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Welcome to The Dig. Join Equipment Finance News editors as they connect with leaders in the equipment finance industry, on both the lender and dealer sides of the table, to discuss new developments, market analysis, trends, tips and more. We aim to create more productive dynamics between lenders and dealers, to make the industry stronger and more profitable. This podcast will help take the industry -- and you -- to better results.
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Welcome to The Dig. Join Equipment Finance News editors as they connect with leaders in the equipment finance industry, on both the lender and dealer sides of the table, to discuss new developments, market analysis, trends, tips and more. We aim to create more productive dynamics between lenders and dealers, to make the industry stronger and more profitable. This podcast will help take the industry -- and you -- to better results.
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The Dig is a podcast that discusses new developments, trends, and tips in the equipment finance industry. The hosts interview industry leaders to provide insights and help strengthen the industry. They emphasize the importance of technology, processes, and having the right people on your team. They also discuss the challenges of managing processes and people, including the need for documentation, continuous analysis, and adapting to a rapidly changing marketplace. They highlight the significance of employee engagement, feedback, and risk management in ensuring the success and protection of a company. Hello, and welcome to The Dig. Join Equipment Finance News Editors as they connect with leaders in the equipment finance industry on both the lender and dealer sides of the table to discuss new developments, investment analysis, trends, tips, and more. We aim to create more productive dynamics between dealers and lenders to make the industry stronger and more profitable. This podcast will help take the industry and you to better results. I am Johnny Martinez, Senior Associate Editor of Equipment Finance News. Equipment Finance News is the one publication for both dealers and lenders filling a critical gap in the market. Find us at EquipmentFinanceNews.com. My name is Johnny Martinez. I'm a Senior Associate Editor at Equipment Finance News, and here with me today is R.J. Grimshaw, a long-time veteran of this industry, and I'll let him introduce himself and his role in Equipment Finance. Well, I appreciate that, Johnny, and I always love our conversations that we have about the industry, and everyone has a different take on it. Yes, I'm R.J. Grimshaw. I've been in the industry, I hate to say, a long time, but a long time. I absolutely love this industry and what it does for our economy as well as our business owners across the country, and as we're going to talk about, we're definitely in an interesting time. It seems like every year we're saying that, but there's no two years that are the same, and specifically right now with people waiting on the Fed and we have an election and things of that nature. It's a pretty dynamic marketplace that it doesn't matter what side of the fence you're on. If you're a manufacturer trying to sell more equipment, if you're the finance company trying to finance the equipment, if you're a service provider, everyone is in this same timeline of events and everyone's trying to figure that out, but at the end of the day, it's really coming down to technology, processes, and the people you have on your teams. When you start talking about managing the people and managing the processes, for you and the roles you've had and the roles you've been in, how do you really go about that? Yeah, it's interesting. A lot of the clients I work with or companies I've been part of, typically that knowledge base is in someone's head. They do it on a daily basis. They understand how to do it. They're living it. It's getting it out of their head into a document from a process perspective because that's the only way you can scale it. By that, though, you have to analyze those processes on an ongoing basis where they're mapped out. It's either a document or a vizio. Then your team members that are following those processes on a daily basis, they're able to fulfill the requirements of their customers because now they have a defined process. Really, that's the first step. Again, it's a living, breathing process and more of a culture philosophy, Johnny, than it is anything else. So many companies are like, we don't need a document or we haven't changed the documents in five years. Well, the world we live in, stuff changes in six months. What's normal today is different. It could be different next year. It could be different next week. That's what my approach is or what I try and coach and teach our clients is document it, but always have that document ready to be edited and track those edits because the marketplace is changing at such a dynamic pace. You mentioned the team members aspect to it. We work and live in an environment that is so rapidly changing. Sometimes that's the processes and systems side, but sometimes that's the people side. When you start looking at turnover and mobility and we've got a layer of employee mobility that we really haven't seen in the post-pandemic world, when you have that, how do you bring those people into the system? When you start seeing that people are changing your contact from a month ago, maybe in a different spot, and you've got to bring this new employee on and there's just all these moving parts, how do you work people into the system and get them involved in the process? Great question. You're right. The level of engagement doesn't matter what statistic you read about that, but it's at an all-time high in terms of employee engagement with their company. That's driven by a multitude of reasons. One, the stresses that we are currently living in terms of the cost of inflation and things of that nature. But to get buy-in from your team, I'm a firm believer that you have to have an opportunity and a culture where they can share their ideas due to the fact that they're living in the trenches on a daily basis. However, that starts with education on the organization and providing context of what you do on a daily basis and always staying focused on the North Star, which is the customer journey and how we're treating our customer. If you do those things, you're going to attract the right people to come in and facilitate those processes and procedures. If you're really good at hiring and recruiting, Johnny, you're actually going to hire people that are going to come in and are able to understand the processes and make adjustments to make your company that much better, too. It helps 110% with the back-end issues, but also you have to allow these people that come into the organization. Again, I'm not talking about your core, what we call vital employees, excuse me, your functional employees, which are going to come in. They're going to follow the processes on a daily basis. However, you as a leader of a company, you have to have those processes in place. The next part of that is that vital employee that I'm speaking of. When you raise your bar and you start attracting a higher caliber people to your organization because of the culture, they're going to come in and be able to take you to another level. So many business owners don't realize that today the world we live in is a different skill set than what it was six months ago or even a year ago, like we were saying. And you have to allow people to change and provide that feedback to leadership and management to stay current of current, again, the world that we live in. Right. And you talk about the feedback process, right? It's easy to look at it as a very customer-centric thing, but it does play a role on the internal side of organizations as well, right? Feedback, you need to get those loops started, those loops going, and have those conversations internally and externally. Exactly. And you can tell, at least I can tell real quick, if I'm engaging with a new company that I'm talking to, and if I start hearing words of assume, I think, I hope, I believe, that's a culture issue. There's no accountability in those types of organizations. We want to pivot that mindset to I own, this is how we measure it, this is how we define success, then you can start building out those processes to build it out when you have those. But when you're just, again, back to those, I call them non-descriptive words, and it's quick. You can walk into any company, and next time you're in a meeting, listen to the people who are saying, I'm assuming this, or I'm hoping this, or I think that. They're not the domain experts in the subject matter, right? It just causes stress for everybody else. And at the end of the day, Johnny, you can have the greatest processes and procedures, but you have to have great people, and you have to know how to treat them right, and you have to give them the opportunity to excel and be the best version that they can. So it's really, it does start with hiring great people, but you have to have the processes and procedures in place. In some ways, I think that's a good transition to one of the big themes on EFN and Equipment Finance News this month is kind of the risk management conversation. And to your point, the process and procedures are part of that, but the people are part of that, too. And you have to sort of work in both realms if you're really going to have your company in a protected space. Right. And to your point, so many customers, especially this year, everyone's portfolio performance over the last five, seven years has been spectacular, right? Better than average. Better than historical averages. That's all we heard. So everyone was just focused on the origination aspect. How much capital can we deploy at a pace because that's where it's at? Well, all of a sudden, like anything, they took their eye off the portfolio management aspects and the risk mitigation part of the business. And all of a sudden, they started exposing these issues because they weren't focused on that. And I've been spending a lot of time, again, just I mentioned earlier, processes and procedures should be reviewed on an annual basis. And you should keep a red line. If you do that annually in terms of getting board approval or approval for management, you keep a running red line of the adjustments you want to make. That's what we would do with our credit policy to make those adjustments so you weren't sitting in a room 11 months later saying, hey, what happened 10 months ago that we wanted to change but I forget? So that's where I'm speaking to a living document. And as soon as you're able to do that, any business, we did it at Unifi, you're able to scale the business. We were able to grow the business and scale after we had the processes and procedures and then we started identifying amazing people. So again, it's almost like a chess game. You're moving your pawns and then also evaluating all facets of the business. Like I said, people took the eye off the ball in regards to their portfolio performance because it was going very well. Now, there's challenges. So guess what? They're putting focus on it, which means the origination part of it is now struggling because people exited out of markets or maybe raised rates and now they're going back into the market saying, oh, you know what? We really do want your business, Johnny. We just decided that we wanted to take a pause. And that's the hardest thing to do in the world is to go from an originator perspective if you're a bank-owned leasing company or just a finance company to come in and out of the marketplace. There's no consistency around that. And actually, it causes harm to all of us in the industry because it puts all the manufacturers and dealers and vendors in the defensive mode. We've talked before and you've talked about part of this, right? The relationship component of this industry does have that kind of connection to the risk, the risk management side as well, where trust is a big part in both. And you've got to have that established when you're going to your point, the vendors and the dealers and the customers. There has to be that relationship, that trust that they're going to put risk in and you're going to put risk in. Right. Yeah, there has to be trust between both parties because at the end of the day, you're both investing resources into the relationship. And you have to have that trust and transparency up front in order to have a meaningful and relevant relationship between both parties. They have to have confidence in what you're providing and you have to have confidence in what they're providing you. And if there's a disconnect between the two, the relationship's not going to work, which is okay. I would always say, that's okay. Maybe we're off timing wise. Maybe we're just not the right fit right now. We maybe are the right fit down the road. The collaboration component of this industry, right? There's so many people in it, but it's a lot of working together and working on these different things. And sometimes it's not the right fit for you, but it's the right fit for somebody else. And everyone trying to work together, competing still, but also cooperating and trying to make sure that the industry fills the needs that are there. That's why I love this industry, is because of that reason right there. And I'm so glad and happy that you've identified that. I was at an event last Monday. I was actually at the EF Cares golf outing in New York, a fundraiser. And I stood on the board for EF Cares. But there was a son of someone who is in our industry and I was talking with him. He's, I think, a junior in college, maybe, and talking about our industry. And as we all joke, they're in the industry, right? When you come in, you're not getting out. We don't let you out. And however, the reason people don't leave is everything you just alluded to. I'm sitting in a fundraiser for the industry and everyone's competitors in the same room. And you would think that everyone's friends, right? And we all look out for each other, primarily protect each other. And good competition is good. And we all have our own niches, what we're good at and strengths at. We talked about this. I come from an abundant mindset. I'd rather bring in a friend of mine or someone I know in the industry that can take care of a need of a dealer than I would have them go search for it. That's the value I can add. If everyone's money's green, everyone has a rate, everyone has an approval ratio. It's the extra value that you're bringing to a relationship. And I don't care if you're the funding source, the dealer, if you're the dealer to the funding source, if you're a service provider in the industry like you are or other organizations, you always have to be looking for areas where you can provide additional value other than just doing your core competency. Bringing it back to the risk component of all this, right? Everyone's going to have their own tolerances as well. And part of knowing what people's tolerances are is having those conversations, those communications, say, hey, everyone's money is green, but this deal may not be my kind of green and maybe you're kind of green. Let's have this conversation. Let's see what we can do. It's spot on. And we don't think we're smarter than each other. We joke about that. I can write a better credit policy than you can write, perform better and things of that nature. My buddies, we always joke around about that. But in the same respect, you have to just stay true to yourself. They're self-induced. Typically, restrictions and usually it's an event that happened in someone's past. It's always chuckles, a certain asset type or end user profile. Maybe someone had an event or an incident before and they vowed to themselves they'll never do that asset again or work with that type of dealer again, which is unfortunate. But I go back to that's what makes it harder for all of us when an event like that happens. But trust, it's so critical in trust. It's a big industry, but it's a small industry. If you lose trust and confidence in the marketplace, it's all difficult to overcome. Where the industry is right now, 2024 has been a weird year for a lot of people. We're headed into the back end of it. There's a lot of moving parts that everyone are watching. Where do you see the industry headed? What are some of the things that maybe people should watch out for to make the best decisions they can in the equivalent finance space? Yeah, I'm very excited about the future. The reason being is that we have to go through, I'll call this a soft reset. We have to go through these soft resets every couple of years, four or five years. And primarily what it does, it weeds out the week. It weeds out the organizations that aren't committed to either to be a finance partner. The other thing it does is it exposes inefficiencies in organizations. If you're not running efficient today, in the world we live in today, first of all, you can't find, you're trying to identify great people to join your organization, but you have to go back to the processes, technology, and systems. You don't have that. You're not going to attract those people because they have the option to pick and choose where they're going to work. And they're going to go to work for a company that has those proper tools. But again, back to your question, I'm ecstatic about where the future's headed. Because at the end of the day, business owners and companies are going to need to continue to finance equipment. And it's up to us to work with our dealers. It doesn't matter if it's a captive or third party. We drive the economy. If we're not financing the equipment for the small to medium-sized businesses across the country, the economy is going to hurt. What happens is we get greedy. It's self-induced back to humans. We get greedy and we go all in in certain areas. So the people that went all in on over the road and knew they were going all in on over the road are now paying the price for that. If you were conscientious and had a strategic approach to it and you weren't focused on growing your balance sheet, but you're focused on disciplined growth, you're OK right now. So those are the organizations that are going to be stronger. And then the other thing it does, Johnny, is it brings some rationality to pricing in the marketplace. We get to a point that there's so much liquidity out there in the marketplace that it's a race to the bottom. And there was no adjustments for the risk associated with the transaction. It was all about just getting an earning asset on the balance sheet. So that's not a level set where people are saying, wait a minute here. We want to price according for the appropriate risk we're taking either on the end user or the asset. And that was all thrown out the window during COVID. We were financing used assets 35% higher than what they were sold for MSRP. I would call friends in the industry and say, hey, how are you handling this? How would you do that? Because it's a time that we never went through before in terms of the inflation and lack of inventory. So I wasn't sure. And keep in mind, at that time, Johnny, we weren't able to finance new equipment because there was no new equipment inventory. So the only opportunity to grow your assets is by financing the use, which were exaggerated sell prices. So you had to make a decision from a risk perspective. And the companies that didn't put bought into that now are paying the price because they're working out transactions that went bad from a collection, work out the fault situation, and they're going to get pennies on the dollars. That makes a ton of sense. And yeah, to your point, the companies that have managed the pandemic and the post-pandemic environment the best are the ones that are sort of standing tall over some of the rubble that has been created. Right. But I'm excited. I'm really, and I would think that, you know, senior leaders in our industry, they know that this is just part of the process, part of the seasonality of our industry. And the good originators are making strategic decisions right now that will pay off in 2027, 2028, 2029. And they're investing in people and technology and things of that nature. And the companies that are trying to stay status quo or have been, fortunately, they're going to continue to be faced with some hard times. All right. Well, with that in mind, we will certainly watch as the industry plays out through the end of 2024 and as far ahead as 2029. And I thank you so much for joining me today for this discussion on kind of the state of the industry, managing risk, managing relationships. And I said, thanks so much. Sounds good, Johnny. I appreciate it, sir. Thank you for joining us on The Dig, a product of Equipment Finance News. In addition to The Dig, Equipment Finance News also hosts an annual equipment finance conference called Equipment Finance Connect, where dealers and lenders gather to network and connect around financing opportunities. We also host the Lender Directory, which features a selection of equipment lenders to help dealers find the solutions they need. Listeners can access Equipment Finance News, The Dig podcast, Equipment Finance Connect, and the Lender Directory at Equipment Finance News and EquipmentFinanceNews.com. Thank you again for joining us at The Dig, where we aim to take the industry and you to better results.
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