Standing Strong After the Storm: Monitor’s Top Private Independents Achieve 9.1% Growth in 2020
by Rita Garwood May 2021
Although Monitor’s Top Private Independents faced many challenges in 2020, the group managed collective volume growth of 9.1% amid the COVID-19 pandemic. With Ascentium Capital out of the running, Stonebriar Commercial Finance seized the crown, while Trans Lease, First National Capital and Kingsbridge catapulted their way into the top five.
CONTENT CONTINUES AFTER CHART
Despite a tumultuous year for the global economy due to the COVID-19 pandemic, Monitor’s Top 25 Independents grew a collective 9.1% in 2020, increasing the group’s volume from $6,075.8 million in 2019 to $6,626.3 million by year-end 2020. Of the group, 15 companies combined to report net gains totaling $905.2 million, while 10 combined to post declines in new business volume equal to $354.8 million, resulting in the most sluggish growth year for the Top 25 Independents since 2010.
The top five reported a collective $3,461.2 million in 2020 new business volume, representing 52.2% of the total originations reported by the whole group. The collective year-over-year increase of the top five was $405.5 million, which accounted for 73.7% of the group’s collective gain.
The Rankings — Top Five
With Ascentium Capital out of the running after it’s acquisition by Regions Bank, Stonebriar Commercial Finance easily took the lead, becoming the No. 1 Top Private Independent with $1,433.1 million in 2020 new business volume, which was up 16.7% from the $1,228 million reported in 2019. Stonebriar’s direct channel activity dropped $85.7 million (-8.8%) year over year, providing 62% of its total volume, while its indirect channel grew by $290.8 million (116%), contributing 38% of its total originations. The bulk of Stonebriar’s volume was large-ticket (96%), with the remaining 4% coming from mid-ticket equipment.
GreatAmerica Financial Services rose to No. 2 in the ranking with $952.3 million in 2020 originations, which was down 11% from $1,069.9 million in 2019. The vendor channel, which provided 97% of GreatAmerica’s total volume, dropped by $121.1 million (-11.6%) in 2020, while its indirect channel increased by 14% year over year to provide 3% of originations. GreatAmerica’s 2020 volume was 49% small-ticket, 37% micro-ticket and 13% mid-ticket.
Trans Lease jumped to No. 3 in the ranking from No. 8 last year with $386.1 million in total volume, which was up $109.2 million (39.4%) from $276.9 million in 2019. Trans Lease’s vendor channel grew by $83.5 million (72%) in 2020, providing 52% of its total volume, while its direct channel declined by $8.8 million (-8.4%) and provided 25% of originations, with indirect and other sources providing the remaining 23% of the total volume. Trans Lease’s 2020 volume was about 50% small-ticket and 50% mid-ticket.
Coming in at No. 4, First National Capital also took an enormous leap in 2020 from its prior position at No. 7. The company reported $370.3 million in total 2020 new business volume, which was up $111.8 million (43.2%) year over year from $258.5 million in 2019. The company derived all of it’s 2020 originations from its direct channel, with originations split between mid-ticket (50%), large-ticket (49%) and small-ticket (1%)
Kingsbridge Holdings catapulted itself into the top five from its No. 10 position last year. Kingsbridge reported $319.4 million in total 2020 volume, which was up $97 million (43.6%) from $222.4 million in 2019. The company’s direct channel grew by $95.75 million (48.3%), providing 92% of its total originations, while its indirect channel grew by $1.3 million (5%) to provide the remaining 8%. Of Kingsbridge’s volume, 85% was mid-ticket and 15% was small-ticket.
Top Percentage Gainers
Making its debut in the ranking at No. 17 this year, Dext Capital grew its volume by 82.6% in 2020, reporting $130.2 million in originations derived from its vendor (62%), direct (23%) and indirect (15%) channels. RESIDCO joined for the first time this year at No. 19 after expanding its 2020 originations by 80.2%, with 87% of its volume coming from indirect sources and 13% coming from its direct channel. No. 5-ranked Kingsbridge Holdings and No. 4-ranked First National Capital posted year-over-year increases of 43.6% and 43.2%, respectively. Crossroads Equipment Lease and Finance rejoined the ranking at No. 9 after a brief hiatus, posting an annual increase of 40.2% sourced from its vendor (65%) and parent (35%) channels.
North Mill Equipment Finance joined the ranking for the first time, making a splash at No. 13 with $182.3 million in new business volume, which was up $46.1 million (33.7%) from $136.7 million in 2019. Dext Capital entered the fray at No. 17 with originations of $130.2 million, which were up $58.9 million (82.6%) year over year. RESIDCO, coming in at No. 19, reported $108.5 million in 2020 volume, which was up $48.3 million (80.2%) from 2019. Quality Leasing joined the group at No. 22 with $94.3 million in new business volume, which was up $11.5 million (13.9%) on a year-over-year basis. Finally, 36th Street Capital entered the ranking at No. 23 with $79.7 million in 2020 originations.
CONTENT CONTINUES AFTER CHART
Just about every one of the Top Private Independents noted the impact of the COVID-19 pandemic on their businesses in 2020. The following highlights capture the overall retrospective of the group:
“The global pandemic and the effects thereof overshadowed all other challenges during 2020. From having to shift to operating remotely to accelerating our adoption of digital resources to dealing with funding sources who retrenched from funding to dealing with customers who had to change payment processing processes, etc. while trying to ensure the health and safety of our employees, the effects of the pandemic were the most disruptive issues we’ve had to deal with in the past decade.”
CONTENT CONTINUES AFTER CHART
“Portfolio credit quality, re-tooling market strategy, new entrants in marketplace, interests driven back to zero for [the] next few years, flood of liquidity from government sources, tempered growth across many industries causing hesitation in capex decisions.”
“The stress of the effects of the COVID-19 pandemic on the macro economy and what it meant to each borrower in our portfolio was the most significant challenge of 2020 as well as refining underwriting guidelines to de-risk the business the company was originating during the pandemic.”
Focus in 2021
As vaccines are being rolled out and the effects of the pandemic are beginning to recede, three primary areas of focus have emerged for independents: fully adjusting to the new normal, modernizing technology and expanding sales teams. The following quotes provide a sample of their goals for the year ahead:
“Our largest challenge for 2021 is to understand from our customers, vendors and funding sources what the long-term effects/changes caused by [the] pandemic are and how we can best address those changes for long-term growth and success. While the expectations are that things will return to normal at some point this year, it is a key for us to identify what will define normal, as there are things that will have permanently changed since last year.“
“The ability to implement new IT initiatives that will improve our efficiencies.”
“Automation. We need to improve and invest in fintech processes and procedures.”
“Identifying and recruiting qualified salespeople to the team continues to be a challenge.”
CONTENT CONTINUES AFTER CHART
The top concern for the group this year is the economy and its impact on capital spending, with 38% of respondents selecting this response. COVID-19 is still the greatest concern for 29% of the group, while 18% are worried about margin compression. Credit quality of customers and regulatory concerns each topped the list for 4% of respondents.
Despite these concerns, most independents anticipate volume growth in 2021. Calculated on an average weighted basis, the group expects to expand its collective volume by 18% by year end. Last year, the group forecasted 21.9% growth for 2020 before the COVID-19 pandemic struck.
In a year in which the group faced myriad difficulties stemming from the COVID-19 pandemic, Monitor’s Top Private Independents still managed to record more than $6.6 billion in 2020 new business volume, which was up 9.1% on a year-over-year basis.
Direct volume continued to take ground from the vendor channel in 2020, with 45.8% of the group’s volume coming from $3,032.7 million in direct originations, which was up 4.2% from last year, and 33.1% of its volume coming from $2,190.2 million in vendor origination, which was down 0.1% year over year. The indirect channel grew significantly in 2020, supplying $1,175.9 million, or 17.7%, of the group’s total volume, which was up 48% from 2019.
Employee productivity increased slightly in 2020, charting an average of $3.29 million per employee in 2020, up from an average of $3.11 million per employee in 2019.
The group is emerging from the brunt of the COVID-19 pandemic with their sleeves rolled up, ready to face new challenges, improve efficiency and expand their businesses. As always, Monitor’s staff is grateful to the companies that participate in our annual survey and make this report possible.
ABOUT THE SURVEY: BASIS FOR RANKING
To meet the criteria for selection, companies that qualify must be privately owned with equity provided by the individual owners and/or privately held owners.
Participants were asked to provide full-year data relating to funded new business volume, which was to include information pertaining to equipment-related loans and leases only.
We also collected information such as staffing levels, origination and funding sources, average deal size, etc. Once received, the data was compiled, checked for accuracy and formatted for this report.
A company’s position in the Monitor’s Top Private Independents ranking is based solely on its funded new business volume.
Questions/Participation Inquiries: Please contact Rita Garwood at firstname.lastname@example.org.
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