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Lending & Credit Risk Equipment Finance

Beyond CRE and traditional C&I: Equipment leasing as a new engine for growth

Kate Randazzo
December 10, 2025
0 min read

How equipment financing compares with CRE and C&I as a growth strategy 

Financial institutions are perpetually pushed to imagine new markets and strategies for growth. One increasingly viable and resilient path is equipment leasing—a sector gaining traction amid economic uncertainty, technological transformation, and changing customer demands.

A compelling opportunity for growth

For banks and credit unions recalibrating portfolios or contending with margin compression, equipment leasing offers a compelling opportunity: consistent demand, diversified exposure, and high-utility assets that retain value across cycles. With capital spending shifting toward automation, infrastructure, and healthcare, leasing has emerged not only as a secondary offering but also as a primary growth lever for many institutions.

While CRE lending has rebounded in recent months, debt distress hasn’t gone away. CRE loan delinquencies at banks remain close to their highest level since 2014. According to CRE Daily, about 1.56% of loans are at least 30 days late. Among the 100 largest banks, that rate jumps to 1.86%. Many financial institutions are working to reduce concentration by diversifying their balance sheets and moving away from reliance on property valuations and market-sensitive real estate lending.

While valuation marks on CRE loans have improved in 2025, they remain vulnerable to interest rate volatility and structural risks such as office oversupply. According to an Abrigo report, CRE valuation discounts narrowed from 4.22% at year-end 2023 to 2.61% in Q2 2025, but the yield mark is still driven by legacy loans repricing slowly amid elevated market discount rates.

At the same time, some banks are struggling to scale their commercial and industrial (C&I) books, citing relationship inertia and a lack of internal sales infrastructure as limiting organic growth. Businesses rarely change providers, making it difficult for banks to meaningfully grow C&I lending without a competitive edge or specialized strategy.

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Equipment finance: A timely alternative

These headwinds have sparked renewed interest in equipment leasing as a scalable, asset-backed lending opportunity for banks seeking to responsibly expand their balance sheets. Viewed as a natural extension of C&I lending, but with stronger collateralization and predictable yields, equipment leasing is emerging as a lower-risk, high-yield growth channel.

The numbers reinforce the shift. According to the 2025 Monitor 101+ Report, independent leasing firms experienced a 7.6% year-over-year increase in assets, with standout firms such as MMP Capital and Regents Capital growing by 82% and 61.6%, respectively.

In terms of new business volume, equipment leasing showed resilience despite broader market slowdowns. While originations dipped slightly overall, 13 of the 25 Monitor 101+ firms increased their volume, including firms such as MidCap Equipment Finance, which grew by 17.4% year-over-year. An ELFA report reveals that construction, machine tools, and medical equipment lead the equipment leasing rankings, supported by investments in infrastructure and healthcare. Construction equipment holds the top spot for the 12th straight year, driven by federal infrastructure projects.

These sectors aren’t just growing—they’re durable. As Peggy Tomcheck of Aspen Capital noted in a Monitor 101+ Executive Roundtable, demand for flexible leasing solutions, especially usage-based models, is accelerating as borrowers seek agility and consistency in their capital allocation.

What makes equipment leasing attractive?

Three trends make equipment leasing particularly compelling now:

  1. Yield and security
    Leasing offers higher yields than many traditional commercial loans while benefiting from physical asset backing. In a risk-conscious lending environment, the ability to structure secured deals with predictable cash flows is a major advantage.
  2. Diversification with growth
    Equipment finance diversifies the loan portfolio beyond CRE and general C&I. Infrastructure, healthcare, and automation are driving asset demand, giving institutions access to sectors with long-term capital needs and stable returns.
  3. Operational efficiency and tech-driven growth
    According to McKinsey’s Global Banking Annual Review 2025, the next era of bank performance will be won not by scale, but by precision. Equipment finance lends itself well to this mindset—institutions can deploy micro-level balance sheet strategies while using automation and analytics to drive profitable growth.

Strategy and systems for tactical equipment financing

To capitalize on the equipment leasing opportunity, banks and credit unions will need to plan ahead. Leaders in the space recommend implementing automated tools for streamlined underwriting as a key competitive differentiator.

Specialized lease management software can improve workflows around invoicing, depreciation, and reporting. For example, IFS LeaseWorks provides an end-to-end platform for managing complex leases, and includes:

  • Variable-rate billing and usage tracking 
  • Tax-advantaged lease structures and bonus depreciation options 
  • Advanced reporting for investors, tax partners, and regulatory needs 

Along with evaluating systems that support lease origination, tracking, and servicing, institutions entering this market should also:

  • Assess portfolio gaps and CRE/C&I concentrations
  • Invest in education to close internal knowledge gaps around equipment finance
  • Build advisory capabilities to offer consultative, usage-based structures

As financial institutions face increasing pressure from margin compression, regulatory complexity, and competition, equipment leasing stands out as a viable approach to responsibly grow while maintaining credit discipline.

 

This article was was written with the assistance of ChatGPT, an AI large language model, and was reviewed and revised by Abrigo's subject-matter expert.

See how IFS LeaseWorks streamlines origination, servicing, and reporting for energy-heavy equipment portfolios.

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About the Author

Kate Randazzo

Content Marketing Manager
Kate Randazzo is a Content Marketing Manager at Abrigo, where she works with industry thought leaders to create digital content that helps financial institutions better serve their customers. Before joining Abrigo, Kate managed social media and produced articles for Campbell University’s quarterly magazine and other university content initiatives. She earned

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Abrigo enables U.S. financial institutions to support their communities through technology that fights financial crime, grows loans and deposits, and optimizes risk. Abrigo's platform centralizes the institution's data, creates a digital user experience, ensures compliance, and delivers efficiency for scale and profitable growth.

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