A large sector of the equipment leasing and finance industry—the captive and vendor segment faces major challenges. These companies that help manufacturers sell more assets through financing are transforming themselves in ways that were unpredictable even five years ago. See Alta’s monthly newsletter for the full story written by Paul W. Frechette, Valerie L. Gerard, and David S. Wiener.
Alta’s recent analysis of top captives operating in the U.S. shows the challenges they face include recessions within their vertical industries, such as agriculture and mining at this time, flat sales and/or developments within the company such a division spin-offs. Captive finance companies with equipment specialties dependent on the health of the sectors served by their parent companies may experience the risk of more turbulent volume fluctuations due to specific industry downturns or recessions.
Captives report a greater need for technology solutions and, the issue is complicated by the increase in Managed Solutions Transactions (MSTs). Some captives that sell most of their transactions to banks may not have in-house digital lease management systems to manage and track the customer financing business, and they are challenged to secure budget approval to acquire and implement these systems. As managed solutions become an increasing part of business, captives are realizing that they have fallen behind in acquiring systems to manage and evaluate the complexities of their equipment financing offering. They are now at a critical stage, having to scrutinize available lease management system options that will integrate with the parent’s general ledger systems-under tight deadlines. Further, MST portfolios have a different set of risks to manage, however, the tools to do so are not readily available on the market.
The size and scope of vendor and captive finance, their concerns and the financing innovations underway became the theme for Alta’s April newsletter. To download this edition or gain a subscription visit www.thealtagroup.com.