Syndications Capability Development 

What Is Equipment Finance Syndication 

Equipment finance syndication is the process of selling portions of a large equipment finance transaction or portfolio to one or more funding partners or financial institutions. Capital market syndication is one of many funding strategies that equipment finance firms can use to preserve the capacity to grow while maintaining strong risk management. It is a strategy that enables the seller (the originator) to spread credit risk, manage balance-sheet exposure, generate fee income, and access additional capital, often while still servicing and managing the transaction as the primary point of contact for the customer and vendor. Syndications have been used successfully within the equipment finance industry for decades. Equipment finance firms typically use syndications to fund: 

• Vendor finance programs with high-volume, small-ticket throughput. 

• Structured lease transactions that involve complex credit or residual risk. 

• Large-ticket financings (i.e., aircraft, rail, energy, heavy equipment). 

How Equipment Finance Syndication Works 

At its core, syndication involves the sale of either whole equipment finance transactions or portions of transactions between institutions—often referred to as “buy desk” or “sell desk” activity. The sell side typically includes banks, captives, or independents with strong origination platforms and more deal flow than they can or want to hold on their balance sheet. The buy side may include commercial banks, finance companies, credit unions, and institutional investors seeking yield, asset diversification, or access to specialized equipment classes. 

Sell-Side Motivators for Equipment Finance Syndication 

There are several strategic reasons for equipment leasing and finance institutions to seek to syndicate an equipment finance transaction. 

1. To preserve capacity to serve priority customers. Originators want to be able to serve as a dependable financing partner to their most valued customers. But internal limitations on how much credit can be extended to a single client can be a hindrance. 

2. To create a source of income. Through syndication, independent and bank-based equipment finance firms can create current-year income when selling a transaction for an amount higher than the current value on book. 

3. To manage risk within the portfolio. An originator also might want to limit its portfolio concentration by selling some transactions within a particular asset type to a third party. 

4. To optimize warehouse line utilization. Independent equipment finance companies may sell some transactions to create funding capacity within their bank line.

5. To obtain gain-on-sale accounting. Manufacturer captives may be able to monetize the full gross profit margin by selling transactions they have funded rather than to accrete that profit over the life of the transaction. 

6. Alleviate margin risk in a volatile market environment. Fixed-rate equipment finance transactions often are initially funded into floating rate warehouse lines, pending inclusion in a securitization or other fixed-rate facility. A one-off syndication mitigates the risk of margin compression. 

In any case, it’s imperative to the success of equipment finance syndication that the seller forge relationships with trustworthy prospective buyers. A key indicator of reliability is how quickly that buyer can come to a decision. Just as important, sellers want to know several additional pieces of information: 

• What is the buyer’s desired yield? 
• What is the buyer’s credit risk tolerance?  
• What is the buyer’s approval time frame? 
• What transaction types are of interest to the buyer?  
• What ticket size is the buyer seeking? 
• What equipment do they want to buy?  
• What industry does the buyer like?  
• What is the desired term length? 
• What is the buyer’s expectation with respect to transaction servicing? 

Buy-Side Motivators for Equipment Finance Syndication 

Institutions often have a different set of motivators to purchase syndicated equipment finance loans. 

1. To meet institutional portfolio objectives. Even if a bank or independent has a solid originations engine in the direct and/or vendor spaces and extensive commercial relationships, it may make sense for these equipment finance firms to engage in the purchase of transactions from others. This can help them to meet their annual origination or volume goals, which their direct and vendor businesses alone can’t do.

2. To open the door to selling transactions. Reciprocity is an important principle in the secondary loan markets. Equipment finance companies that want to be able to sell transactions build relationships and gain access to future opportunities by participating as a buyer in the syndications market. That two-way facility also gives them a better look at what’s happening in the market with pricing and financing structures. Having that view of the buy/sell trade on transactions can tell them what is and isn’t competitive.

3. As a market-entry strategy. Companies that lack a sales force may purchase equipment finance transactions as a way of entering the market without spending money to hire and build a sales infrastructure. 

Alta’s Approach to Equipment Finance Syndication 

The Alta Group has extensive, proven experience in helping players in the industry put together equipment finance syndications that benefit all participants. Our team members have executed tens of thousands of transactions representing more than $100 billion in value over the course of their careers. 

Alta’s advisors know the industry from the inside out and on a global scale. Because of our extensive relationships and client work in this space, we know what it takes to originate a transaction and what the market will bear in terms of negotiations. We bring an independent, objective point of view that is unique among equipment finance advisory firms.   

“The big advantage that The Alta Group brings to the table is knowing your challenges—because we’ve faced them, too. We have facilitated tens of thousands of transactions over the course of our careers. We know what a successful negotiation looks like, and we can help you achieve success with an approach that fits both your goals and the market.” – David Wiener, Managing Director 

Key Focus Areas of Alta’s Syndications Work 

We help our clients put together successful syndications by putting in the groundwork in the following areas: 

• Guiding the creation of a viable syndication process. Assistance in development of a viable set of procedures, confirming that the requisite skill sets are in place. 
• Establishing the “strike zone.” We put our decades of experience to work in helping you determine the appropriate industries, asset types, transaction size, pricing, risk appetite, and other parameters that will help you identify successful deals. 
• Aligning your goals to market realities. We make sure our clients’ plans are calibrated to match the ever-changing demands of the market.  
• Matching buyer and seller capabilities. By putting in the work up-front, we help our clients avoid wasting time on deals that are a mismatch between buyer and seller. 
• Facilitating meetings with the right partners. Whether it’s at an industry trade event or through another channel, we have the relationships and trust in the industry to help you connect with the participants who can help you achieve your goals. 
• Counseling on transaction decisioning. Once prospects start coming in, we can help you triage deals and maintain focus on those that are the best fit. 
• Advising on documentation. We understand the documentation process from the inside out, and can help ensure your documentation meets current market standards with regard to billing and collections, remittance, late fees, remarketing agreements, and other areas. 

Working Syndications from the Sell Side 

Sellers who work with us might be equipment finance companies wanting to discreetly  enter the market and who ask us to confidentially take a transaction or transaction portfolio to the market. For example, if an independent lessor with a line of business has reached the limit of its credit exposure, doesn’t want to do a securitization, and doesn’t want to open up a second line, we can advise them on how to create a viable deal. 

As with buyers, this involves a value proposition based upon the kind of equipment and collateral involved, the size and structure of a deal, and the amount of risk involved.  

Equipment Finance Syndication Case Studies 

The Alta Group’s proven effectiveness in establishing equipment finance syndication – as shown in the following case studies – has made Alta the leader in this field. 

Augmenting Funding Capability With a Capital Markets Syndication Offering 

When a large international equipment finance bank subsidiary sought a capital markets syndication offering to expand their existing funding capability, they partnered with The Alta Group to make it happen. We identified and confronted potential barriers to that goal, established a solid value proposition, and built a launch timeline. That value proposition made clear to potential investors how they would benefit from the bank’s syndication offering – and paved the way for the bank’s successful launch of this venture.  

Procuring Millions in Capacity to Finance New IT Equipment 

After a financing arrangement it had sought fell through, a privately-owned lending firm only had half of the $100 million needed to buy new IT equipment. But since that equipment had already been delivered, the company had to scramble to find a solution right away. The Alta Group came to their aid to arrange new financing, structure the deal to accommodate lender underwriting, and found five candidate lenders who bought into a mutually satisfactory finance agreement. Not only did the client meet the immediate financing requirement, they retained The Alta Group over the next two years. During that time, Alta provided over $225 million in financing commitments involving some 20,000 assets financed through a dozen discrete takedowns involving a variety of asset classes beyond IT in 17 locations in the U.S., Europe and Asia-Pacific. 

Family Office Establishes U.S. Buy Desk to Diversify Portfolio 

A South American family office turned to Alta for help entering the U.S. equipment finance market. Alta guided the firm through business model selection, origination strategy, and due diligence on qualified syndicators. The client has since invested over $10 million through a newly established buy-desk platform. 

Independent Lender Launches Syndication Platform to Boost Capacity 

An independent equipment finance company sought to relieve pressure on its bank line and pursue larger deals beyond its internal limits. Alta helped design a syndication sell desk, established transaction procedures, and identified a network of suitable buyers. The lender is now equipped to independently syndicate and expand its deal capacity. 

Get Expert Guidance on Equipment Finance Syndication  

The Alta Group has a reputation as a trusted advisory firm in the equipment leasing and finance industry. We maintain that trust by furnishing the detailed, wise counsel mentioned above, and by being scrupulously honest with our clients about the merits and demerits of any suggested transactions.  

When you’re ready to adopt a customized equipment finance syndication strategy, contact us at The Alta Group and we’ll help you develop that winning approach.