I recently interviewed Shawn Arnone, Direct Capital’s Vice President of Business Development. Shawn identifies and implements vendor financing programs with national manufacturers, dealers and resellers of equipment. He also seeks out strategic portfolio opportunities.
Shawn has nearly 20 years of experience in financial services, including more than 15 years in the equipment finance industry. He has filled senior vice president roles at US Express Leasing and CIT, served as a vice president for Key Equipment Finance, and in sales and management positions at Citicapital, Copelco Capital, and Canon Financial Services.
Shawn’s background and current role give him a unique perspective on the national equipment and small business financing landscape that he shares with us below:
Business owners have been experiencing significant problems in accessing capital for the past couple of years. Do you feel that we’re on the rebound yet?
SA: We are definitely starting the rebound but people are very cautious. Banks and lending institutions want to lend but they just can’t pull the trigger. They are so caught up with trying to stabilize their company, shore up their balance sheets, retain talent and adhere to the government restrictions placed on them (if they participated in any of the bailout programs), that lending is the furthest thing from their everyday operations. While this is not a good thing for the economy, it creates a huge opportunity for companies such as Direct Capital that not only have capital to lend, but are also willing to issue approvals and get that money in the hands of small business.
What are the biggest frustrations you’re seeing from the clients you work with?
SA: The clients looking to implement a financing program for their customers are most frustrated with actually closing a deal. Things that used to top the priority list, such as rates, residual values and the availability of “app only financing” aren’t as important. The partners we work with are interested in a company that can underwrite a deal and then actually fund it! More and more approvals, from top-tier national funding sources, are being pulled back or canceled without notice again creating a huge opportunities for financing companies that can execute on those approvals.
What industries do you seeing moving the quickest out of the recession?
SA: I’m seeing the most activity in the Technology vertical. Regardless of the economy, companies realize that they cannot put off technology upgrades and refreshes. It’s clear that they have to be prepared for when the economy turns. If they’re not and their competition is, the revenue loss could be disastrous. Also, any vertical that has a medical or health care component to it is definitely far ahead and along in the recovery process.
What areas of the country are showing the most strength?
SA: The Northeast and West Coast (California) seem to be coming out of this quicker than other regions. But, recovery anywhere can be a good thing. As long as small business owners and consumers see light at the end of the tunnel, no matter where that light is for now, it can spur confidence in other parts of the country which can lead to a more widespread recovery.
You recently attended the Equipment Leasing and Finance Association ELFA) Annual Conference. What are your biggest takeaways that will impact business financing in the coming months?
SA: Our industry has been through its most challenging period since the ELFA was first formed (45+ years ago). As a result of consolidation, mergers and liquidations, many financing companies are now gone. But, through all this, there are companies that remain strong and continue to lend where it makes sense helping business’ grow. Direct Capital has been smart through the tough times and is grateful to be one of those companies helping small business owners take advantage of the opportunities created by the current economy.
That being said, financing companies will continue to fall through 2010 (especially small local / regional banks), credit will remain tight for at least another 2 or 3 quarters and until the housing market stabilizes and rebounds (predicted by early 2011) the road will remain bumpy. That’s all the gloom.
The bright side, banks are starting to see more and more deposit activity giving them a lower cost of funds. Independent finance companies, like Direct Capital, who managed well through this storm, are poised to help small business owners out there now who must acquire equipment. And, this whole downturn made lending institutions realize that they will need to price appropriately to account for credit and equipment risk while eliminating the urge to acquire business, at any cost, for the sake of volume.