At a Glance
- A Secured Research survey found that 35% of middle market equipment finance firms carry at least three client relationships where fully loaded servicing costs exceed margin contribution.
- Relationship managers rarely recommend terminating a client because their compensation structure, career incentives, and emotional investment all point toward retention regardless of profitability.
- The true cost of an unprofitable relationship extends beyond negative margin—it includes the opportunity cost of RM time, credit committee bandwidth, and operational resources consumed by high-maintenance, low-return accounts.
- Firms that conduct disciplined annual portfolio triage and exit their bottom-performing relationships consistently redeploy those resources into origination that produces 3–4x the margin contribution within 18 months.
The Relationship Nobody Will Name
Every middle market equipment finance leader knows the account. It was a marquee relationship once—a cornerstone of the portfolio during a growth phase, a name that appeared in board presentations and investor materials. The CFO had the CEO’s direct line. The annual reviews were dinners at the kind of restaurant that requires a jacket.
That was seven years ago. Today, the client’s equipment needs have shifted. Their credit profile has compressed. They renegotiate every renewal with three competing term sheets in hand, extracting pricing concessions that push the relationship below the firm’s cost of capital on a fully loaded basis. The relationship manager spends 15 hours per month managing requests, resolving operational issues, and attending quarterly reviews that produce no incremental business. Nobody in the organization will say what everyone already knows: this relationship should end.
