alluded to it before, but independent lessors are dynamic and diverse. Some have very interesting models. I have a strong conviction that the next decade will be the decade of the independent lessor whereas the past decade was dominated by bank-owned lessors. I really think this is going to be a good time to be an independent. I know your readers are probably thinking, “How can that happen if independents can’t get funding.” As I said earlier, this situation will cure itself. No vacuum is ever left unfilled. Developing a new funding mechanism is one of the things that I am currently investigating.

The first thing an independent should be doing is evaluating its competitive advantages in order to determine the real value it brings to the market (its current and future customers). All lessors should ask themselves a tough question: if they disappeared today, would they really be missed by the market — except for any short-term disruption to their customers’ leasing needs? If the answer is no, it is doubtful any value-added product or service is being provided. Nobody wants to be in such a position in today’s market or any market for that matter.

An honest and impartial evaluation of the organization’s competitive advantages is required. What is it really good at that nobody can replicate easily? Does it have any truly unique products or services? Maybe there is superior industry knowledge or sector expertise “a niche only it can fill in such a way that differentiates it over its competitors?” Does one’s technology platform make a difference? How about superior customer service?

Identifying and exploiting such value-add differentiators is often easier for industry specialists versus generalists. That is why there are plenty of opportunities in this market for the smaller, entrepreneurial lessors — the minnows of the sea — to get fatter and bigger at the expense of larger more institutionalized entities.

The effectiveness of a value-added product or service is determined largely on market recognition. How does it make life easier and simpler for the customer, manufacturer, vendor or dealer? Does it entice customers to do business with you before anybody else? The bottom line is that such a value-added product or service should help the lessor make money — or it truly is not living up to its billing.

M: Can you give a more concrete example?

BF: Sure. I have been thinking back on what has changed between the time when independent lessors previously roamed the lands before the banks began to rule. What struck me is that many of the best independent lessors were absolute experts in the equipment they leased. They knew what to pay for it (or not to over pay). They knew how and who they were going to resell it upon return and for approximately what price. They knew what changes were in store for an asset by its manufacturer. We had real honest-to-goodness asset managers and teams of them in some cases.

Once we entered the era of the bank-owned lessors, that focus faded in importance. Making matters worse, the delinquency and default rates were at historic lows so why spend the money on this talent. We began to look at this business as “financing” as opposed to “leasing.” It is no accident that the ELA was renamed the ELFA during the later part of this period. The once important gurus of equipment/asset management became “Maytag Repairmen.” Everyone took equipment asset values and expertise for granted. Everything was worth whatever someone’s residual curves said they were. What made matters worse was that banks preferred the better interest income GAAP accounting treatment of capital leases versus operating leases (of which only a few banks really understood or cared for anyway); besides it was easier. Now after this meltdown, we find that lessors of all stripes are paying the price of neglecting the asset managers and their departments. And by the way, asset management is not just a department … it’s a lot more than that. It is a profession and a damned valuable one at that. Neglect it, and you do so at your own peril!

M: So are you saying that independent lessors should go back to that focus?

BR: I think so. It certainly is one way to ensure a competitive advantage. If you understand the equipment you are leasing better than most, you provide a value to your customer that the generalist cannot.

M: Should every lessor have an asset specific niche?

BR: I am saying that you need to be good enough and provide enough value that you will be really missed if you leave the market. That is one way to make sure that you don’t exit. Having said that, I don’t want the readers to understand that I am saying that lessors should each have one niche. By all means they should build a diversified portfolio of niches or businesses within their business. That is why real professional asset managers are worth their weight in gold. To use a hockey analogy, everything starts with the defense. You can’t go flying down the ice trying to score unless you know the core team behind you is solid. The defense, in this case, the asset expertise, provides the direction for the lessor to attack the market and grow. But not just to grow for growth sake but to grow safely.

Bob Rinaldi is chairman of the Equipment Leasing & Finance Association’s Political Action Committee (LeasePAC), an ELFA director and trustee of the Equipment Leasing & Finance Foundation. He can be reached at or

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