Capital, LLC is a thriving group of Financial Service Companies which
in Salt Lake City, Utah. Founded in 2002, NBF Capital LLC strives to
meet the financing needs of multiple constituencies across numerous
333 North 300 West
Salt Lake City, UT 84103-1215
801-453-8030 - Office
801-453-8031 - Fax
- Toll Free
Payments to NBF Capital, LLC
P.O. Box 4046
Salt Lake City, UT 84110-4046
NBF Capital, LLC
Small Ticket Leasing Strategy
Sub-Prime Residential Mortgage Loan Strategy
Sub-Prime Mortgage Products
Summary of NBF CApital, LLC.
HISTORY OF NBF CAPITAL, LLC
AND BUSINESS STRATEGIES
Ownership and Original Strategy
NBF Capital, LLC dba National Business Finance (NBF) was formed in March
2002 in Salt Lake City, Utah. The company was established to take advantage
of the opportunities in equipment financing that came into existence
as a result of several lending organizations leaving the leasing industry.
Since 1999, the number of equipment leasing companies has sharply declined
due to heavy losses associated with poor portfolio performance and a
lackluster economy in specific industries such as transportation and
construction. These industries experienced high delinquency, erosion
of collateral values, and lessee operating losses. Companies such as
The Associates (now Citicapital), GreenTree Financial, Newcourt Financial,
Soris Financial and others, experienced tremendous losses in their transportation
portfolios largely due to unsound credit practices employed during the
late 1990s in efforts to boost market share. For example, The Associates,
the perennial market leader in the transportation industry, financed
first-time owner/operator truck drivers with as little as 5% down on
new equipment with significant curb-side depreciation and F.E.T. To
remain competitive, other lessors followed suit. When the economy softened,
independent truck drivers lost their haul sources and could not make
their equipment payments. The result was a huge repossession rate, which
further eroded the value of used equipment.
NBF employs solid lending strategies designed
to create and maintain a performing portfolio even during the weakest
economic periods. Specifically, NBF's policy is to fund only those borrowers
that have the ability to repay based on their industry experience and
the strength and viability of their current employment arrangement.
Furthermore, NBF structures and prices transactions appropriately to
manage the overall risk.
Presently, there are far more sub-prime transactions
available than there are dollars to fund them. As a result, NBF is able
to “pick and choose” the transactions to include in the
portfolio. To date about one transaction in ten applications is funded.
Additionally, the pure supply-and-demand aspects of this type of financing
enable NBF to command a premium when including a particular transaction
in the portfolio. If a customer cannot accept the approved terms, there
are plenty of others that will. Despite the high rates on the portfolio
(typically 25% plus), NBF structures transactions that result in payments
that can be made by the borrowers in the normal course of their business.
It would not make good business sense to price and structure transactions
that were overly burdensome for borrowers.
The flow of business into the NBF portfolio is
originated through established vendors, construction and trucking companies,
and repeat customers.
When NBF receives a financing request, they perform exhaustive research
and analytical measures. No customer is approved for financing that
has not been contacted personally, and in detail by one of the NBF principals.
Quite often these borrowers have “stories” to tell regarding
personal credit and other factors that are evaluated by the NBF officers.
Once the borrower has been fully scrutinized,
the collateral is evaluated to validate condition and value. Due to
the high curb-side depreciation associated with new equipment and the
Federal Excise Tax assessed on new class-8 tractors & trailers,
NBF prefers to finance used equipment. The equipment will not be specialized,
but will have a ready market should repossession become necessary. In
addition to the equipment to be financed, NBF always asks for additional
collateral when conditions warrant. Collateral risk is also offset by
vendor recourse whenever possible. This greatly assists the remarketing
of the collateral, if necessary, but also helps to minimize losses in
The key to the NBF portfolio is its exit strategy
and the ability to manage risk. NBF has a letter agreement with Kenworth
Sales Co. of Salt Lake City and Utility Trailer Co.'s Salt Lake City
branch to help refurbish and remarket or repurchase equipment that has
NBF now employs 15 professionals as shown on
the attached organization chart. Each member of the organization has
many years of leasing and equipment financing experience.
Other NBF Business Strategies
The principals of NBF recognize the danger of
having all of their “eggs in one basket”. Therefore, the
sub-prime trucking and transportation portfolio is only one of several
strategies in the business model. In addition to servicing their own
commercial portfolio, NBF brokers transactions for an up-front fee to
other large funding sources such as GE Capital, Zions Bank, and others
with whom they have established working relationships. A third part
of the business model relates to taking on the role of lessee advisor
with large-ticket, complicated transactions. The fourth strategy included
in the business model is to provide small ticket leasing services to
community banks. The fifth strategy is to provide sub-prime and other
niche mortgage products that are usually provided by brokers to these
same community bank customers.
Small Ticket Leasing
After the failed merger of First Security Bank
and Zions Bank in 2000 and the subsequent acquisition of First Security
Bank by Wells Fargo Bank, First Security's small ticket leasing portfolio
was sold. First Security successfully operated the small-ticket business
within First Security's community bank system for years under the "Handi
Lease" moniker. Although the Handi Lease program has been discontinued,
there remained a large under-served market.
NBF has established a small-ticket leasing program
for community banks in Utah. NBF services the transactions on behalf
of the community banks. The community banks may chose to either sell
the transactions to NBF for a fee or to participate in the transactions.
In today's demanding market, more than seventy-five percent of U.S.
company's choose leasing as their method of acquiring equipment. Over
one-third of all equipment purchased in the past years have been acquired
Some of the reasons the popularity of leasing
is accelerating at such a fast pace is due to the fact that leasing:
• Conserves cash reserves - Leasing permits 100% financing with
no down payment, so you get the equipment you need without a major cash
outlay. You can also cover the costs associated with delivery, installation,
maintenance, training and other “soft costs”. Customized
lease programs are often developed to include everything required in
getting the equipment operational, productive and generating revenue.
• Low Cost option – Through the combination of tax benefits,
and other lease structures, leasing can be the lowest cost financing
• Preserves lines of credit - Many leases can be accomplished
without impact to other credit availability, thereby preserving much
needed credit availability and liquidity.
• Provides tax benefits - Equipment purchases made with cash or
credit lines are made with after tax dollars. Some Leasing structures
allow businesses to classify lease payments pre-tax business and operating
expenses, which are 100% tax deductible.
• Provides obsolescence protection – Leasing can provide
a cost effective method for upgrading and retooling equipment that has
outlived its initial advantages or is unable to feed growing production
or service demands. Programs can be easily structured to eliminate the
hassle of selling used equipment at severely depreciated values in the
continual effort to modernize and upgrade.
• Provides flexible payment plans - Leasing, you can arrange long,
flexible terms with low monthly payments. Leases can accommodate seasonal
payment structures and
• Provides the latest technology - using leasing you can build
in programs for technology upgrades and replacement of outdated equipment.
• Allows the equipment to pay for itself – With leasing
you don’t begin paying for the equipment until it is delivered
and begins working.
• Protects against rising interest with fixed rates – Most
lease payments are fixed, not adjustable - you don't have to worry about
floating interest rates.
• Offers fast and convenient funding – Most of the time
leases can be approved and funded in days.
Sub-Prime Residential Mortgage Loan Strategy
Another NBF strategy is to provide niche products
to community banks. After the small-ticket leasing product was successfully
rolled out in early 2004, interactions with community banks identified
another niche product where assistance is necessary to avoid loss of
customers to larger banks. One of the products most desired is a sub-prime
residential mortgage product. Most large banks have sub-prime programs
within their product mix or have correspondent relationships with national
sub-prime sources. Many community banks lack sufficient sub-prime volume
to warrant the commitment of resources to a correspondent relationship
or to focus on these transactions. Such mortgages have previously been
referred to various brokers directly by loan officers with varying degrees
of success and confidence. Such policies concerning sub-prime mortgages
may lead to predatory lending issues due to the involvement of some
unscrupulous sub-prime brokers. NBF has established itself as a Flow
Lender (a step above the broker level) for Argent Mortgage, one of the
largest and most efficient sub-prime sources in the United States. As
a Flow Lender, NBF can partner with loan officers to reduce processing
time and be more responsive to borrower needs than could a broker. The
result would allow the our partners to better serve customers and to
improve the efficiency and profitability when dealing with sub-prime
In our discussions with community banks, sub-prime
mortgages arise from applications that look like 'A' loans at first
but issues are discovered during processing that drop them into sub-prime
status or applications that have been approved as 'A' credits subject
to construction of the house that later deteriorate during the construction
period. These situations create problems with the construction loan
take-out commitment, and unless a sub-prime commitment can be obtained,
the construction loan must be classified, and the mortgage loan would
have to be held in portfolio.
Most of the community banks have sub-prime volume
that runs to about 10% of their total mortgage volume. Since few have
correspondent relationships with sub-prime lenders (the volume for each
lender being insufficient to warrant it), they lose many potential customers
with sub-prime credit status before the application simply because the
loan officer realizes the loan would need to be brokered and may refer
the borrower directly to a sub-prime broker to avoid the hassle factor.
NBF believes that an efficient sub-prime source could add to total loan
volume because loan officers would not be as inclined to refer inquiries
that are suspected to be sub-prime. In addition, many sub-prime borrowers
can repair the issues that caused their sub-prime status within 24 to
36 months, making them ideal refinance candidates down the road. More
importantly, satisfying the sub-prime borrowers' needs builds customer
NBF hired Brad Vernon, a loan originator with
over 10 years of experience in mortgage banking and over 30 years of
total professional experience in the financial and accounting fields
(Brad is also a CPA) to head up the sub-prime mortgage lending effort.
NBF Sub-Prime Mortgage Products
NBF offers three basic product types:
1. Fixed Rate; 30, 20 and 15 year fully-amortizing
2. 2-Year Fixed/Adjustable; LIBOR indexed, 2% initial maximum cap, 1%
subsequent maximum cap every 6 months, 6% lifetime cap
3. 3-Year Fixed/Adjustable; Caps and indexes identical to 2-year above.
Terms for the three product types are flexible
based on credit and LTV. They fit into the following five programs:
1. "A" Credit Program, Middle Credit Score over 680
2. Non-Prime program, middle credit score 500
3. Highest Credit Score Program, based on highest
of tri-merged credit score,
500 to 680.
4. 100% Program, Middle Credit Scores 600 + for
full doc, 680 + for stated
5. 80/20 Program, Middle Credit Scores 600 +
for full doc, 620 + for stated
Other factors affecting eligibility and pricing
for each program include:
1. Mortgage History or Rating/Foreclosure History
2. Debt Ratio and Gross Disposable Income
3. Credit History/Bankruptcy
4. Property Type
5. Occupancy Type
6. Documentation Standards
7. Credit Evaluation
8. Property Marketability
9. State Limitations
NBF Capital, LLC will process, submit to underwriting and close the
loans after "handoff" from the loan officers. NBF will not
attempt to directly solicit additional mortgage business from the borrowers
after the loan has closed, thus leaving control of the customer in the
hands of the originating loan officer.
NBF can provide a wide range of options with
rates and terms with the following information:
1. Fax of 1003
2. Fax of Credit Report or Credit Report Summary
3. Fax of Appraisal (if completed)
4. Fax of Title Commitment (if completed)
If the rates and terms are acceptable, then underwriting
can be done in 24 to 36 hours after assignment of the complete file.
1. NBF has identified a currently underserved
small ticket equipment leasing and a sub-prime residential mortgage
2. NBF is already a profitable player in equipment
leasing markets and can provide the expertise for these niche services
to our partners to better serve these markets and thus better maintain
3. NBF is not a threat to capture the customer
4. NBF can provide better access to sub-prime
mortgage products for the community banks.