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Industry Future Council Meets, Discusses Industry Opportunities and Challenges
Posted 02/14/08
During last year’s Industry Future Council (IFC), participating members noted that they were waiting for a “correction” in the marketplace. Later that year, it arrived. What a difference a year makes. This year’s Council, which convened in January, said the industry appears to be having a “crisis of confidence,” as one IFC member put it. The questions this year centered around how long and severe the crisis would be, and what could equipment finance companies do to weather the crisis and be prepared to thrive when it’s over. If there was one word to define the near future of the industry, said the IFC, it is “liquidity.” Liquidity, so plentiful for the last few years, has suddenly dried up except for certain “puddles.” Companies with continuing access to capital can grow through expanded originations and through acquiring portfolios from those less able to meet continuing re-funding and capital requirements. While everyone else is mainly concerned with survival, companies with liquidity also have the opportunity to improve their operations, streamline and make processes more efficient.
A “return to basics” also emerged as a theme among IFC members when discussing what companies will need to do to take advantage of the available prospects. The IFC members noted that opportunities for smaller equipment finance companies, regional banks and non-conventional financiers may actually have a near-term competitive advantage, as larger banks and independents struggle with Basel II requirements. Specialized skill sets (such as origination or asset management), industry-specific focus or expertise (especially seen in corporate organizational structures), or asset-specific knowledge and skills (as found most prominently among captives), will add to a company’s success. And, establishing and maintaining old-fashioned relationships, could be a real differentiator.
In terms of market opportunities, IFC members agreed that alternative energy and “green technologies” hold promise though yet to be clearly defined, but are well positioned for more rapid growth. See the upcoming Webinar on alternative financing.
At the end of the day, however, the IFC noted that, while the equipment leasing and finance market is experiencing a correction, the industry is fundamentally sound. While the IFC is clearly concerned about the immediate future, the long-term outlook for the equipment leasing and finance business was good. One member predicted that two quarters without bad news will help capital to flow again. And, the correction will have washed the unhealthy aspects from the market. Demand for financing will continue, said the IFC. Companies that use this correction phase to hone their competencies and improve the efficiency of their operations should be well-placed to thrive when the “best of times” arrive.
The 2008 IFC Report will be available at the Foundation store in early spring. Donors receive the IFC report at no charge. Non-donors may download the report from the Foundation store for $200.
Sites of Reference:
http://www.store.leasefoundation.org/product/2008_industry_future_council_report/
