The entrepreneurial endeavors of seasoned veterans Steve Hudson and Bradley Nullmeyer have captured the equipment finance industry’s attention for nearly three decades. In 2007, the industry took notice as the pair reunited to form Element Financial. As Nullmeyer, Element’s president notes, things started to “heat up” in late 2011 when the two witnessed a growing demand for equipment as North America began to re-tool itself post-recession.

In the following exclusive interview, Nullmeyer explains the reasoning behind Element’s acquisitions, its rational and durable platform powered by a steady stream of pre-committed funding from its partnerships with insurance companies, and the company’s holistic approach to the North American marketplace. As importantly, Nullmeyer makes the point that Element Financial is not a replay of Newcourt Credit Group.

Equipment Finance Advisor:  While Element Financial is based in Canada, we note that many of the companies acquired have been based in the United States. Can you explain the rationale behind this?

Bradley Nullmeyer:  We saw an opportunity that was occurring in the re-equipping of North America and at the same time, we were aware of  what was happening with certain competitors. GE was experiencing a downsizing of its capital group and CIT had been through bankruptcy and had taken TARP money, which meant they couldn’t lend in Canada. Here in Canada, we ended up with a marketplace that was dominated by the banks … there wasn’t an independent equipment leasing company here and we took that opportunity to enter the market.

Prior to 2007 and since I had left CIT and Tyco, I was running some venture capital businesses but was never really having any fun … it was the right time for me to join Steve as president of Element Financial, that he and others had founded in 2007and we began to formulate what we wanted the company to be.  Quite simply, what we wanted was to be in partnership with manufacturers as they took advantage of the new equipment market boom.

The strategy of attaching oneself to a manufacturer and that seeks life cycle management and total end-customer management can be a very successful one for a finance company. As a case in point, one of our startup ventures at CIT was Snap-On Credit and it’s still a $1.2 billion finance within  its parent. What that means for Element today is we don’t have a branch network or an 800 number, but if you go into a Bobcat dealer and acquire a Bobcat, we’ll be there as Bobcat Finance. From that point to the very end of the relationship with the end customer, which can be a number of multiple cycles, we will be in complete partnership with our manufacturer. That means you won’t see Element selling things at auction. It’s a strategy that has withstood the test of time as an efficient way to finance equipment acquisitions.

In the end, we have two partners: the manufacturer and the insurance companies that seek investment opportunities. I can go to those companies and say, “Here’s Bobcat, here are their credit parameters, the interest rate, the loss profile” and so forth. It allows me to “prefund” all of those programs through our life insurance partners with long term funding commitments. And we do this very specifically, because if you get into the commercial market and commercial paper dries up as it did during the Russian Crisis, your costs go up and you get into trouble. That’s what happened at Newcourt and why we ultimately wound up being acquired by CIT.

Equipment Finance Advisor:  What are the key differences between today’s Element Financial and Newcourt Credit?

Nullmeyer: There are two major differences. For one, we were 23 years old then and today we’re 53 ... older but wiser with more maturity and experience. The other difference is we are focused on only four business units. They are: fleet management operations, vendor finance, aviation finance and our most recently announced unit, railcar finance, which we announced late last year. This partnership opportunity arose from a relationship we had in our past life with Trinity Industries that manufactures railcars.

In our previous life we had 14 business units. Today, those four business units are what we are all about and we won’t be in any others. Each of our acquisitions has been strategic to build a solid platform in those business verticals.  If you look at fleet management as an example, we began with acquiring TLSI, a 35-year old company and then we added GE Fleet to it last year. Most recently, we just closed on PHH Arval, a company founded in 1946 and the first fleet company in the world

If you look at PHH Arval acquisition, we have a company that has been in business over 60 years that has a great system for forward-facing customer support. This is a true North American fleet management acquisition and we love this business because for one, it’s very sticky with over 98% retention rates. It’s a business with high fee-based income, which we also like. There isn’t just the financing component, there’s a fee-based service component as well. More and more customers like this because we can provide things like tax reporting or telematics that tell them when their driver is driving too fast and the like. And, as they look at green cars, we can take a client through the steps in determining the total cost of ownership over a long period of time through our consulting expertise.

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