When it comes to the funding environment, 2016 was a tough year with low rates and increased competition as equipment financing companies were retaining a lot of business to grow their own portfolios, says Sera Oliver, vice president of capital markets for Key Equipment Finance in Albany, in a new article in Equipment Leasing & Finance magazine.
Looking at 2017, however, there is hope and optimism that funding prospects are brightening, with an uptick in deal flow. "Both our syndication and our buy sides are feeling positive about 2017. We think it will be a better year," Oliver says.
When it comes to the cost of funds, “I don’t see costs increasing now and I don’t expect them to change dramatically this year,” Oliver says. Besides, she adds, “Our sell desk says there’s a lot of pent-up demand in the market, and now that the election is behind us, they don’t think rates will go up enough to change investors’ spread requirements.”
On availablity, Oliver says, "We've seen a lot of new players, (but) some are in the higher-risk cateogry, which is not where we play." On the sell side, she says potential investors for the deals the bank has are abundant, due in part to a number of smaller banks that have entered the market. But these smaller banks are also pursuing some of the same deals as Key Equipment Finance. "A couple of them started a capital markets group, and they've been some of our biggest competition lately. They don't have much exposure, so the world is their oyster, and they're gobbling up deals."
Oliver also sees some competitors going down-market and doing selective B-credit transactions. “We’re not doing that,” she says. “We have not loosened our credit box at all and are holding the line at credits that meet our requirements.”