We are a nationwide provider of equipment financing solutions primarily to
small and mid-sized businesses. We finance over 100 categories of common-use
commercial equipment important to the typical small and mid-sized business customer,
including copiers, computers and software, security systems, telecommunications
equipment and certain commercial and industrial equipment. This segment of the
equipment leasing market is commonly known in the industry as the small-ticket
segment. We access our end user customers primarily through origination sources
comprised of our existing network of over 12,300 independent commercial equipment
dealers, various national account programs and, to a much lesser extent, through
direct solicitation of our end user customers and through relationships with
select lease brokers. We use both a highly efficient telephonic direct sales
model and, for strategic larger accounts, outside sales executives to market
to our origination sources. Through these origination sources, we are able to
deliver convenient and flexible equipment financing to our end user customers.
Our typical financing transaction involves a non-cancelable, full-payout lease
with payments sufficient to recover the purchase price of the underlying equipment
plus an expected profit.
The small-ticket equipment leasing market is highly fragmented. We estimate
that there are more than 100,000 independent commercial equipment dealers who
sell the types of equipment we finance. We focus primarily on the segment of
the market comprised of the small and mid-size independent equipment dealers.
We believe this segment is underserved because: (1) the large commercial finance
companies and large commercial banks typically concentrate their efforts on
marketing their products and services directly to equipment manufacturers and
larger distributors, rather than to independent equipment dealers; and (2) many
smaller commercial finance companies and regional banking institutions have
not developed the systems and infrastructure required to adequately service
these equipment dealers on high volume, low-balance transactions. We focus on
establishing our relationships with independent equipment dealers to meet their
need for high-quality, convenient point-of-sale lease financing programs. We
have the capabilities and expertise to service large national accounts through
our National Accounts Finance Group which provides dedicated resources focused
on exemplary service levels for select national accounts. We provide equipment
dealers with the ability to offer our lease financing and related services to
their customers as an integrated part of their selling process, providing them
with the opportunity to increase their sales and provide better customer service.
We believe our personalized service approach appeals to the independent equipment
dealer by providing each dealer with a single point of contact to access our
flexible lease programs, obtain rapid credit decisions and receive prompt payment
of the equipment cost. Our fully integrated account origination platform enables
us to solicit, process and service a large number of low-balance financing transactions.
Through the issuance of Federal Deposit Insurance Corporation (“FDIC”)-insured
deposits, the Company’s wholly-owned subsidiary, Marlin Business Bank
(“MBB”), serves as the Company’s primary funding source. On
February 23, 2014, MBB added the FDIC-insured money market deposit accounts
(the “MMDA Product”) as another source of deposit funding. This
product is offered through participation in a partner bank’s insured savings
account product to clients of that bank. It is a brokered account with a variable
interest rate, recorded as a single deposit account at MBB. In the future MBB
may elect to offer other products and services to the Company’s customer
base. As a Utah state-chartered Federal Reserve member bank, MBB is supervised
by both the Federal Reserve Bank of San Francisco and the Utah Department of
Financial Institutions.
We believe several characteristics may distinguish us from our competitors,
including the following:
Multiple Sales Origination Channels. We use multiple sales origination channels
to penetrate effectively the highly diversified and fragmented small-ticket
equipment leasing market. Our direct origination channels, which account for
approximately 93% of the active lease contracts in our portfolio, involve: (1)
establishing relationships with independent equipment dealers; (2) securing
endorsements from national equipment manufacturers and distributors to become
the preferred lease financing source for the independent dealers who sell their
equipment; and (3) soliciting our existing end user customer base for repeat
business. Our indirect origination channels account for approximately 7% of
the active lease contracts in our portfolio and consist of our relationships
with brokers and certain equipment dealers who refer transactions to us for
a fee or sell leases to us that they originate. Indirect business represented
8% of 2015 originations, while direct business represented 92%.
Highly Effective Account Origination Platform. Our telephonic direct marketing
platform and our strategic use of outside sales account executives offer origination
sources a high level of personalized service through our team of 136 sales account
executives, each of whom acts as the single point of contact for his or her
origination sources. Our business model is built on a real-time, fully integrated
customer information database and a contact management and telephony application
that facilitate our account solicitation and servicing functions.
Comprehensive Credit Process. We seek to manage credit risk effectively at the
origination source as well as at the transaction and portfolio levels. Our comprehensive
credit process starts with the qualification and ongoing review of our origination
sources. Once the origination source is approved, our credit process focuses
on analyzing and underwriting the end user customer and the specific financing
transaction, regardless of whether the transaction was originated through our
direct or indirect origination channels. Our underwriting process involves the
use of our customized acquisition scorecards along with detailed rules-based
analysis conducted by our team of seasoned credit analysts.
Fully Integrated Information Management System. Our business integrates information
technology solutions to optimize the sales origination, credit, collection and
account servicing functions. Throughout a transaction, we collect a significant
amount of information on our origination sources and end user customers. The
enterprise-wide integration of our systems enables data collected by one group,
such as credit, to be used by other groups, such as sales or collections, to
better perform their functions.
Sophisticated Collections Environment. Our centralized collections department
is structured to collect delinquent accounts, minimize credit losses and maximize
post charge-off recovery dollars. Our collection strategy employs a delinquency
bucket segmentation approach, where certain collectors are assigned to accounts
based on their delinquency status. The delinquency bucket segmentation approach
allows us to assign our more experienced collectors to the late stage delinquent
accounts. In addition, the collections department also focuses on collecting
delinquent late fees, property taxes, and other outstanding amounts due under
the customer’s contracts.
Access to Multiple Funding Sources. We have established and maintained diversified
funding sources, with a facility sponsored by a national credit provider and
with our wholly-owned subsidiary, MBB. MBB is currently our primary funding
source through the issuance of fixed and variable rate FDIC-insured deposits
raised nationally through various deposit brokers and direct deposit relationships.
