MAX Community Sees Leasing as Small Business Cash Conservation Option

MONTGOMERY, Ala. — It was a painful encounter when MAX Community Credit Union lost out on a plum equipment leasing contract with a local medical facility to a larger bank.It was enough of a hit to send the $723 million credit union behind closed doors to discuss entering the equipment-leasing realm full throttle to complement the financial institution’s already established business services division. The talks turned into reality when in October 2008, MAX LeasingUSA made its debut. A 100% owned subsidiary of MAX Community CU, the CUSO offers a range of equipment leasing options from $5,000 to $150,000. Transactions over that threshold are also available.Mark Ziegler was hired in October 2005 to create a business services division, but he soon discovered that the credit union was not meeting a popular request.“More and more businesses were leasing their equipment, and we did not have an option for that,” recalled Ziegler, who is president of MAX LeasingUSA.Ziegler researched several possibilities, including brokered leasing. But after talking to others in the business, some suggested forming a CUSO. To go that route, it was decided that all operational functions including management, assistance with documentation, accounting, credit scoring and residual evaluations would be outsourced to a third-party vendor to cut down on internal costs. The most expensive component came from personnel and benefit expenditures, Ziegler said.While MAX LeasingUSA is still gaining traction, within the first 17 days of opening for business, it landed a boiler system leasing contract for a dry cleaning shop and recently inked a computer technology deal. The CUSO serves professional services, construction, health care, wholesale and retail industries with equipment ranging from desktop and laptop computers to forklifts.The CUSO is projected to do $5 million in sales this year and up to $10 million in 2010 depending on how the economy adjusts, said Bruce Chaflin, who was recently hired as senior vice president. The financial service industry veteran brings more than 30 years of experience in credit leasing to the new role.“Equipment leasing tends to thrive during an economic downturn,” Chaflin said. “You see small business wanting to conserve cash. In addition, it helps protect against equipment [becoming obsolete].”Still, the competition can be cutthroat. Max LeasingUSA competes with several large banks and GE Capital. There was certainly buzz at the Equipment Leasing and Finance Association’s annual meeting last October in New Orleans. The trade association represents financial services companies and manufacturers in the $650 billion U.S. equipment finance sector. Chaflin and Ziegler attended the conference and noticed that they were probably the only credit union leasing outfit in the building.“The competition was lamenting that we were there,” Chaflin recalled.Chaflin said Max LeasingUSA’s differentiator is its local decision making versus small business owners working with out-of-state and even overseas representatives. Ziegler said the CUSO also takes a “kindler, gentler approach to leasing” through its plain English applications. While there are certain leasing niches within the aircraft, marine and government realms, the decision was made to stick to equipment commonly used by small businesses, Chaflin said.So far, the biggest challenge has been getting the word out that MAX LeasingUSA is up and running. The CUSO is open to members and nonmembers, and the hope is to convert the latter group to long-term credit union relationships. Chaflin’s connections, including serving on a medical board, have helped to build early relationships with vendors. Ziegler said networking mixers and other events are also being planned.One of the leasing division’s goals is to create a strong presence within the health services industry, which is projected to be a powerful growth engine for the nation’s stalled economy, Chaflin said.“It’s incumbent of providers to stay on top of the technology with medical equipment and we want to provide the financing for that equipment,” Chaflin said.Even though this may be an ideal time for small businesses and leasing in their efforts to stay cashed in, Max LeasingUSA is committed to stringent underwriting and linking with creditworthy applicants. In fact, the CUSO has received a number of applications only to be rejected because of less than stellar credit histories, Ziegler said.“The challenge is to make the right credit decisions,” Chaflin pointed out.–[email protected]