Colonnade publishes industry commentary on small ticket equipment finance and leasing.
Small ticket equipment finance and leasing companies are a significant source of funding for capital equipment. The small ticket equipment finance/leasing segment is significant, accounting for about one-third of the total $1 trillion of annual equipment leasing and finance volume in the United States. These lenders/lessors focus on transactions of $250,000 and below (including “micro-ticket” deals of under $25,000). The participants in this sector of the commercial finance market are surprisingly diverse, ranging from major banks to nimble independent firms. Go-to-market strategies vary as well – most firms in the sector originate through channel partnerships with equipment manufacturers and vendors, but some firms use direct sales methods or a broker network. The customers of small ticket equipment finance and leasing companies are also quite diverse, ranging from small businesses/sole proprietorships to major corporations. Finally, small ticket equipment finance and leasing companies offer a range of products, from conditional sale agreements (a term loan secured by equipment) to operating leases (shorter-term rental arrangements with equipment ownership retained by the lessor).
Since the financial crisis and recession of 2008 – 2009, several major non-bank independent equipment finance and leasing firms have prospered as banks withdrew from the marketplace. The demise and dismantling of GE Capital also created major opportunities for non-bank leasing and finance firms. As the recovery gained length and strength, banks became less ambivalent about this segment. M&A transaction activity in the past two years heralds the re-emergence of commercial banks as buyers of small ticket equipment finance and leasing companies. Other non-bank strategic buyers are also active. As these independent firms are absorbed into larger lending enterprises, emerging firms are seeking to become the new independents. A handful of these young companies are building tech-enabled platforms and deploying different business models (including the marketplace lending/exchange strategy) to the market. Private equity firms and family offices with an interest in the industry are making investments in these emerging small ticket equipment finance/leasing firms.