Should Financial Institutions Consider Leasing Capital Equipment?
Southlake Capital in Birmingham, AL, provides community bankers an opportunity to offer equipment leasing to their commercial customer base, a service that historically has been impractical due to lack of expertise and economies of scale. Mike Seals heads up the division building on his successes over the past 20 years as well as being a former SouthTrust Bank Leasing Officer.
According to an Equipment Leasing & Finance Foundation report produced by IHS Global Insight, about $653 billion of equipment and software will be financed or leased this year, a 12% increase over the prior year. Approximately 50% of this volume is financed by banks. However, the lion's share of this volume is provided by large banks with assets in excess of $10 billion. "Community banks are exposed to significant competition in the equipment finance arena", states Seals. According to the Independent Community Bankers of America, community banks control approximately 21% of all US banking assets and 58% of all loans to small business. "Despite this market acceptance for traditional bank loans/products, community banks control a negligible portion of all lease receivables. At the same time banks are also experiencing lack of loan demand, net interest margin squeeze and high levels of liquidity. Community banks have the demand and ability to fund these transactions. They simply need the expertise and platform from which to operate. We provide that platform without the fixed investment and overhead of establishing their own business unit” says Seals.
Southlake Capital is taking a distinctive approach to delivering a unique and sometimes misunderstood product to the community bank market. Unlike other equipment finance companies, Southlake Capital will provide a variety of options to community bankers to help them increase their loan portfolio and bottom line. Each bank will choose their level of involvement on any given transaction depending on their level of risk tolerance, credit criteria, liquidity, capital level and yield requirements. Banks will be able to generate fees, loans or lease receivables on any given transaction and will have the flexibility to change their approach at any time. Competing offerings to community bankers appear to fall into one of two categories. The most commonplace product involves a leasing company that offers a fee for a referral. The alternative approach typically involves a leasing company that presents a transaction to a bank for funding. Although many consider the equipment leasing product more transactional in nature, it opens the door many times for that bank to get its foot in the door to offer other products and services the bank offers.
Mr. Seals has spent over 30 years in the financial leasing industry, including the most recent 20 years managing his own successful leasing company. He has worked almost exclusively with community banks and understands their challenges. Mike Seals has owned Southlake Capital since 1997. He has developed a large syndication network that will allow Southlake Capital to fund a wide range of transactions. “Size of transaction and client exposures should not matter when we evaluate the ability to fund a given lease", says Seals. Southlake will offer a full complement of equipment finance products to community banks that will in turn be offered to their clients, including direct leasing to the banks existing clientele as well as vendor financing and leasing, and municipal leasing. Lease structures will include true leases and loans and will be driven by the end user’s desired tax and financial objectives. “we work directly with the commercial lenders to understand their client’s needs and provide them with the best product for their specific needs, Seals concludes.
If you would like to explore the possibility of increasing your C&I business with your bank, please give Mike Seals a call at 205-682-2815 and mention that you heard about Southlake Capital on BankerAdvice!