Dennis P. Neumann CEO, BNY Capital Funding LLC

Tony Golobic Founder & CEO, GreatAmerica Leasing Corporation

Paul R. Sinsheimer Chairman, President & CEO, Financial Federal Corporation

Kenneth R. Collins Jr. Chairman, President & CEO, Susquehanna Commercial Finance

It’s often said the more things change, the more they stay the same. Consider, for a moment, the following scenario: America is wallowing in recession; Democrats are staging a comeback in Washington D.C., the country is mired in a difficult and unpopular war, energy independence is a hot topic on most Americans’ minds and a Philadelphia sports team wins a national championship game.

Sounds familiar? But I’m not talking about 2008; the year in question is 1974 (the sports team, by the way, was the Philadelphia Flyers). Indeed, history has a way of repeating itself. But other things, successful business ventures for instance, tend to evolve and grow.

Also in 1974, a small executive recruiting firm in southeastern Pennsylvania decided to launch a finance industry newsletter to better reach its small but growing constituency. Thirty-five years later, that tiny newsletter has grown into the equipment finance industry’s preeminent publication.

The growth of the Monitor was paralleled by the evolution of the industry it serves. And, what better way to pay homage to the Monitor than to honor that industry and the visionaries who built it? So to commemorate this important milestone, we spoke with four veteran leasing and finance executives, each of whom witnessed the extraordinary growth of the equipment leasing industry.

A common theme throughout our conversations is just how much the leasing industry has changed over the years. While everyone seems to have a different take on the particulars of this evolution, there is common story: that of a marginal financing product’s rise from a humble beginning to what is today — a more than $600 billion business sector.

“The industry was like a giant carousel,” remembers Dennis P. Neumann, CEO of BNY Capital Funding. “Each year a different equipment type came to market… All a lessor had to do was stay in the market for ten years to get a broadly diversified portfolio.”

Neumann, who is 62, entered the leasing industry in 1978 not long after completing the graduate program at Northwestern University’s Kellogg School of Management. He started his career at First Chicago in cash management before migrating to the trust department managing corporate pension funds. His first job in leasing was as a lease syndication director at NAC Leasing, a division of North American Car Corp., where he brokered lease equity in railcar positions. Neumann says by the early 1980s the industry had begun to explode. “There were high interest rates, new tax-benefit transfers (TBTs) and an influx of new lessors,” he recalls. “What was once a bank domain with a few credit companies now included a host of industrials that could get better returns than reinvesting in their own business.”

Tony Golobic, founder and CEO of GreatAmerica Leasing Corporation, says this growth was paralleled by a new approach to the business of leasing and a whole new group of players. “We used to be populated by smaller to mid-sized companies that were either owner operated or were managed by people who were there from the beginning,” he says. “These managers, with some exceptions, had a long-term outlook, they were closely involved with their customers and they tended to be value-add competitors. Their main source of net income was spread.”

Golobic, a CPA, has been active in equipment finance for 35 years, and entered the industry not long after receiving his M.B.A. in Finance from the University of Chicago in 1971. Over the years he’s worked for Mellon Financial Services, LeaseAmerica Corporation and GE Capital. He founded GreatAmerica in 1992.

As Golobic explains, this wave of new entrants brought with it a more regimented way of doing things. “Over the years a number of very large corporations, both banks and nonbanks, entered the field and things have gotten a lot more short-term oriented and commoditized,” he says.

Paul Sinsheimer, chairman, president and CEO of Financial Federal Corporation, thinks this has led to a formulaic approach to crafting deals — a methodology that, in his opinion, has caused more harm than good. Sinsheimer says that over the last 30 years the leasing industry has been “taken over by financial engineers.” He notes, “I would venture to guess that a very large number of credit approvals that are generated in the leasing business today are done using algorithms and computer scoring. I think the results of today’s financial environment speak to the realities of that process.”

Sinsheimer, 61, got his start in leasing in 1970 as a collector at Commercial Alliance Corporation, where he stayed for the next two decades working up to executive vice president. In 1989, he helped launch Financial Federal Corporation, serving as president and CEO of the company’s major operating subsidiary, Financial Federal Credit Inc. He took over as chairman and CEO of Financial Federal Corp. in 2000.

He attributes his longevity to a reliance on a set of enduring principles that he says are just as relevant today as they were when he started in the industry. “I do things today pretty much the way I learned to do them 30 years ago,” he says, “that is, do not rely on algorithms to make decisions but make decisions on rudimentary credit analysis, you know, length of time in business, cash flow, value of the collateral, rate versus risk, the down payment. Just round up the usual suspects.”

Sinsheimer isn’t the only industry veteran who emphasizes an adherence to time-tested principles; but this traditionalist approach has had to be leveraged with an acceptance of the truly dramatic technological changes of the past three decades. There is no segment of society that hasn’t been touched by the leaps and bounds that technology has made. Today we are plugged in, networked and cross-referenced like never before. As Golobic says, we are “light years” from where we started.

Kenneth R. Collins Jr., 58, is chairman, president and CEO of Susquehanna Commercial Finance, Inc. Collins entered the banking industry in 1972 with Industrial Valley Bank and started in the leasing industry in 1979 with FMC Finance, where he specialized in agricultural and farm equipment. He recalls how things were done when he started in the industry.

“I can remember taking credit applications over the phone, posting checks, making collection notes on ledger cards; we even hired drivers to go out and collect payments,” he says. “Now the click of a mouse takes care of all that.”

Sinsheimer points out that his distrust of formulaic credit decisions is not an indictment of technology, as long as one understands its limits. “I’m not negative toward technology or computers,” he explains. “They have made us much more efficient in the back office and improved our ability to communicate. Computers are wonderful things, but they are tools, not a methodology.”

Along with the changes in the technological landscape, over the years a number of high-profile scandals rocked the corporate world, which forced important shifts in the regulatory framework. The executives we spoke to agree that in some instances it has been a challenge for the industry to keep up with all the new rules.

“The regulatory climate today is nothing like it was before; oversight has increased ten-fold,” says Collins. “Back in the 1970s or 1980s, leasing companies were little known, they weren’t followed by analysts; they were kind of out there trailblazing, putting out new products and understanding the rules from their accountants and legal people as they went along.” But as the industry grew up and we got bigger, he says, “…more attention was given to it and over that time the bigger the companies became, the more attention they got, and the rules on how we did business kept changing.”

The other executives share Collins’ frustration. “The government has worked overtime trying to close what they label ‘loop holes,’” says Neumann. “Rule makers have locked arms to change the business on multiple levels; FASB/IASB, Basel II have all been working to eliminate the creativity of the industry.”

Adds Golobic, “A significant change was the IRS’ movement to substantially eliminate the tax shelter aspects of leasing, for example, elimination of Investment Tax Credit and introduction of the passive activity loss rules, among others. This has substantially reduced the profitability.” But, he concedes, “In the long term, it has made our industry a lot stronger fundamentally.”

Neumann says that with the changing regulatory environment, words like cross-border, off-balance sheet, special-purpose entity all became “versions of financial four letter words.”

“Calls went out for more transparency even though our business was fully transparent,” he says. “That said, I think we, as an industry, did a poor job of organizing to get our positive, unified message on the Hill to differentiate us from the Enron/Worldcom debacle.”

Collins, who serves as chairman-elect of the Equipment Leasing & Finance Association, takes Neumann’s point to heart, and says when the ELFA brought former Congressman Ken Bentsen on board as president in 2006, it made a conscious decision to change that. He says it turns out to have been a great move. “I’ve worked with Ken very closely since he came in and I can tell you, he has brought so much to us with his ability to get attention and work on advocacy for the industry. He has brought awareness to the people in D.C. about who we are and our importance.”

Yet if there’s one thing that has come out of our discussions with industry veterans over the years, it’s that equipment leasing, more than most other sectors, derives its strength from the individuals who decided to make it their career path.

“This is an industry that attracts bright, interesting, entrepreneurial, aggressive individuals,” explains Neumann. “The cross pollination available to young people in the industry is almost boundless as long as you are willing to get up and get involved.”

For years he says, the equipment finance industry was a small, close-knit and highly fluid group where participants consistently crossed paths both professionally and socially. While the industry of today is much larger and more loosely defined, the same paradigm continues to feed the “cross pollination” to which Neumann refers.

In an industry of individuals, a few names do stand out. Every craft has its icons, and in equipment finance there is no shortage of nominees. We asked our executives who inspired them coming up.

“Well, sometimes you can learn more from a person’s missteps than their successes,” says Collins. “I think Paul Gass trailblazed the small-ticket sector and set the benchmarks for a lot of us. Some of his initiatives didn’t turn out the right way, but much of his innovation and foresight remain today.”

Gass founded Eaton Financial Corporation — a lessor of office and business equipment, which was purchased in 1988 by AT&T for $71 million and became a unit of AT&T Credit (which became AT&T Capital). Gass went on to launch Bankvest Capital, which went bankrupt in 1999.

Collins went to work for AT&T Capital at the time of the Eaton acquisition and says his time with the company proved vital in his development as both a salesperson and a manager. “I went through some serious training with AT&T with regards to team building. I came away with a lot, the whole team concept, working with people, building relationships and doing it all as efficiently as you can — it helps me run my business today at Susquehanna,” he says. “The other thing that AT&T showed me is ongoing renewal; you know, looking at what you do all the time to get better at it or to increase the efficiency.”

“There are lots of people that influenced me over the years,” says Sinsheimer, “but I’d say on the industry side I learned this business from Cal [Clarence] Palitz who had a very clear vision of what this business is and how it should be run. I believe his achievements in the industry are unparalleled. He also trained and mentored many of the industry’s most successful executives.”

Palitz, who died in November 2000, less than a year after retiring from the industry, spent 44 years in equipment finance and is considered by many to be an icon. Sinsheimer spent almost his entire leasing career at Palitz’s side, first at Commercial Alliance, which Palitz founded in 1963, and then a Financial Federal, which the two launched together.

For others, choosing just one name seemed to be impossible. “There are a number of leasing industry leaders for whom I always had a lot of respect,” says Golobic. On his list: Jim Renner, who retired last year from Wells Fargo Equipment Finance; Ron Orndorff, the former chairman and CEO of M&I First National Leasing, who now sits on the board of M2 Lease Funds; Mike Fleming, who retired from ELFA and is now with Alta Group; and John Deane, also of Alta Group, among others.

“What all of them have in common is their strong sense of integrity, affinity for doing things the right way and their humility,” Golobic explains. “These qualities led them to build strong organizations with lasting reputations.”

What all four of the veterans we interviewed have in common is a shared enthusiasm for both the industry and their role as mentors to the next generation of leasing professional.

“I’m very passionate about this industry, I love what I do,” says Sinsheimer. “I can’t wait to get to work in the morning. I have a great group of young people who are growing in this business. Watching them grow, watching them learn, training people to embrace our business model, expand it and grow with it, it’s a lot of fun for me.”

“I think what excites me the most is the people,” adds Collins “I can be talking to a CEO of a Fortune 500 company one day and a farmer the next. We deal in so many different industries that it creates excitement. I’m one of those people who absolutely loves what I do.”
Neumann says there are a number of things that make the industry exciting for him, “but without exception the number one thing is the creativity and resilience of its members.”

Golobic looks forward to seeing what the next generation will bring to the industry. “This business is still entrepreneurial, fast changing and challenging,” he says. “While much of our industry has become commoditized, there is still ample room for dedicated, determined and hard working individuals to build their dreams. Without a question, this is an industry with a future.”