Two banks serving Long Island recently made major inroads into the equipment financing space.
In June, People’s United Bank, which is based in Bridgeport, Conn. and has 69 branches on Long Island, acquired Vend Lease Co., a nationwide provider of equipment financing to suppliers and vendors primarily in the hospitality industry.
And Investors Bank, a Short Hills, NJ-based bank with eight branches in Nassau and Suffolk and a regional lending office in Melville, launched an equipment financing group in February when it welcomed a seven-person team of seasoned equipment financing professionals aboard.
Vend Lease, which is based in Baltimore and will maintain its existing brand, became a division of the People’s United operating subsidiary LEAF Commercial Capital, an equipment leasing company that the bank acquired last year. People’s United’s combined equipment finance units have more than $4 billion in assets.
Before acquiring LEAF Commercial Capital, People’s United’s equipment financing expertise “focused on mid-ticket and larger ticket offerings,” according to People’s United President Jeff Tengel. “LEAF was in the smaller-ticket space, which was a part of the business that we weren’t participating in.”
The average size of LEAF transactions is about $25,000, Tengel said.
The Vend Lease acquisition allowed the bank to expand into equipment financing for the hospitality industry, which was not a space in which LEAF had a particular area of expertise, Tengel added.
“There is some synergy with our existing clients that have equipment financing needs,” Tengel said of the acquisitions. Over the last year, “we have connected clients with the LEAF team and gotten very positive feedback,” he said.
Part of the appeal of LEAF is its “sophisticated technological capabilities,” Tengel said. “We are having broader conversations about how to leverage those technological capabilities across our entire business banking platform to benefit new and existing clients in Long Island and across our footprint. It almost feels like we bought a fin-tech company inside an equipment financing company.”
Kenneth Walters, group leader and managing director of the equipment finance group at Investors Bank, previously worked in New Jersey for Jacksonville, FL-based EverBank, where he and his colleagues built a national equipment finance portfolio.
When EverBank was acquired by TIAA, Walters’ team no longer fit in with the company’s strategy and sought permission to look for a new home for the team and portfolio.
“Investors did not have an equipment finance operation, and it was looking to diversify,” Walters said. “It was a nice fit for them. They assumed the lease for the office we sit in, and all that changed was the name on the door.” To complement the original seven team members that came over from EverBank, the group is adding three additional members this month.
The group brought a $350 million portfolio over to the bank and is hoping to do $150 million to $200 million in additional business this year, according to Walters.
“Our business has a nationwide footprint, and we work with branches throughout the bank,” Walters said, noting there will be a particular focus on growing business in the New York and New Jersey markets to match Investors Bank’s footprint. “It’s another product that the bank can bring to their customers. They can offer both equipment loans and leases.”
Typically, commercial and industrial lenders will provide a loan for up to 75% to 85% of the cost of a new piece of equipment, Walters said.
“If a customer is buying a $1 million piece of equipment, they might have to put $150,000 to $250,000 down, and the bank would lend the balance,” he said. “But we can lend 100 percent of the cost, because of our knowledge in this area and our ability to take that equipment and do something else with it if needed.”
For lease transactions, the bank owns the equipment, and thus can take depreciation benefits. “With the new tax law, we get a 100 percent write-off from day one,” Walters said. “We can pass the savings on to the customer by offering a lower interest rate in financing.”
The group works primarily with companies with annual revenues of $20 million and up, though companies in the $50 million to $250 million range are in their sweet spot. Typical transaction sizes are $3 million to $30 million, according to Walters.
“We consider ourselves generalists, but we do have concentrations in heavier asset industries, which require financing for equipment like rail cars, barges, ferry boats, manufacturing equipment, trucks and trailers, helicopters and telecom equipment,” Walters said.
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