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TRENDSINEQUIPMENTLEASING&FINANCEPatriciaVoorheesLendItConferenceMarch7,2017

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TheEquipmentFinanceMarket–Size,TrendsandHowIt’sDifferentFromtheSMBLoanMarket

ChangingEquipmentBuyingPaVernsTheIntegratedPOSFinancingOpportunity

SuperiorEquipmentLeasingAssetPerformanceandWhyIt’sanOpportunityForFintechs

What’sNext?-FintechOpportuni\esinEquipmentFinance

AGENDA

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Sources:EquipmentLeasing&FinanceFounda\on:2009-2015A,2016-2017EStateoftheEquipmentFinanceIndustryReport(Keybridge,LLC)TermEquipmentLeasing&FinancebasedonCompe\\veIndustryAnalysisofTheAltaGroup

$180 $197 $240 $270 $277 $269 $270 $272 $275 $281

$467 $396 $449

$533 $599 $677

$776 $777 $776 $792

$436 $578

$602

$601 $566

$579 $538 $578 $621 $633

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

2009A 2010A 2011A 2012A 2013A 2014A 2015A 2016F 2017F 2018E

Tot. Non-Financed Investment Equip. & Software (09A-15E 6.5% AACGR)

Non Leased Vol. Financed (09A-15E 8.3% AACGR)

Term Equip. Leasing & Fin. Vol. (09A-15E 7.6% AACGR)

6.5%

2.1% $1,705

$1,083

$1,584

The U.S. Equipment Market Size - $1.7T

Cashpurchases

Financedwithcreditcard,WC,lines

Termleasesandloans

•  EnormousU.S.EquipmentMarketEs4mated$1.7T

•  Tradi4onalbank/cap4veandindependentlessorsfinancing16%or$275Bofpurchases

•  Tremendousopportunitytopenetratecash,CCandWCpurchaseswithtechnologyenabledleaseoffering

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•  Resultsofasurveyofexis4ngELFA(EquipmentLeasingAndFinanceAssocia4on)members

•  Leasingasapreferredmethodmorethandoubled2012-2016

•  Significantdecreaseinuseofcashorworkingcapitallinestofundequipmentpurchases

Preferred Methods Of Financing

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Why Is Equipment Leasing Different From The SMB Loan Market?

•  Equipmentleasingassetsconsistentlyoutperformotherassetclasses•  Advantagedriskperformanceduetoessen\alusenature•  Lowercostofcapitalforexperiencedlessorsvs.SMBloanproviders

StrongAssetPerformance

• Matchingcapitalflow(vendorfunding)withequipmentdelivery•  AssetspecificUCCfilings•  Propertytaximplica\ons/filings•  Vendordatarequirementsapprovals,assetperformanceaging

Opera>onalConsidera>ons

•  Vendor,financesourceandequipmentbuyer•  Equipmentbuyerswantintegratedflexiblefinancing•  Vendor’sinterestistou\lizefinancingasatooltoincreasesalesandcustomerreten\on

3PartyTransac>ons

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Examples Of Fintech And Technology Enable TradiQonal Lessors

Fintech Example Companies Technology Enable TradiQonal Lessors

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•  TrendsofImprovedEquipmentSalesandDesiretoFinanceWillBenefitLessors

•  CustomerDesireForIntegratedSolu4onsWillFavorFintech,technologyenabledsolu4ons

Source: EquipmentLeasing&FinanceFounda\on:2017

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23.4%

29.2%

37.0%

10.3%

VendorProgramOriginated

Cap\veProgramOriginated

OriginatedDirectly

Third-PartySourcedVolume

�  Combinedorigina\onthroughVendor/Cap\vechannelsrosefrom47%to53%�  Mostoforigina\onmigra\onmovementtoCap\vefromDirectOrigina\on�  Financingdecisionmadenearer\meofequipmentselec\on�  Increasedcustomerdesireforfinancingsolu\onsIntegratedatPOS&mobilesolu\ons

Changing Equipment Financing Decisions – Closer To POS And Mobile

2015LeaseOrigina>onBySource

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PerformedBeLerthanOtherABSAssetClasses

OutperformedtheStockMarket,

CorporateBondsandRealEstate

USSmall-Ticket:TotalDelinquenciesvs.Three-Monthand12-MonthAverages

Equipment Leasing ABS Outperforms Other Asset Classes

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TheSMBloanandleasemarkethasbeenunderservedbybanks,openingupopportuni4esforFintechstoenter

►  Equipmentbackedsecuri\za\ontransac\onshaveperformedextremelywelloverthecyclesinthelast20years,secondonlytoUSTreasuries

►  TechnologyanddatadrivenFintechshaveintroducedabroaderspectrumoffundingsourcesviaautomatedmarketplaces,includingaccreditedinvestorsandotherfunds,toop\mizecostoffundsandincreasebalancesheetresiliency

►  SomeFintechshaveenoughscalenowtoaccessthesecuri\za\onmarketsuchasOnDeck….s\llnoexampleofpureplayequipmentleasingFintechwithapublicorprivatesecuri\za\on

►  OverallcostoffundshigherforFintechssuchasOnDeckbasedonloanproducttype,lossesandlackofperformancedatathroughcycles(OnDeckcostoffunds5.8%-Independentlessorwith$350MMorgreaterannualorigina\ons~2%)

►  Duetotheessen\alusenatureofequipmentandtheresultantlowlossprofile,ins\tu\onalinvestorsareaVractedtoequipmentbackedsecuri\za\ons…opportunityforFintechLessorsachievingscaletoleveageaVrac\vecostoffunds

Fintech Funding Opportunity

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Relentlessly evolving customer needs and expectations along with disruptive

technologies are transforming the industry landscape….. laggard incumbents will

disappear but the nimble will prosper

TRENDS ACCELERATING INNOVATION IN ASSET FINANCE

Move from Ownership to usage: Increased focus

on ‘asset as a service’ with IoT enabling the

tracking, management and usage of the asset

Move from traditional leases/ loans to managed

solutions: Increased demand for integrated services –

Asset + Warranty/Maintenance/ Insurance

Shift towards online and self-service: Mobility/

digital on the front end is changing the way buying

(of asset) happens and the it is financed

MSTs will make up

more than 20% of

industry volumes over

the next 3 to 5 years2

Approximately 35

million drivers will

use car sharing

services by 20211

For 30% companies,

dealer & vendor

portal is one of the

top 3 key IT initiative3

Source: 1. BCG Analysis; 2. ELFA 2016 Presentation; 3. Business Technology Performance Index 2015/2016

What’s Next – Financing Product EvoluQon

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Summary - Fintech Equipment Leasing Opportunity

HugeMarket

BuyingTrendsFavorFintechSolu\ons

SuperiorAssetPerformance

•  $1.7TU.S.equipmentandsopwaremarket•  Enormousopportunitytopenetratecurrent

cashsalesandcreditcardandworkingcapitalpurchasestotaling$1.4T

•  Financingdecisionsincreasinglyintegratedatpointofsale

•  EmergingTechnologies,ar\ficialintelligence,Blockchainhavepoten\altostreamlineopera\onsbetweenfinancesourcesandvendorsenhancethecustomerexperienceands\ckiness

•  EquipmentABS(asset-backedsecuri\es),performsbeVerthananyassetclassbutU.S.Treasuries

•  OpportunityforFintechproviderswithperformancehistoryandscaletoaccesscostoffundssignificantlylowerthanSMBloanproviders

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How We Can Help ?

Consul>ngServicesTailoredtoFintech-EquipmentFinance•  StrategicManagementConsul>ng

•  Marketassessments•  Alliances-buildorbuy•  Private-labelpartnerships

•  Merger&Acquisi>onAdvisory•  Capitalraising•  Duediligence•  Businessvalua\ons

•  DigitalBusinessAdvisory•  Assessment,benchmarking,introduc\ons•  Plaqormrecommenda\ons•  Financialins\tu\onpartnering•  Point-of-salesolu\ons

Resources

Downloadcompletepresenta\onhVp://thealtagroup.com/fintech-services/Contact:PatriciaVoorhees,DirectorTheAltaGrouppvoorhees@thealtagroup.comMobile/Text:203.770.3084TwiVer@pmvoorheesTwiVer@thealtagroupllc

MemberoftheEquipmentLeasingandFinanceAssocia\on(ELFAonline.org)Co-founderofCommercialEquipmentMarketplaceCouncil(CEMCouncil.com)