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Thank you guys so much for joining us today.

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And as you guys may or may not have noticed,

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we have been doing a lot more videos regarding equipment financing and I am very

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excited for today because we have a veteran in the industry. George,

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he is someone that is well-known and he has a wealth of knowledge that he's

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gonna share with us today. So George,

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go ahead and introduce yourself and the company that you're with and we can get

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started.

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Sure. Uh, I'm George Parker, COCE,

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O of Vince, source Capital.

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Our firm specializes in providing equipment financing to

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venture capital backed startup companies.

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We're we're actually located in Connecticut and here in New York,

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and we've been doing this for over 25 years.

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25 years. George, that is amazing. And thank you for having us over your house.

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So let's get started. How did you get into this equipment financing industry?

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Well, I actually, uh,

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started in commercial banking with a bank out in Chicago

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and, uh, came right out of, uh, MBA school. And, uh,

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after the training program I was assigned to a, uh,

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division that focused on equipment finance companies.

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And so that's how I got my first introduction to the industry.

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So from there, you know, now you're coce o of vent source capital,

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you guys specifically, uh, on a specific niche in the area,

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in the space. So kind of tell us a little bit more about that.

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Well, as you know, uh,

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the equipment finance industry is a very significant industry. It's over, uh,

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$1 trillion annually and volume.

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And within the industry there are, uh,

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n niches and ours is one of them.

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So we cover a segment of the equipment finance industry

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that, uh, focuses on earlier stage companies, uh,

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startup companies. And, um, I,

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I think our space is probably 30 to 40 billion

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a year. And there are multiple players,

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somewhat similar to my company,

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although we have some individual specialties.

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Ours is more equipment focused. So

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For, for venture's capital specifically, you know, um,

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you guys focus on this specific area, the startup area. Um,

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but when people think about equipment financing, they think about like,

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you know,

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the huge machines that either you're working with restaurants or you're working

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with a construction company, you know, big machinery. Uh,

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that's kind of what most people think about when they think equipment financing.

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So for you guys,

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let's talk a little bit about the specifics of what equipment financing and what

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equipment looks like for your customers.

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Well, it's certainly not the large, uh, equipment, the,

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the huge trucks and manufacturing equipment. So that's not what we, uh,

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get involved with. More times than not,

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we're covering research oriented equipment lab and test equipment. Mm-hmm.

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Um, IT equipment. Okay.

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And more light production equipment. So that,

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that's a lot of what we do. In addition to that for, uh,

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specific players, we may cover medical equipment or, um,

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equipment of that, of that nature. So that's more of what we do.

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Uh, there's a lot of software involved with the equipment that we finance,

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and so it's,

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it's more on the technology end of things as opposed to the hard iron,

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uh, part of the industry.

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That's great.

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And that's something different that we haven't seen on our channel specifically

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because we've always talked to people that work in equipment financing,

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but it's more on, you know, the big machinery side.

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So this is definitely something that's interesting, uh,

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and that not many people are aware of.

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Yes, I, I would say that's so, and if you think about our customer base,

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these are technology firms and innovation firms,

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and so a lot of what they're using is technology equipment.

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So that that's, that drives what we're doing.

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So a lot of equipment financing is, you know,

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referral based when it comes to getting customers, uh, and,

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and maintaining those customers. So for you guys specifically, what,

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how do customers find you guys? How, how do they get involved with you guys and,

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and you guys end up working together?

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We use a number of channels,

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but I would say that out of the channels that we use ref,

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the referral channel is probably our, our largest. We have some direct,

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uh, business direct customers and,

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and so we will call on specific companies and offer them our services.

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But a lot of, a lot of the times it comes from referrals,

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from banking, uh, uh,

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contacts that we have from other equipment finance companies

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who don't specialize in what we're doing, but would like to see,

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you know, a fee from, uh, from referring the business to someone like us.

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And let's talk a little bit more about the referral aspect.

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What percentage of your, of your clientele right now, of your clients,

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what percentage of them are coming from referrals or have come from referrals?

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I'd say about 70%.

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70%.

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About 70% come from some form of referral.

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And how do you maintain,

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cuz because I think a lot of people want to know they want to grow in equipment

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financing or in the alternative financing industry.

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How do you maintain a referral to keep coming back to you?

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How do you maintain that relationship?

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So when, when I look at how we market, okay. It's,

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it's a combination of things. So we,

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we have to get our name out to the end customer, which,

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which which are the, uh, venture capital backed startup companies. Okay.

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But, but more importantly,

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we have to get our brand out to referring sources.

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So we do a lot of, uh,

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publicizing to our referring sources, calling them,

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developing relationships with them, um,

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making sure that we touch base with them, um, multiple times a year.

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Okay.

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And so that's more of how we get the transactions coming to us. Is it,

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it's,

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it's from interfacing mostly with the referral sources

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and in the background,

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making sure that our name is out there by advertising

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doing other types of publicizing to make sure that folks out there in

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the industry know who we are.

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So how important is it to create a,

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a niche in the area that you're working in, just in general?

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Because for you guys it seems to to have been a success and some people that are

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just starting out, they're trying to figure out their way around, you know,

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the industry or a industry. So how important it is to,

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to start focusing and just settle down on, on one specific area?

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I think it's very important, uh, for a couple reasons. One,

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for somebody starting out for sure.

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Because you don't wanna start out and be competing against the

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large financing sources. Okay.

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Particularly the banks and the large finance companies. Okay. Um,

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it's better if you can identify a market that's not being covered.

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Well learn that market well so that you can

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identify holes in the market,

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places in the market where there's still a need and a,

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and an approach to the market that's different than others. Okay.

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And I think that's what we've done. Uh,

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the other factor is the cost of financing.

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And so usually when you're starting up,

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you don't have the lowest cost of financing and, and generally you're brokering,

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so you're going to somebody else with, hopefully with, uh,

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a cost of financing and you have to,

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you have to put some kind of margin on top of that. Okay.

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So for all those reasons, I think it makes sense to find a niche,

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uh, part of the market somewhere where it's not being covered as well as,

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as, as maybe others. And, uh, where you have some kind of,

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uh, competitive advantage going into the market,

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a lot of times that's know-how or knowledge of the market that you can turn

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into a competitive advantage.

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So George, from,

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let's talk about the start to finish of the entire process of a client that,

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that wants to join. You guys work with you guys,

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they start the process and then, you know,

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you guys take them through the entire thing. How long does that, does,

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does that take specifically?

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Well, from start to finish,

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I'd say the shortest I've seen a transaction happen, it's maybe three weeks.

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Okay. Um, and you have to understand, uh,

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the process of what we do. These are, these are companies that, uh,

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are high risk that that's, uh, first and foremost.

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And so they have limited, uh, operating backgrounds.

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They're generally backed by an outside investor group.

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Okay. Um, and we're talking, uh,

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transactions in size anywhere from one to 5 million. Okay.

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So on the front end we do a screening process that may take a couple

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of days Okay. To, uh, get the information from the company,

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screen them as to whether they look like they're gonna be a, a,

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a good candidate. If they get through that process,

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we would probably send them out a proposal. Uh,

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we don't do anything before there's a signed proposal.

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Once we get assigned proposal,

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now we get into the due diligence process,

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which involves looking carefully at the financial statements,

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talking to their, uh, VC backers. Okay.

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Uh, talking to their, um, banks and trade references.

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And then doing other, um,

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I guess you would call due diligence types of, uh,

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of things and be before long,

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that's taken at least two or three weeks. Okay.

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And so that's, that's why the process takes at least that amount of time.

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So I did my research and I, and I recently found the tips,

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the leasing tips that you released over a hundred tips,

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Uh, and a hundred years ago.

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Go ahead. So, so I found those tips.

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Could you share some of tho those equipment finance leasing tips, uh, to,

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so the people watching this, cuz it was very interesting, very intriguing,

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and like we said earlier,

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equipment financing is very much an area that it's complex.

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So could you share some of the tips?

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Sure. So the tips were oriented to customers,

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and I'll just give you a few things.

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One is to set your priorities in terms of what you're

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trying to accomplish with the leasing. It's not always pricing. Okay.

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Although pricing is very important,

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but there are other things like how much availability will you need? Okay. Um,

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what kind of equipment are you trying to acquire? And,

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and a lot of times these types of issues will dictate

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what types of equipment finance companies you want to talk to. For example,

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if your transaction is below a hundred thousand dollars,

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that's a certain type of equipment finance company who would consider financing

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like that. It's not, it's not someone like us, for example. Okay.

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And so doing that early planning, uh, is very important.

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Realizing that it's generally gonna take you longer than what you think

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to line up the financing that you want and need.

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So plan on on that additional time. Okay.

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So that's very important as well. Um,

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o other things like making sure you check out the financing partner you're

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getting involved in, uh,

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having some sense of where to go to start looking for the financing.

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You may want to start with your accountant,

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you may want to try to get referrals from others.

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And then how to evaluate proposals.

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So what piece of advice would you have, uh,

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to a broker that is primarily used to working with unsecured credit or, uh,

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unsecured working capital? Uh,

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and they're trying to dive into now the equipment finance world and they don't

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know much about working in equipment financing.

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A couple of things. Um,

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certainly equipment financing is different than brokering

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working capital financing. Um, it's all financing,

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but equipment financing is specialized as is working

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capital. So I would try to understand how it's different.

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Okay. And to do that, if I were starting,

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I would certainly attend some of the equipment financing, uh, conferences,

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uh, get a talk to folks that are there, uh,

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sit for some of the sessions where you can learn more about equipment financing.

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There's an organization called the, it's, I hope I can get this right,

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is the American Association of Equipment Finance Brokers. Okay.

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So all of our associations, by the way, are alphabet soups in,

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in terms of, in terms of their names.

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But this one in particular is a very good organization for getting

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background in equipment financing and how to go about being a,

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an equipment finance broker, best practices.

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There are lots of experience, uh, brokers there.

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I would recommend spending time with some, a group like that Yeah.

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To get exposure to the industry before diving into the industry. Yeah,

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That's great. Um, a lot of people are diving into the industry now.

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There's a lot of new people coming in, a lot of new players.

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But we've also seen that the world is changing. You know, the,

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the financial aspect of it, the, the economical aspect of it.

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It's all changing rapidly. What impacts have you seen with,

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uh, the financial changes going on with inflation, uh, you know,

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with all those problems that the country's dealing with, uh, what changes,

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what impacts have you seen it in regards to the equipment financing world?

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Well, it's, it's an evolving situation, uh, for sure. Okay.

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And this isn't the first time we've seen a cycle like this one.

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All of them are, are a little different. And certainly this one is as well.

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Um, what I'm seeing is we're seeing a slowdown for sure. Mm-hmm.

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It's starting to show and the equipment finance volume mm-hmm.

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My market has been there for over a year. Uh,

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we've seen a pullback and the venture, uh,

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debt side of things for more than a year. Uh,

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what's accelerating things,

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I think is the recent developments with some of the banks. Mm-hmm. Uh,

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Silicon Valley Bank, uh, PAC West Bank,

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and some of the other banks, uh, particularly in our space, uh,

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where we've seen either the banks fail or, uh, come under,

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uh, stress.

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And I think that's starting to accelerate that in addition to

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the rate rises that have come from the Fed are starting to accelerate

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folks pulling back from making these equipment purchase decisions.

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Okay. And if they're not buying, uh, more equipment,

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certainly the financing of equipment pulls back as well.

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And so I think we're starting to see that we're starting to see higher

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delinquencies, higher write-offs. And,

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and so those are the early signs that, you know,

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we could be headed into a more challenging e environment for the rest of the

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year and possibly for most of next year.

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Let's dive in more specifically, uh, with your, the niche area that you,

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you work with, you know, it's FinTech companies, medical companies,

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software sales, um, the financial impact of the country. Like we,

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we were just talking about.

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How has it impacted those companies that you work with directly?

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Um, I,

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I think it's impacted them greatly up until the last

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couple of months before Silicon Valley Bank, uh,

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had their problem. Okay. Our industry was already hit, uh,

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last year by just a downturn in technology

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and, um, a closing pretty much of the I p O market. Mm-hmm. Okay.

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And so our market relies on, uh,

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the I p O market as an exit,

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and there are a lot of things related to that that kind of backs our industry

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up. Okay. And so, as a consequence,

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you saw in our industry some of the funding that goes into the industry

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coming from the folks that make investments in the venture capital

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firms. Mm-hmm. Okay. Pension funds, uh, you know,

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asset managers that put money into these, uh, venture capital firms,

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they started to pull back. Okay. And so, um,

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on on the other side, uh,

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some of the technology companies saw downturns and their revenue.

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Okay. So that's, that's, that's a, that's another bad sign.

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But at any any rate, um, what,

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what you've been seeing in our market is that that's caused the venture capital

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firms to pull back,

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to start triaging to a certain extent,

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favoring companies that they've made investments in that look like they're gonna

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pay out within a, a reasonable period of time.

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And disfavor companies that are longer shots,

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or that will require a lot more equity to see their, uh,

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see their profitability materialize.

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What that has meant for folks like us is that you have to be more

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discerning in the transactions that you do. Uh,

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there are probably fewer transactions, uh, than there,

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there were three years ago or two years ago.

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But the flip side of it is that there's been a pullback from

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competitors like Silicon Valley Bank who's basically, you know,

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they kind of pulled out of the market pack West is now being

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impacted. And so, you know,

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there's an opportunity for alternative sources like us mm-hmm.

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To actually find more deals. But you have to be more discerning.

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It's fascinating.

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That's truly fascinating because I think that gives a response to the question

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that people have. It's like, is this something bad that's going on? Like,

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what do we do? How do we handle this? But like you said, it's,

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it's being discerning and seeing how you go into that environment and you dive

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in

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E Exactly.

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We've always found that there's opportunity when there's some

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turmoil in the market. And so from my point of view,

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we get an opportunity to see and find better

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deals at, at better pricing where the risk reward makes more sense.

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Well, George, thank you so much for your time.

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Thank you for your wealth of knowledge,

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because I know a lot of people are interested and they're just trying to

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maneuver this specific space. So I want to thank you for,

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for just dropping all those golden nuggets and also walking us through,

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you know, just how to maneuver this industry overall. So George,

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thank you so much.

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Thank you. It's my pleasure.