broader and therefore our brokers are able to originate in a much
wider range of credit risk, making them a more valuable partner to
their customer relationships,” Souverein notes. “Historically, our
primary underwriting was for true startup businesses and less traditional tenured credit profiles. Post cycle, we have become a more
significant funding source to our brokers in the B+ market, offering
risk-based pricing between 14% to 26%.
“We believe a strong attribute of our business is not only our experience with the broker channel but our hands-on, common sense style
of doing business. Our 40-person staff doesn’t hide behind scoring
models and is empowered to make independent, subjective, prudent
decisions with the help of quantitative tools. We like to think that we
make a more difficult credit segment easy,” he adds.
With a strong parent company, successful business model and
years of experience in its favor, Pawnee survived the economic downturn by anticipating and preparing for the crisis. Tightening the reins
early in the downturn positioned Pawnee for a strong recovery.
“Why do you think Pawnee has been successful and survived
the credit cycle? Experience, a robust business model and most
importantly, credit discipline in the face of irrationality, despite the
consequence of a shrinking portfolio. Internally we identified that
our competitors were mispricing risk and found some competitive
behaviors to be completely irrational. We also saw the economic
deterioration earlier than most due to the character of the weaker
credits in our portfolio. While some of our competitors continued their
irrational behaviors until late 2008, we had already restricted credit
parameters by that time and when significant industry correction took
hold, we were already two years into contracting our business. That
discipline, while unpleasant, laid the framework for the strong position we find ourselves in today,” Souverein says.
Today, Pawnee anticipates continued success and has in place
a long-term credit facility provided by a bank syndicate group led
by JPMorgan Chase. “Our discipline and business model has put us
in a position of strength within the industry and we see ourselves
continuing to capitalize on that market opportunity,” Souverein notes.
“In addition, the future for the independent broker is very bright.
The truth is, there has been a cleansing, albeit painful, in our entire
industry. This was needed following an obviously overheated credit
environment, and we believe a healthier environment will emerge.
While it may be a slow process, there will be new entrants on the
funding side of this business as demand increases,” he adds.
However, despite Pawnee’s stable footing, Souverein feels the
immediate outlook is still shaky for the industry overall: “Unfortunately,
we believe there are months of continued uncertainty ahead. Housing
had such a significant role in supporting our industry by aiding both
equipment acquisition and portfolio performance. Home equity has
evaporated and is likely to erode further in 2011. This fact, along
with stagnant business revenues, higher fuel costs and the general
cautious sentiment of the small business owner will continue, in our
opinion, to mute demand into 2012.”
Always eager to learn and grow, Souverein is clearly grateful
for the experience and education that Pawnee has afforded him.
In addition, he takes advantages of the benefits of participating in
industry trade associations, particularly the National Association of
Equipment Leasing Brokers (NAELB) and the National Equipment
Finance Association (NEFA).
Touting the benefits of association participation, Souverein says,
“We’re active in both associations, of course, and I’ll point out the
benefits with several questions: How do you really understand what’s
going on in your profession if your company isn’t involved in its trade
associations? How can you keep a finger on the pulse of macro trends
in the industry, interface cost effectively with your most valuable
business partners, your funders, and glean ideas to improve your
business from your peers? Would you want to compete with an asso-
ciation member who likely has greater knowledge and resourcing
abilities than you do?”
“[T]he future for the independent broker is very bright. The truth is, there has been a cleansing, albeit painful, in our entire industry ...
and we believe a healthier environment will emerge. While it may
be a slow process, there will be new entrants on the funding side
of this business as demand increases.”
After 18 years in equipment leasing, Souverein could be considered a veteran, and his loyalty to the industry and Pawnee are part
of his personal identity. What keeps him in the game is quite simple:
“I’m unemployable outside leasing!” he jokes. “Eighteen years with
the same business card is uncommon in this business. I’m attached
to this industry and to Pawnee. I love coming in each day trying to
contribute to the success of our customers and the ‘Tribe.’ While I’ve
had an invigorating ride helping bring Pawnee along from a small
five-employee independent 18 years ago, through an IPO in 2006
and surviving the great recession most recently, I’ve never been more
bullish about Pawnee, and I think our best days lie before us.” m
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