A new report, “The Changing of the Guard: The Evolving Roles of Banks and Independents in Equipment Finance,” released by the Equipment Leasing & Finance Foundation evaluates the current and expected competitive landscape for both banks and independent equipment finance companies in the $1 trillion equipment finance industry. It also assesses the increasing importance of the asset management sector in equipment finance, which includes private equity (PE) firms, credit funds, business development companies and family offices.

The report was commissioned by the foundation and prepared by management consulting firm FIC Advisors. The findings are based upon multiple interviews with equipment finance leaders, a review of recent survey results and other research, as well as FIC Advisors’ client experience.

The six key summary takeaways derived from the report are:

• Many banks appear hesitant about their commitment to equipment finance and are reducing their exposure. At the same time, a smaller number of banks are beginning to reengage and grow equipment finance assets.
• Banks continue to face deposit shrinkage.
• Independents are in a stronger competitive position than they have been for many years; however, access to funding and capital, critical to their success, are available only to the stronger performers.
• Private funds — in particular PE firms — are playing an increasing role, primarily with Independents.
• Credit quality has declined from previous years.
• The current M&A market shows little activity. Analysts do not expect a rebound until at least 2025.

“We have seen dramatic shifts in the industry over the last year as banks have reduced their equipment finance exposure, creating an opening for independent providers to grow their market share,” Valerie Gerard, foundation research committee chair and co-CEO of The Alta Group, said. “This study provides a comprehensive examination of how banks and independents are navigating market volatility and opportunities in their respective sectors, emerging trends and likely operating options for these groups over the next few years. The insights are invaluable to equipment finance practitioners for their business strategy and decision-making, as well as advisors and vendors to the industry.”

The full report is available online.