The Entrepreneurs: Monitor’s Top Private Independents of 2019
by Amanda Koprowski January/February 2019
Despite a year of tariffs, trade wars and increased interest rates, Monitor’s Top Private Independents had a remarkably successful 2018, with a net year-over-year volume increase of 17.2%. Three of the top independents saw new business volume of over $1 billion, while Amur Equipment Finance broke into the top five for the first time.
Amanda Koprowski, Managing Editor, Monitor
Business continues to hold steady or even improve in equipment finance, as the Top 25 Private Independents reported $7,504.5 million in new business volume for 2018, topping a record-setting 2017 with a growth of 17.2% year-over-year. Four companies achieved volume growth of over $100 million apiece, and with only four companies reporting a net decrease of $80 million, total volume growth for the year came out to an impressive $1,101.1 million.
The top five reported a collective $4,134.6 million in new business volume, accounting for 55% of the total volume reported. The net year-over-year growth of the top five, $650.3 million, represented 59% of the total variance.
The Rankings – Top Five
Ascentium Capital continued to dominate in the No. 1 position, reporting new business volume of $1,230 million, an increase of $225.2 (22.4%) from $1,004.8 million in 2017. The bulk of Ascentium’s volume once again originated in the vendor/dealer channel, which provided $990 million or 80% of the total, with the balance attributed to direct (16%) and indirect (4%) originations.
Although it didn’t experience as impressive a percentage increase as in 2017, Stonebriar Commercial Finance still maintained its No. 2 position, crossing over into origination volumes of ten digits with a reported new business volume total of $1,030 million in 2018. Volume was comprised of $718.1 million (70%) from direct originations and $311.9 million (30%) from indirect originations, the latter of which grew by 24% year-over-year.
No. 3-ranked GreatAmerica Financial Services also crossed the billion-dollar threshold, reporting $1,015.2 million in new business volume, up $92.2 million (10%) from $923 million in 2017 and only $14.8 million behind Stonebriar’s total for 2018. Vendor originations accounted for 98% of total volume, with only the remaining 2% coming from indirect activity.
ENGS Commercial Finance finished the year once more at No. 4 with $508.3 million in volume, up a solid $133.3 million (35.6%) from $375 million in 2017. ENGS’ vendor channel provided $505.4 million of its total volume, with direct originations only accounting for $2.9 million of the whole.
Somerset Capital Group slid out of the top five, making way for Amur Equipment Finance to take over the last slot at the top, reporting a hearty $351.1 million in volume, an impressive 66.7% improvement year-over-year from its $210.7 million total from 2017.
Liberty Commercial Finance benefitted from a truncated first year in the business in 2017 when it came to percentage gain, seeing a whopping 332% improvement year-over-year after reporting a total new business volume of $107.2 million in 2018.
The next four percentage gainers couldn’t quite match that level of growth, but nevertheless had excellent years. Wallwork Financial recorded 67.10% growth year-over-year, up to $194.3 in 2018 from $116.3 in 2017. Amur’s 66.7% percentage improvement helped it nab a top five position, while SQN Capital Management’s year-over-year growth has it nipping at Amur’s heels, rising from the No. 14 to the No. 6 position. Finally, AP Equipment Finance experienced a solid year of growth, watching originations grow by 43.8% year-over-year.
Liberty Commercial Finance likely deserves a Rookie of the Year award, arriving in the Top 25 at No. 24 only two years after its founding. Meanwhile, Microfinancial/TimePayment made it onto the list for the first time at No. 15, reporting $166 million in total new business volume, a 20.2% year-over-year improvement of its $138.1 million total for 2017. OnSet Financial’s debut on the list came in at No. 21, with a reported $119.2 million in total new business volume.
CG Commercial Finance remained on the list, although it is now labelled under its new name, Nexseer Capital.
Most of the Top 25 from 2018 have been mainstays, but that may change for next year’s list. VAR Technology Finance (No. 13) will join LEAF Commercial Capital after being acquired by People’s United Bank, and ENGS has been bought by Mitsubishi UFJ Lease & Finance Company.
In 2018, top independents saw their best growth by volume since 2014, finally breaking through the $7 billion barrier.
Misgivings over competition as seen in last year’s survey seemed to have driven companies to tackle a market that’s still robust but tightening. Additionally, success seems to have also accounted for a flurry of M&A activity, as several of the more fruitful independents of past years have been subsequently bought out by banks or larger lenders.
Focus in 2019
Many independents seem to have embraced technological advancement, with respondents citing various ways they hope to update their business, including everything from systems integration to data utilization to back office streamlining.
Independents also want to remain focused on customer relations, either through better and faster application processes, an emphasis on customer service or building up personal relationships to increase customer retention.
Although competition topped the list of concerns last year, most of the Top 25 are far more focused on the economy and capital spending in 2019, with 56% citing it as their main concern heading into the rest of the year. Competition followed at 24%, while concerns over credit quality, margin compression and government instability split evenly among independents at 4% each.
Calculating a forecast for the group on an average weighted basis, the independents expect to grow by 19.6% in 2019, a more aggressive number than they predicted in 2018. Considering how much they over-performed last year, this may be understandable. However, with multiple surveys reflecting a mild, though real fall in business optimism, a more conservative forecast may also be warranted.
2018 saw little evidence of a market dip among independent equipment financiers, with the departures of some major players in 2016 and 2017 apparently leaving a larger slice of the pie for the remaining companies.
The industry saw improvement in virtually all available metrics, with employee productivity rising and a larger number of hires coming into independent companies despite an incredibly tight labor market. Only the average deal size shrunk, falling 17.1%.
That said, companies both in and out of finance are looking at a decade-long post-recession recovery and waiting for the other shoe to drop, which was reflected in the change in priorities and concerns seen in the survey’s emphasis on the economy. Thus, expectations remain positive, just more muted, with independents looking forward to a successful 2019 with no reversal in growth anticipated.
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