GRANITE FINANCIAL INC, SB-2/A, 1997-06-23

GRANITE FINANCIAL INC
SB-2/A, 1997-06-23
EQUIPMENT RENTAL & LEASING, NEC

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 23, 1997.

REGISTRATION NO. 333-29303.

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------

AMENDMENT NO. 1

FORM SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
---------------------
GRANITE FINANCIAL, INC.
(Name of small business issuer in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 6153 84-1349929
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code) Identification No.)
WILLIAM W. WEHNER
6424 WEST 91ST AVENUE 6424 WEST 91ST AVENUE
WESTMINSTER, COLORADO 80030 WESTMINSTER, COLORADO 80030
TELEPHONE: (303) 650-4059 TELEPHONE: (303) 650-4059
(Address and telephone number of principal executive (Name, address and telephone number
offices and principal place of business) of agent for service)
Copies to:

ROBERT W. WALTER, ESQ. STEVEN E. SEGAL, ESQ. NOLAN S. TAYLOR, ESQ.
DAVID C. ROOS, ESQ. LEBOEUF, LAMB, GREENE THOMAS R. TAYLOR, ESQ.
CURT R. FOUST, ESQ. & MACRAE, L.L.P. LEBOEUF, LAMB, GREENE
BERLINER ZISSER WALTER & GALLEGOS, SUITE 2000 & MACRAE, L.L.P.
P.C.
1700 LINCOLN STREET, SUITE 4700 633 SEVENTEENTH STREET 136 SOUTH MAIN STREET, SUITE 1000
DENVER, COLORADO 80203 DENVER, COLORADO 80202 SALT LAKE CITY, UTAH 84101
TELEPHONE: (303) 830-1700 TELEPHONE: (303) 291-2600 TELEPHONE: (801) 320-6700
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the Registration Statement becomes effective.

If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the
Securities Act, please check the following box and list the Securities Act
registration statement number
of the earlier effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check
the following box and list the Securities Act registration statement number of
the earlier effective
registration statement for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED UNIT(1) PRICE(1) FEE
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<S> <C> <C> <C> <C>
Common Stock................................. 2,415,000(2) $ 9.50 $22,942,500 $6,952.27
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Underwriters' Warrants for Common Stock...... 150,000 $ .001 $ 100 $ .03
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Common Stock underlying Underwriters'
Warrants(3)................................ 150,000 $11.88 $ 1,782,000 $ 540.00
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Total............................... $24,724,600 $7,492.30
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</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c).
(2) Includes 315,000 shares of Common Stock contained in the over-allotment
option.
(3) Pursuant to Rule 416, includes such indeterminate number of additional
shares of Common Stock as may be required for issuance upon exercise of the
Underwriters' Warrants as a result of any adjustment in the number of shares
of Common Stock issuable upon such exercise by reason of the anit-dilution
provisions of the Underwriters' Warrants.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

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<PAGE> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

PROSPECTUS SUBJECT TO COMPLETION, DATED JUNE 23, 1997

dated , 1997

2,100,000 SHARES

GRANITE FINANCIAL, INC.
[GRANITE FINANCIAL, INC. LOGO]

Common Stock

The shares of Common Stock offered hereby are being sold by Granite Financial,
Inc. (the "Company"). The Company's Common Stock trades on the Nasdaq National
Market under the symbol "GFNL." On June 20, 1997, the last reported sale price
of the Common Stock was $10.12 per share. See "Price Range of Common Stock."

SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share....................................... $ $ $
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Total(3)........................................ $ $ $
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</TABLE>

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. The Company has also agreed to issue to certain of the Underwriters
warrants to purchase 150,000 shares of Common Stock exercisable at
$ (125% of the Price to Public). See "Underwriting."

(2) Before deducting expenses payable by the Company estimated at $375,000.

(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an additional 315,000 shares of Common Stock solely to cover
over-allotments, if any, at the Price to Public shown above, less the
Underwriting Discount. If this option is exercised in full, the total Price
to Public, Underwriting Discount and Proceeds to Company will be
$ , $ , and $ , respectively. See "Underwriting."

The shares of Common Stock are offered by the Underwriters subject to prior sale
when, as, and if delivered and accepted by the Underwriters and subject to their
right to reject orders in whole or in part. It is expected that delivery of the
Common Stock will be made at the offices of Piper Jaffray Inc. in Minneapolis,
Minnesota or in book-entry form through the book-entry facilities of The
Depository Trust Company on or about , 1997.

PIPER JAFFRAY INC.

RAYMOND JAMES & ASSOCIATES, INC.

CRUTTENDEN ROTH
INCORPORATED
<PAGE> 3

[FOUR COLOR PICTURES TO COME]

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 103 OF REGULATION M UNDER THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED (THE "EXCHANGE ACT"). SEE "UNDERWRITING."

2
<PAGE> 4

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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and Consolidated Financial
Statements and the related Notes thereto appearing elsewhere in this Prospectus.
Except as otherwise indicated, all information in this Prospectus assumes that
the Underwriters' over-allotment option will not be exercised. Unless the
context indicates otherwise, all references herein to the "Company" refer to
Granite Financial, Inc., its limited liability company predecessor and its
subsidiaries. Industry data used in this Prospectus was obtained from industry
publications that the Company believes to be reliable, but has not been
independently verified. Each prospective investor is urged to read this
Prospectus in its entirety.

THE COMPANY

The Company is a finance company specializing in originating, funding,
acquiring, selling, securitizing and servicing non-cancelable, full-payout
equipment leases for a broad range of businesses located throughout the United
States. The Company's operations are primarily in the small-ticket segment of
the equipment leasing market, which encompasses leases of equipment with
original purchase prices of $100,000 or less. The average purchase price of
equipment leased by the Company's lessees is approximately $30,000 per lease.
Leases are originated through a network of approximately 50 independent lease
originators selected by the Company's experienced management team. The Company
is committed to providing the highest level of service to its lease originators
and is investing in advanced technology which will allow the Company to
electronically link each originator with the Company's systems and resources.
The Company also develops specialty lease finance programs in conjunction with
its lease originators that are designed to meet the particular financing
requirements of the business customer. Through providing superior customer
service and streamlining the lease application and funding process, the Company
seeks to position itself as a strategic partner with its lease originators.

The Company is currently implementing a consolidation strategy in the
small-ticket segment of the equipment leasing market. The Company believes a
favorable environment exists for acquisitions in this segment of the equipment
leasing market because of the highly fragmented nature of the industry, the
inability of a significant number of small equipment lease finance companies to
obtain more favorable financing rates available through the asset-backed
securities markets and the increased cost of new technologies that generally
cannot be afforded by smaller participants in the market. The Company's
consolidation strategy encompasses the purchase of other companies active in the
small-ticket segment of the equipment leasing market as well as independent
lease originators that may or may not currently conduct business with the
Company. Consistent with this consolidation strategy, the Company concluded the
acquisitions of Global Finance & Leasing, Inc. ("Global Finance") in March 1997
and SFR Funding, Inc. ("SFR Funding") in June 1997. Founded in 1989, Global
Finance specializes in providing equipment lease financing for point-of-sale
equipment which costs $2,000 or less per lease. SFR Funding was founded in 1988
and specializes in originating equipment leases, primarily for businesses in the
hospitality industry. The Company's consolidation strategy is designed to expand
its existing business and take advantage of its core competencies including,
among other things, its highly developed customer service program, use of
sophisticated technology to achieve efficiencies in the application,
underwriting and collection processes, development of close working
relationships with lease originators, knowledge of the equipment leasing market
and experienced management team.

The Company has experienced significant growth since its founding in
February 1995. The aggregate of lease payments under all leases financed by the
Company and either held as direct financing leases, or sold to third parties or
securitized, excluding leases funded by Global Finance (the "Gross Servicing
Portfolio") increased from $1.2 million at June 30, 1995 to $44.2 million at
June 30, 1996, and totalled $94.4 million at March 31, 1997. Total revenues
increased from $1.3 million in the period ended June 30, 1995 to $21.9 million
for fiscal 1996. For the first nine months of fiscal 1997, total revenues
increased 222.3% to $53.2 million from $16.5 million for the comparable period
of 1996, while pro forma net income increased 490.2% to $1.4 million from
$230,000 for the comparable period of 1996. The Company has also experienced
significant increases in lease applications, with its funding backlog increasing
from $2.9 million at June 30, 1995 to $12.9 million at

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3
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June 30, 1996. At March 31, 1997, the Company had a backlog of approved lease
applications of approximately $31.4 million that were subject to lessee
acceptance of the lease terms, equipment delivery and funding.

According to the Equipment Leasing Association and the International Trade
Administration, business equipment leased in the United States accounted for
approximately $168.9 billion of 1996 business investment in equipment, compared
to $85.0 billion in 1986. The Company estimates that the market for small-ticket
equipment with an original purchase price of $100,000 or less constitutes
between approximately 25.0% and 30.0%, or an estimated range of $42.3 billion to
$50.7 billion of equipment acquired under lease. The small-ticket equipment
leasing market has experienced growth in recent years because of several
factors, including (i) the decline in prices of computers and computer
peripherals and corresponding increases in demand for this equipment; (ii) the
adoption of accounting pronouncements concerning the consolidation of earnings
of manufacturers and captive finance company subsidiaries, which has resulted in
an increased demand for independent financing such as that provided by the
Company; (iii) the consolidation of the banking industry; (iv) stricter lending
requirements of commercial banks; and (v) reductions in the cost of funds for
independent finance companies such as the Company through access to the
asset-backed securities market and other sources of lower cost capital.

The Company derives its earnings primarily from gains recognized on the
securitization or sale of leases. The Company has completed three securitization
transactions to date under which a special purpose subsidiary of the Company
sells lease-backed notes or certificates to institutional investors. In each
securitization, the Company receives advances based on a percentage which is
less than the aggregate present value of cash flows from an undifferentiated
pool of leases, effectively overcollateralizing the lease-backed notes or
certificates. Over the life of the lease pool securitized, the Company is
eligible to receive the excess cash flow (the "securitization residual
interest") resulting from the difference between the lease payments received,
net of defaults, and the payment of (i) principal and interest to investors in
lease-backed notes or certificates and (ii) servicing, backup servicing and
trustee fees and other securitization expenses. Payments due under the
lease-backed securities issued in each of the Company's securitizations have
been insured by a financial guaranty issued by MBIA Insurance Corporation and
have been rated AAA by Standard & Poor's Ratings Group and Aaa by Moody's
Investors Service. In the nine months ended March 31, 1997, the sales of leases
disposed of through securitization transactions represented 62.4% of the
Company's total revenues. The Company anticipates that sales of leases through
securitization transactions will comprise a significant portion of the Company's
revenues in future periods. Following securitization or sale of leases, the
Company services leases, for which it also receives monthly servicing fees.

The Company's objective is to become a leading provider of business
equipment lease financing in the small-ticket segment of the equipment leasing
market. The principal components of the Company's strategy for achieving this
objective are to (i) undertake additional strategic acquisitions in order to
accelerate growth, leverage operating efficiencies and increase funding volume;
(ii) expand the Company's existing business through a variety of means,
including implementing new marketing initiatives, establishing strategic
alliances with select equipment vendors, and entering the business-to-business
("e-commerce") market through an Internet Web site now under development; (iii)
maintain and enhance the Company's relationship with its network of select
independent lease originators through continuing strong customer service,
developing additional specialty leasing programs and implementing new
interactive technologies designed to maximize efficiencies in the lease
application, underwriting, approval, servicing and collection functions; (iv)
reduce and control the Company's cost of capital by conducting additional
securitization transactions and through the establishment and maintenance of
relationships with a diverse group of funding sources; and (v) utilize
sophisticated data processing systems and stringent internal controls to monitor
and maintain the application of consistent underwriting criteria throughout the
lease application process.

The Company was incorporated as a Delaware corporation in June 1996. The
Company's offices are located at 6424 West 91st Avenue, Westminster, Colorado
80030, and its telephone number is (303) 650-4059.

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4
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THE OFFERING

Common Stock offered by the
Company.................. 2,100,000 shares

Common Stock to be
outstanding after this
offering................. 5,825,000 shares(1)

Use of proceeds............ To consummate acquisitions, to support
securitization transactions, to implement
computer system upgrades and interactive
technology to further expand the Company's
business, for other working capital needs and for
general corporate purposes. Pending application,
net proceeds will be used to temporarily reduce
indebtedness. See "Use of Proceeds."

Nasdaq National Market
symbol................... GFNL
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(1) Excludes 560,000 shares of Common Stock issuable upon the exercise of
options and warrants outstanding at June 21, 1997. See "Management -- Option
Plan" and "Description of Capital Stock."

SUMMARY CONSOLIDATED FINANCIAL INFORMATION

<TABLE>
<CAPTION>
NINE MONTHS
ENDED MARCH 31 FISCAL YEAR FEBRUARY 21, 1995
------------------ ENDED (INCEPTION) TO
1997 1996 JUNE 30, 1996 JUNE 30, 1995
------- ------- ------------- -----------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1):
Sales of leases............................. $50,308 $16,380 $20,638 $ 1,261
Income from direct financing leases......... 2,918 135 1,224 7
------- ------- ------------- -------
Total revenues.............................. 53,226 16,515 21,862 1,268
Cost of leases sold......................... 46,876 15,296 19,297 1,172
Provision for credit losses................. 443 46 95 28
Interest expense............................ 1,377 16 551 --
Securitization expenses and amortization.... 257 -- -- --
------- ------- ------------- -------
Total costs................................. 48,953 15,358 19,943 1,200
Gross profit................................ 4,273 1,157 1,919 68
Other expenses.............................. 1,935 792 1,156 246
Pro forma income taxes(2)................... 983 135 282 --
------- ------- ------------- -------
Pro forma net income (loss)................. $ 1,355 $ 230 $ 481 $ (178)
======= ======= ========== =============
Pro forma earnings (loss) per share......... $ .44 $ .11 $ .24 $ (.09)
OTHER DATA(1):
Dollar amount of leases funded during
period................................... $49,692 $23,110 $35,169 $ 1,450
Number of leases funded during period (not
in thousands)............................ 1,962 920 1,381 64
Gross Servicing Portfolio(3)................ $94,444 $30,692 $44,163 $ 1,216
Number of leases serviced as of period ended
(not in thousands)....................... 3,305 979 1,443 63
Delinquencies as a percentage of Gross
Servicing Portfolio at end of
period(4)................................ 1.65% .97% 1.44% --
</TABLE>

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<TABLE>
<CAPTION>
MARCH 31, 1997
--------------------------
ACTUAL AS ADJUSTED(5)
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(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents......................................... $ 4,775 $ 14,007
Direct financing leases........................................... 11,194 11,194
Direct financing leases assigned to lender........................ 17,341 17,341
Securitization residual interest.................................. 6,107 6,107
Total assets...................................................... 45,495 54,727
Total liabilities................................................. 30,749 20,826
Stockholders' equity.............................................. 14,746 33,901
</TABLE>

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(1) Excludes information for Global Finance, which was acquired on March 31,
1997.

(2) Prior to the Company's initial public offering of Common Stock on October
25, 1996 (the "Initial Public Offering"), the Company was a limited
liability company and not subject to federal or state corporate income
taxes. On the date of the Initial Public Offering, the Company changed its
form of organization from a limited liability company to a C Corporation,
recorded deferred income taxes totalling approximately $100,000 and began
providing for federal and state corporate income taxes from that date. Pro
forma data includes adjustments for federal and state income taxes as if the
Company had been taxed as a C Corporation at a combined federal and state
tax rate of 37.0% for all periods presented. See Note 7 to Consolidated
Financial Statements.

(3) The Company's Gross Servicing Portfolio consists of aggregate lease payments
for all leases financed by the Company and either held as direct financing
leases, or sold to third parties or securitized, as of the end of the
indicated periods.

(4) Represents delinquencies of 31 or more days. The Company had no
delinquencies over 31 days at June 30, 1995.

(5) Adjusted to reflect the sale of 2,100,000 shares of Common Stock by the
Company at the assumed offering price of $10.00 per share and the
application of the estimated net proceeds therefrom, including repayments of
amounts outstanding under certain credit facilities of which a total of $9.9
million was outstanding at March 31, 1997. See "Use of Proceeds."

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6
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RISK FACTORS

In addition to the other information contained in this Prospectus, the
following risk factors should be considered carefully in evaluating the Company
and its business before purchasing shares of Common Stock offered hereby. This
Prospectus contains certain forward-looking statements that involve substantial
risks and uncertainties. When used in this Prospectus, the words "may," "will,"
"expect," "anticipate," "continue," "estimate," "project," "intend," "believe"
and similar expressions are intended to identify forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934 regarding events, conditions and
financial trends that may affect the Company's future plan of operations,
business strategy, operating results and financial position. Prospective
investors are cautioned that any forward-looking statements are not guarantees
of future performance and are subject to risks and uncertainties and that actual
results could differ materially from the results expressed in or implied by
these forward-looking statements as a result of various factors. Such factors
are described under the headings "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Business" and in the risk
factors set forth below.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity. The Company requires significant capital resources to fund new
equipment leases. In the nine months ended March 31, 1997, the Company's
liquidity was provided through the completion of the Initial Public Offering,
closing of two securitization transactions and establishment or assumption of
additional bank and other credit facilities. The Company's operating cash
requirements exceeded cash available from operations in the nine months ended
March 31, 1997 and fiscal 1996 as a result of the Company's rapid growth and
limited access to capital. Net cash used in operating activities in the nine
months ended March 31, 1997 and fiscal 1996 was $3.8 million and $7.0 million,
respectively. The Company's operating cash requirements include (a) funding of
equipment leases and interest expense on leases funded under bank and other
credit facilities, (b) fees and expenses incurred in connection with lease sales
and securitizations, including the cost of supporting each securitization
through overcollateralization of the amount funded, (c) tax payments and (d)
administrative and other operating expenses. The Company has obtained cash
required in operations through (a) lease sales and securitization transactions,
(b) bank and other credit facilities and warehouse financing arrangements under
which leases are financed on a temporary basis and (c) sales of equity to
affiliates of the Company upon formation of Granite Financial, LLC and in the
Initial Public Offering. At March 31, 1997, the Company had cash and cash
equivalents of approximately $4.8 million and unused borrowing capacity of $33.1
million under its bank credit facilities. The Company will continue to be
dependent on its ability to secure additional financing when and as needed, and
on terms acceptable to the Company, the unavailability of which could materially
adversely affect the Company's results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

Dependence on Warehouse Credit Line and Other Credit Facilities. In
February 1997, the Company established a $36.0 million warehouse credit line
("Warehouse Credit Line") with a bank syndicate led by CoreStates Bank, N.A.,
under which the Company borrows against leases held for sale or pending their
inclusion in securitization transactions. The Warehouse Credit Line expires in
February 1998, subject to extension for additional one-year periods upon the
Company's request but at the sole discretion of the lenders. The Company
maintains six other full recourse credit facilities aggregating $12.5 million,
of which $6.0 million is available for funding at various times through July
1997, $2.0 million is available under an unsecured revolving line of credit
which expires on or before January 1998, and $4.5 million is available under two
term loans and a line of credit assumed by the Company in connection with the
acquisition of Global Finance. The credit facilities assumed on closing of the
Global Finance acquisition are currently usable only by Global Finance and not
by Granite Financial, Inc. The Company will use $1.5 million of the net proceeds
of this offering to prepay a term loan assumed by the Company in the Global
Finance acquisition. See "Use of Proceeds." Two of the Company's bank credit
facilities aggregating $6.0 million expire in June and July 1997. Given the
Company's access to other credit facilities, the Company may elect not to renew
these facilities. The Company anticipates that it will maintain its existing
Warehouse Credit Line and certain of its other

7
<PAGE> 9

credit facilities. The Company will seek to obtain replacement or additional
financing as these and other arrangements expire or become fully utilized.
However, there can be no assurance such replacement or additional financing will
be obtainable on acceptable terms. To the extent the Company is unable to
maintain its existing credit facilities or to arrange new credit facilities with
sufficient borrowing capabilities, the Company may have to curtail lease funding
activities, which could have a material adverse effect on the Company's
financial condition and results of operations.

Dependence on Securitization Transactions. The Company depends on pooling
and selling leases in securitization transactions to repay its bank and other
credit facilities and to generate cash for funding of new leases. In the nine
months ended March 31, 1997, the Company completed two securitization
transactions under which lease-backed securities in the aggregate principal
amount of up to $92.5 million can be issued by the Company through grantor
trusts, and as to which $30.7 million had been issued at March 31, 1997. The
sales of leases disposed of through securitization transactions represented
approximately 62.4% of the Company's revenues in the nine months ended March 31,
1997 and is expected to comprise a significant portion of the Company's revenues
in future periods. Accordingly, the Company's results of operations may
fluctuate from quarter to quarter as a result of the timing and size of its
securitizations. The timing of any securitization transaction is affected by a
number of factors, some of which are beyond the Company's control, including
conditions in the securities markets generally, conditions in the asset-backed
securities markets specifically, the credit quality of the Company's lease
portfolio, availability of third-party credit enhancements, the ability of the
Company to adequately service its lease portfolio, and the absence of any
material down-grading or withdrawal of ratings given to securities previously
issued in the Company's securitizations. While the Company retains the right to
substitute performing leases for non-performing leases in each securitization,
subject to certain limitations, a significant increase in non-performing leases
as to which substitution is impractical or untimely may trigger acceleration of
repayment obligations of principal outstanding under lease-backed notes or
certificates, which would materially adversely affect the Company's receipt of
cash flows from the securitization residual interest. The amount of any gain on
sale through a securitization is based upon certain estimates, which may not
subsequently be realized. To the extent that actual cash flows on a
securitization are materially below estimates, the Company would be required to
revalue the securitization residual interest and record a charge to earnings
based upon the reduction. Because the securitization residual interest retained
by the Company bears the risk of loss on the entire portfolio of leases which
are securitized in a particular transaction, small fluctuations in charge-off
rates and other factors could have a material adverse effect on the Company's
ability to realize its recorded basis in the securitization residual interest.
Adverse changes in the market for securitized leases, or a substantial
lengthening of the warehousing period, would adversely impact the Company's
reported earnings, the funding available to the Company, could require the
Company to curtail its funding of new leases, and could have a material adverse
effect on the financial condition of the Company. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."

ECONOMIC CONSIDERATIONS

Fluctuations in Portfolio Performance. The Company specializes in funding
leases of equipment with a purchase price of $100,000 or less to commercial
businesses located throughout the United States. To date, a significant majority
of leases funded by the Company have related to equipment leased by small and
mid-size businesses. Although the Company conducts its own independent credit
investigation and maintains strict underwriting criteria, no assurance can be
given that such criteria will afford adequate protection against payment
delinquencies or charge-offs. Because the Company commenced operations in
February 1995, there is limited performance data available with respect to the
Company's Gross Servicing Portfolio and, consequently, historical delinquency
and charge-off statistics are not necessarily indicative of future performance.
As anticipated by the Company, the Company's statistical analysis indicates that
delinquencies and charge-offs have risen as a percentage of lease receivables as
leases in the Gross Servicing Portfolio have aged and become more seasoned. In
the event the Company's leases experience higher delinquencies or charge-offs
than anticipated, the Company's earnings could be negatively impacted. In
addition, increasing rates of delinquencies or charge-offs could result in
adverse changes in the structure of the Company's future securitization
transactions, such as increased interest rates on asset-backed notes or
certificates issued in such

8
<PAGE> 10

transactions, an increase in the Company's net investment in the securitization
residual interest or a reduction in the advance rate against leases included in
a securitization transaction. See "Business."

Risk of General Economic Downturn. The Company's business is directly
related to business investment in capital and other equipment, which is
influenced by a variety of factors including the implicit return on capital
invested, prevailing interest rates, availability of capital and other general
economic conditions. Although the Company believes that current economic
conditions favor continued growth in the markets it serves, a future economic
slowdown or recession could adversely affect the Company's ability to fund or
securitize leases. In addition, delinquencies and charge-offs could be expected
to rise in an adverse economic environment, which could also adversely impact
the Company's ability to sell or securitize leases which it funds or its ability
to recognize its basis in the securitization residual interest or in leases held
in its portfolio.

Interest Rate and Cost of Funds Risk. The Company's profitability is
determined by, among other things, the difference between the implicit lease
rate charged to lessees and the Company's cost of funds. The implicit lease
rates charged by the Company are based on interest rates prevailing in the
market at the time of lease approval. Until the Company sells or securitizes
leases, the Company generally funds the cost of the lease investment under its
variable rate bank credit facilities and from working capital. The Company's
operating margins could be adversely affected if interest rates increase prior
to the Company selling or securitizing leases or if the Company is unable to
securitize leases. Future increases in the Company's cost of funds could result
in the Company raising the implicit lease rate charged to its customers, which
could cause originators or customers to seek funding elsewhere. The Company has
sought to mitigate the risk of interest rate increases by attempting to match
funds required for lease financings with funds available through bank and other
credit facilities, securitization transactions and lease sales. Although the
Company may be able to dispose of leases through other securitization
transactions in the event interest rates decline, existing securitization
arrangements require the Company to securitize a minimum dollar amount of leases
on a periodic basis. The Company does not hedge against interest rate increases
using derivative securities or otherwise. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business."

REALIZATION OF SECURITIZATION RESIDUAL INTEREST

In each securitization transaction conducted to date, the Company receives
advances based on a percentage which is less than the aggregate present value of
cash flows from an undifferentiated pool of leases, effectively
overcollateralizing the lease-backed notes or certificates. Over the life of the
leases securitized, the Company is eligible to receive the excess cash flow (the
"securitization residual interest") resulting from the difference between the
lease payments received, net of defaults, and the payment of (i) principal and
interest to investors in lease-backed notes or certificates and (ii) servicing,
backup servicing and trustee fees and other securitization expenses. The cash
flows ultimately available from the securitization residual interest are largely
dependent upon the actual default rates experienced on leases securitized in a
particular pool. Because the securitization residual interest bears the risk of
loss on the entire portfolio of leases in a particular securitized pool, small
fluctuations in defaults could have a material adverse effect on the Company's
ability to realize its recorded basis in the securitization residual interest.
The sales of leases disposed of through securitization transactions represented
approximately 0% and 62.4% of the Company's revenues in fiscal 1996 and in the
nine months ended March 31, 1997, respectively, and is expected to comprise a
significant portion of the Company's revenues in future years. The Company's
cost of leases sold through securitizations have been calculated using estimates
concerning charge-offs, recoveries from liquidated equipment and other factors
that are consistent with both the Company's and industry experience and that the
Company believes is consistent with estimates that would be applied by unrelated
purchasers of similar streams of estimated cash flows. Although actual
charge-offs have been materially consistent with management's estimates to date,
the lack of seasoning of the Company's leases and rapid increases in leases
available for sale could result in future charges to earnings as a result of
actual charge-offs exceeding management's forecasts. Any such future charges
could cause the price of the Common Stock to decline, perhaps substantially. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

9
<PAGE> 11

RISKS ASSOCIATED WITH CONSOLIDATION STRATEGY

One of the Company's strategies for growth is to acquire other companies
that originate, fund, service and sell equipment leases. Although the Company
has discussed and continues to discuss possible acquisitions with a variety of
entities, to date the Company has acquired only two companies, Global Finance
and SFR Funding, and currently has no acquisition agreements, understandings or
commitments for any material acquisitions, either singly or in the aggregate.
There can be no assurance that the owners of other companies the Company desires
to acquire will be willing to sell them to the Company on reasonable terms, if
at all. Certain of the Company's competitors may also seek to acquire the same
companies which the Company seeks to acquire. This may increase the price and
related costs at which the Company could otherwise have acquired such companies,
perhaps materially. The Company's inability to complete acquisitions on
reasonable terms could adversely affect the Company's ability to grow its
business.

The Company anticipates that it may expend a material and undetermined
portion of the proceeds of this offering to pursue and consummate acquisitions.
Such use of proceeds may significantly shorten the period of time during which
the proceeds of this offering are expected to fund the Company's operations and
will reduce the Company's working capital to the extent the Company uses cash to
fund acquisitions. In addition, the Company may fund acquisitions in whole or
part by issuing equity securities, and any such issuances, individually or in
the aggregate, may be substantially dilutive to holders of the Common Stock.
Acquisitions also may result in the Company incurring additional debt and
amortizing costs related to goodwill and other intangible assets, either of
which could have a material adverse effect on the Company's results of
operations.

The Company may experience difficulties in assimilating the operations,
services and personnel of acquired companies and may be unable to sustain or
improve the historical revenue and earnings levels of acquired companies, any of
which may materially adversely affect the Company's operating results. In
addition, to the extent it becomes necessary for the Company to fund the working
capital requirements of acquired companies, the Company's working capital
available for its currently existing operations will decrease. Acquisitions
involve a number of additional risks, including the diversion of management's
attention from ongoing business operations and the potential loss of key
employees of acquired companies. There can be no assurance that the Company can
successfully implement its consolidation strategy. The failure to consummate
acquisitions on reasonable terms or the inability to successfully integrate and
manage acquired operations and personnel could have a material adverse impact on
the Company's business and results of operations. See "Business."

COMPETITION

The market for financing in the small-ticket segment of the equipment
leasing industry is highly competitive. The Company competes with a number of
national, regional and local finance companies. The Company also competes
against captive finance companies affiliated with major equipment manufacturers,
commercial banks, savings and loan associations, credit unions and conventional
leasing companies. Many of the Company's competitors, as well as potential
competitors, possess substantially greater financial, marketing, personnel and
other resources than the Company. The Company's competitors and potential
competitors include far larger, more established companies that have access to
capital markets for unsecured commercial paper and investment grade rated debt
instruments, and to other funding sources that may be unavailable to the
Company. The Company is currently developing an interactive system for lease
origination. If similar systems are first developed or implemented by others,
the Company could be at a competitive disadvantage. There can be no assurance
the Company will be able to compete successfully against current or future
competitors or that competitive pressures faced by the Company will not
materially adversely affect its business, operating results and financial
condition. See "Business -- Competition."

LIMITED HISTORY OF OPERATIONS; MANAGEMENT OF RAPID GROWTH

The Company was organized in February 1995 and has had a limited history of
operations. Although the Company was profitable in fiscal 1996 and in the nine
months ended March 31, 1997, there can be no assurance that the Company's
operations will remain profitable. Since its inception, the Company has

10
<PAGE> 12

significantly expanded its business and experienced rapid growth in revenues.
This significant growth has required the Company to increase its management,
administrative and financial resources and to hire, train, supervise and manage
an increased number of customer service, underwriting, accounting and other
personnel. The ability of such personnel to successfully manage the
underwriting, lease approval and collection functions will be dependent upon the
maintenance of consistently enforced underwriting criteria, existence of
adequate internal controls, efficient collection procedures, adequate staffing
and the use of effective automated systems. There can be no assurance that the
Company's management, staff, procedures, internal controls or systems will be
adequate to maintain, support and successfully manage the Company's anticipated
growth. Failure to manage growth and other changes in its business could have a
material adverse impact on the Company's results of operations and financial
condition. See "Business."

DEPENDENCE ON INDEPENDENT LEASE ORIGINATORS

The Company's leases are originated through a network of approximately 50
select independent lease originators located throughout the United States. Lease
transactions generated by the largest single independent lease originator
accounted for approximately 18.0% and 15.7% of the gross dollar amount of leases
funded by the Company during fiscal 1996 and the nine months ended March 31,
1997, respectively. Four independent lease originators accounted for between
5.0% and 10.0% of the gross dollar amount of leases funded by the Company during
the nine months ended March 31, 1997. Two independent lease originators each
accounted for between 5.0% and 10.0% of the gross dollar amount of leases funded
by the Company during fiscal 1996. The Company enters into non-exclusive
brokerage agreements with each of its independent lease originators which are
terminable on short notice. Continued growth in leases originated by its network
of independent lease originators will be dependent in part on the Company's
ability to obtain efficiencies in the lease approval process and to otherwise
enhance the level of service offered to its independent lease originators.
Should one or more independent lease originators that generate a significant
number of leases begin directing funding opportunities to the Company's
competitors, the Company's results of operations could be materially adversely
affected. See "Business."

DEPENDENCE ON KEY PERSONNEL

The Company's success is largely dependent on the efforts of William W.
Wehner, its Chairman of the Board and Chief Executive Officer, Larry K. White,
its President, and on William S. Cobb, Mark H. Speros, Kelly G. Long, William W.
("Skip") Wehner and Mark A. Miyasaki, each of whom is a senior officer
responsible for a different aspect of the Company's operations. The Company has
entered into employment agreements with William W. Wehner, its Chief Executive
Officer, and Larry K. White, its President, but has no employment agreement with
any other officer. Larry K. White was only recently hired by the Company and
therefore has had limited involvement in the Company's operations to date. The
loss of the services of any of the Company's senior management personnel could
have a material adverse effect on the Company, although the loss of William W.
Wehner's services would be most significant. The Company has obtained "key man"
life insurance on the life of Mr. Wehner in the amount of $2.0 million. See
"Management."

CONTROL OF THE COMPANY

Following this offering, the Company's executive officers, directors and
their affiliates will, in the aggregate, beneficially own approximately 41.8% of
the Company's outstanding shares of Common Stock. These stockholders, if acting
together, would be able to effectively control most matters requiring approval
by the stockholders of the Company, including the election of the members of the
Board of Directors, the authorization of an increase in the Company's capital
stock, or the dissolution, merger or sale of the Company. The voting power of
such stockholders under certain circumstances could have the effect of delaying
or preventing a change in control of the Company. See "Principal Stockholders."

ANTI-TAKEOVER EFFECTS OF CERTAIN CHARTER AND STATUTORY PROVISIONS

The Board of Directors of the Company is authorized, subject to certain
limitations, to issue without further consent of the stockholders up to
2,000,000 shares of Preferred Stock with rights, preferences and

11
<PAGE> 13

privileges designated by the Board of Directors. In addition, in the event of
certain change of control transactions, the vesting of options and the
expiration of any restriction periods on stock awards under the 1996 Stock
Option Plan (the "Option Plan") may be accelerated. These provisions could have
the effect of delaying, deferring or preventing a change in control of the
Company. In addition, the Company is subject to the provisions of Section 203 of
the General Corporation Law of the State of Delaware ("Section 203") regulating
corporate takeovers. Section 203 prevents certain Delaware corporations from
engaging, under certain circumstances, in a "business combination" with an
"interested stockholder" (as defined) for three years following the date that
such stockholder became an "interested stockholder," unless the business
combination or interested stockholder is approved in a prescribed manner. These
provisions of Delaware law could delay or make more difficult a merger, tender
offer or proxy contest involving the Company. See "Description of Capital
Stock."

SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of Common Stock in the public market after
this offering could adversely affect the market price of the Common Stock. Upon
closing of this offering (and assuming no exercise of any stock options), the
Company will have a total of 5,825,000 shares of Common Stock outstanding, of
which 3,825,000 will be freely tradeable without restriction under the
Securities Act of 1933, as amended (the "Securities Act"). All of the remaining
2,000,000 shares are "restricted securities" as defined by Rule 144 promulgated
under the Securities Act. Beginning 180 days after the date of this Prospectus,
upon the expiration of lock-up agreements with the Underwriters, all of these
shares will be available for sale in the public market subject to compliance
with Rule 144 volume and other requirements. The Company also anticipates
registering for issuance or resale the 900,000 shares of Common Stock reserved
for issuance under the Option Plan. As of June 21, 1997, options to purchase
410,000 shares have been granted and are outstanding under the Option Plan, of
which options to purchase 303,000 shares were then currently exercisable.
Options to purchase the remaining 107,000 shares become exercisable during
calendar 1997 and at varying times thereafter. See "Shares Eligible for Future
Sale."

IMPORTANT FACTORS RELATED TO FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS

This Prospectus contains certain forward-looking statements as defined in
the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). These
forward-looking statements include the plans and objectives of management for
future operations, growth and development, including plans and objectives
relating to the origination, funding, sale and securitization of leases,
acquisitions and future economic performance of the Company. Specifically, the
forward-looking statements and associated risks set forth in this Prospectus
include or relate to the Company's plans or expectations to (i) capitalize on
its operational capabilities and experienced management team, (ii) increase
productivity through utilization of advanced technologies and expansion of its
business using new interactive capabilities, (iii) leverage its access to lower
cost funds through securitizations and perhaps other sources to increase the
gross profit margins of acquired companies, (iv) increase its market share as it
executes its consolidation strategy, (v) successfully implement an interactive
Web site and Internet marketing, (vi) implement additional marketing
initiatives, (vii) complete future securitization transactions or lease sales,
(viii) maintain delinquency and net charge-off rates within acceptable ranges,
(ix) identify and acquire complementary equipment leasing companies or
independent lease originators, (x) develop additional specialty lease and vendor
direct programs in the future and (xi) commence e-commerce transactions among
the Company, equipment vendors and lessees.

12
<PAGE> 14

develop those systems before its competition, that competitive conditions within
the industry will not change materially or adversely, that demand for the
Company's lease financing will remain strong, that the Company will retain its
existing independent lease originators and key management personnel, that the
Company's forecasts will accurately anticipate market demand for equipment lease
financing in the small-ticket market, that the Company will continue to have
access to the asset-backed securities markets or other lower cost sources of
capital, and that there will be no material adverse change in the Company's
operations or business. Assumptions relating to the foregoing involve judgments
with respect to, among other things, future economic, competitive and market
conditions, and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the control of the
Company and its management. Although the Company believes that the assumptions
underlying the forward-looking statements made in this Prospectus are
reasonable, any of those assumptions could prove inaccurate and, therefore,
there can be no assurance that the results contemplated in any forward-looking
statement made herein will be realized. In addition, as disclosed elsewhere
under "Risk Factors," the business and operations of the Company are subject to
substantial risks that increase the uncertainty inherent in such forward-looking
statements. Any of the other factors disclosed under "Risk Factors" could cause
the Company's revenues or net income, or the growth in revenues or net income,
to differ materially from prior results. Growth in absolute amounts of cost of
leases sold or charge-offs or the occurrence of extraordinary events could cause
actual results to vary materially from the results contemplated by the
forward-looking statements contained herein. Budgeting and other management
decisions are subjective in many respects and thus susceptible to
interpretations and periodic revisions based on actual experience and business
developments, the impact of which may cause the Company to alter its funding,
marketing, capital expenditure or other budgets, which may in turn affect the
Company's results of operations. In light of the significant uncertainties
inherent in the forward-looking statements included herein, the inclusion of
such information should not be regarded as a representation by the Company or
any other person or entity that the objectives or plans of the Company can or
will be achieved.

13
<PAGE> 15

USE OF PROCEEDS

The net proceeds to the Company from the sale of the Common Stock offered
hereby are estimated to be approximately $19.2 million (approximately $22.0
million if the Underwriters' over-allotment option is exercised in full), after
deducting estimated underwriting discount and offering expenses and assuming a
public offering price of $10.00 per share.

The primary purpose of the offering is to provide the Company with
additional capital to fund its growth, including to consummate acquisitions, to
increase the number of leases that the Company can fund and hold for pooling and
sale in the asset-backed securities market, to support securitization
transactions, for other working capital needs and for general corporate
purposes. The Company intends to use an undetermined portion of the net proceeds
of this offering to pursue acquisitions of other companies engaged in the
origination, funding, servicing and sale of equipment leases. Although the
Company has discussed and continues to discuss possible acquisitions with other
entities, the Company has reached no agreements or understandings with respect
to any material acquisition. In addition, the Company will use $1.5 million to
prepay a term loan bearing interest at 13.0% per annum from Sirrom Capital, L.P.
that was assumed by the Company in the Global Finance acquisition. The Company
will also use approximately $500,000 for computer upgrades, including upgrades
for interactive systems. Pending their ultimate application, the remaining net
proceeds will be used to reduce temporarily the Company's balances under its
Warehouse Credit Line and other credit facilities. As of March 31, 1997, amounts
outstanding under the Warehouse Credit Line bore interest at an effective rate
of 9.125% per annum and amounts outstanding under the Company's other credit
facilities bore interest at effective rates of 9.25% to 13.0% per annum. At
March 31, 1997, the amount to be temporarily repaid under the Company's credit
facilities would have been $8.4 million.

DIVIDEND POLICY

The Company currently intends to retain future earnings to finance its
growth and development and therefore does not anticipate paying any cash
dividends in the foreseeable future. In addition, the Company's revolving credit
facilities restrict the payment of cash dividends by the Company under certain
circumstances. Payment of any future dividends will depend upon the future
earnings and capital requirements of the Company and other factors which the
Board of Directors considers appropriate. For information regarding the
distribution paid to certain of the members of Granite Financial, LLC at the
time of the Initial Public Offering, see "Certain Transactions."

PRICE RANGE OF COMMON STOCK

Since the Initial Public Offering, the Company's Common Stock has been
quoted on the Nasdaq National Market under the symbol "GFNL". Prior to the
Initial Public Offering, the Common Stock was not listed or quoted on any
organized market system. The following table sets forth for the periods
indicated the high and low closing sales prices of the Common Stock as reported
on the Nasdaq National Market. Such quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission, and may not necessarily
represent actual transactions.

<TABLE>
<CAPTION>
FISCAL 1997 HIGH LOW
---------------------------------------------------------------- ------ -----
<S> <C> <C>
Second Quarter (from October 25, 1996).......................... $ 9.50 $8.00
Third Quarter................................................... $12.75 $9.38
Fourth Quarter (through June 13, 1997).......................... $11.00 $8.38
</TABLE>

On June 20, 1997, the last reported sale price of the Common Stock reported
on the Nasdaq National Market was as indicated on the cover page of this
Prospectus. As of March 31, 1997, there were approximately seven holders of
record of the Common Stock and the Company estimates, based upon information
provided by brokers, that it has in excess of 400 beneficial owners of its
Common Stock.

14
<PAGE> 16

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
March 31, 1997 and as adjusted to give effect to the sale by the Company of the
2,100,000 shares of Common Stock at an assumed public offering price of $10.00
per share and the application of the estimated net proceeds therefrom. See "Use
of Proceeds." The table should be read in conjunction with the Company's
Consolidated Financial Statements and the related Notes thereto included
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
-----------------------
ACTUAL AS ADJUSTED
------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
DEBT:
Warehouse Credit Line................................................ $ 5,686 $ --
Limited recourse Class A note payable................................ 16,293 16,293
Notes payable........................................................ 4,237 --
------- -----------
Total debt................................................... $26,216 $16,293
------- -----------
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value, 2,000,000 shares authorized, none
issued............................................................ $ -- $ --
Common Stock, $.001 par value, 20,000,000 shares authorized;
3,725,000 shares issued and outstanding and 5,825,000 shares pro
forma as adjusted(1).............................................. 13,754 32,909
Retained earnings.................................................... 992 992
------- -----------
Total stockholders' equity................................... 14,746 33,901
------- -----------
Total capitalization......................................... $40,962 $50,194
======= =========
</TABLE>

- ---------------

(1) Does not include: (i) an aggregate of 300,000 shares of Common Stock
reserved for issuance upon exercise of warrants issued in connection with
the Initial Public Offering and the Underwriters' Warrants; (ii) 410,000
shares of Common Stock reserved for issuance upon exercise of stock options
outstanding under the Company's Option Plan, of which options to purchase
290,000 shares were exercisable at May 31, 1997; and (iii) 480,000 shares of
Common Stock reserved for issuance upon exercise of stock options available
for future grant under the Company's Option Plan. See "Management -- Option
Plan."

15
<PAGE> 17

SELECTED CONSOLIDATED FINANCIAL DATA

The following table presents certain summary consolidated financial
information for the year ended June 30, 1996 and the period February 21, 1995
(inception) to June 30, 1995, which has been derived from the Company's
Consolidated Financial Statements audited by Ehrhardt Keefe Steiner & Hottman
PC, independent certified public accountants, certain of which have been
included elsewhere herein. The selected consolidated financial data as of March
31, 1997 and for the nine months ended March 31, 1997 and 1996 have been derived
from the unaudited consolidated financial statements of the Company for such
periods and include, in the opinion of management, all adjustments (consisting
of normal recurring adjustments) necessary for the fair presentation of the
financial condition and results of operations at and for such periods. The
Company's results of operations for the nine months ended March 31, 1997 may not
be indicative of its results of operations for the full year.

<TABLE>
<CAPTION>
FEBRUARY 21,
NINE MONTHS FISCAL YEAR 1995
ENDED MARCH 31 ENDED (INCEPTION) TO
----------------- JUNE 30, JUNE 30,
1997 1996 1996 1995
------- ------- ----------- --------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1):
Sales of leases.................................... $50,308 $16,380 $20,638 $1,261
Income from direct financing leases................ 2,918 135 1,224 7
------- ------- ----------- -------
Total revenues..................................... 53,226 16,515 21,862 1,268
Cost of leases sold................................ 46,876 15,296 19,297 1,172
Provision for credit losses........................ 443 46 95 28
Interest expense................................... 1,377 16 551 --
Securitization expenses and amortization........... 257 -- -- --
------- ------- ----------- -------
Total costs........................................ 48,953 15,358 19,943 1,200
------- ------- ----------- -------
Gross profit....................................... 4,273 1,157 1,919 68
Other expenses..................................... 1,935 792 1,156 246
Pro forma income taxes(2).......................... 983 135 282 --
------- ------- ----------- -------
Pro forma net income (loss)........................ $ 1,355 $ 230 $ 481 $ (178)
======= ======= ======== ==========
Pro forma earnings (loss) per share................ $ .44 $ .11 $ .24 $ (.09)
OTHER DATA(1):
Dollar amount of leases funded during period....... $49,692 $23,110 $35,169 $1,450
Number of leases funded during period (not in
thousands)...................................... 1,962 920 1,381 64
Gross Servicing Portfolio(3)....................... $94,444 $30,692 $44,163 $1,216
Number of leases serviced as of period ended (not
in thousands)................................... 3,305 979 1,443 63
Delinquencies as a percentage of Gross Servicing
Portfolio at end of period(4)................... 1.65% .97% 1.44% --
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1997
------------------------
ACTUAL AS ADJUSTED(5)
------- --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................................... $ 4,775 $ 14,007
Direct financing leases............................................. 11,194 11,194
Direct financing leases assigned to lender.......................... 17,341 17,341
Securitization residual interest.................................... 6,107 6,107
Total assets........................................................ 45,495 54,727
Total liabilities................................................... 30,749 20,826
Stockholders' equity................................................ 14,746 33,901
</TABLE>

- ---------------

(1) Excludes information for Global Finance, which was acquired on March 31,
1997.
(2) Prior to the Initial Public Offering, the Company was a limited liability
company and not subject to federal or state corporate income taxes. On the
date of the Initial Public Offering, the Company changed its form of
organization from a limited liability company to a C Corporation, recorded
deferred income taxes totalling approximately $100,000 and began providing
for federal and state corporate income taxes from that date. Pro forma data
includes adjustments for federal and state income taxes as if the Company
had been taxed as a C Corporation at a combined federal and state tax rate
of 37.0% for all periods presented. See Note 7 to Consolidated Financial
Statements.
(3) The Company's Gross Servicing Portfolio consists of aggregate lease payments
for all leases financed by the Company and either held as direct financing
leases, or sold to third parties or securitized, as of the end of the
indicated periods.
(4) Represents delinquencies of 31 or more days. The Company had no
delinquencies over 31 days at June 30, 1995.

16
<PAGE> 18

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ACCOUNTING PRACTICES

Overview. The leases underwritten by the Company are non-cancelable,
full-payout leases. As such, the Company's leases cannot be cancelled at the
lessee's discretion and all payments (which include interest implicit in the
lease) must be made at or before the dates due. The Company's leases meet the
accounting criteria for capitalization and are accounted for by the Company as
direct financing leases. See "Business -- Risk Management; Lease
Underwriting -- Lease Terms and Conditions." Since its inception, the Company
has initially funded all of its direct financing leases with recourse debt under
its existing bank and other credit facilities or using its own working capital.
The Company typically retains these leases for a period of time. Thereafter, the
Company may sell or securitize leases on a non-recourse or limited recourse
basis, at which time the Company may relinquish any continuing economic interest
in such leases or may retain a contingent interest in the leases. The Company
retains servicing rights on all leases it underwrites and is paid servicing fees
on a monthly basis. The Company's accounting practices with respect to direct
financing leases, securitizations and sales of leases are summarized below.

The Company's leases are collateralized by the business equipment leased as
well as, in many cases, a personal guarantee provided by a principal of the
lessee. The Company also manages credit risk through diversifying its business
customer base, geographic location of lessees and the type of business equipment
leased. The Company believes that prepayment and charge-off risks are mitigated
by the non-cancelable, full payout structure of its leases which cover equipment
used in business operations. The Company has no contractual obligation to
discount the total lease payments due and, accordingly, the Company is entitled
to the aggregate amount of all lease payments on prepayment. The Company has
experienced nominal prepayments to date. The Company also attempts to manage the
risk of charge-offs through strict adherence to the Company's underwriting
criteria.

Direct Financing Leases. In accounting for direct financing leases, the
Company records the total lease payments, the estimated unguaranteed residual
equipment value and the initial direct costs (consisting of commissions and fees
paid to lease originators and other origination costs) as the investment in the
direct financing lease. The difference between the investment in the direct
financing lease and the cost to the Company of the equipment being financed is
recorded as unearned income. The unearned income is recognized over the life of
the lease using the interest method. On securitization or sale of the lease, the
Company's investment in the lease, including initial direct costs, is eliminated
and the resulting sales and cost of sales are included in results of operations.
Unless the residual value of the leased equipment (the "residual equipment
value") is sold in connection with the securitization or sale of the lease, the
estimated residual equipment value remains on the Company's balance sheet and is
recognized as income from direct financing leases over the life of the lease
using the interest method. Any permanent reduction in the estimated residual
equipment value is charged to operations in the period it occurs. The Company
books a maximum residual value of 10.0% of the original equipment cost of leases
(or, in the case of Global Finance, 10.0% of the lease receivable) other than
those leases with a $1.00 buy-out. No residual value is booked on leases with a
$1.00 buy-out.

Securitizations. The Company has completed three securitizations which
provide for aggregate funding in the amount of approximately $114.2 million. The
Company's securitizations consist of a $21.7 million lease-backed note
transaction completed in April 1996, a $65.0 million lease-backed certificate
transaction completed in November 1996, and a $27.5 million lease-backed
certificate transaction completed in March 1997. As of March 31, 1997, the
Company had securitized leases under the lease-backed note and certificates in
the aggregate amount of $52.4 million. In each securitization, the Company
transfers leases to a wholly-owned, bankruptcy remote special purpose subsidiary
which in turn simultaneously transfers its interest in the leases to a grantor
trust which issues beneficial interests in the leases in the form of debt or
equity securities.

In each securitization, the Company receives advances based on a percentage
which is less than the aggregate present value of cash flows from an
undifferentiated pool of leases, effectively overcollateralizing the

17
<PAGE> 19

lease-backed notes or certificates. Over the life of the lease pool securitized,
the Company is eligible to receive the excess cash flow (the "securitization
residual interest") resulting from the difference between the lease payments
received, net of defaults, and the payment of (i) principal and interest to
investors in lease-backed notes or certificates and (ii) servicing, backup
servicing and trustee fees and other securitization expenses. The securitization
residual interest may be sold to investors or may be retained by the Company. In
each of its securitizations to date, the Company has retained the securitization
residual interest. The fair value of the securitization residual interest is
based on the Company's estimates using a risk adjusted discounted cash flow
approach.

As the holder of the securitization residual interest, the Company's right
to receive this excess cash flow is subject to certain conditions specified in
the related agreements designed to provide additional credit enhancement to
holders of the lease-backed securities issued in the securitization. The Company
estimates the expected levels of cash flows available to the securitization
residual interest after taking into consideration estimated charge-offs,
recoveries and other factors which may affect the cash flows available to the
securitization residual interest. The Company estimates defaults on securitized
lease portfolios and has included estimated losses within the assumptions
underlying the accounting for the securitization residual interest. See Note 2
to the Consolidated Financial Statements. The Company believes its reserves are
adequate and monitors such adequacy by examining current delinquencies, lease
portfolio characteristics, economic conditions and trends and management's
expectations of future trends. The cash flows ultimately available to the
securitization residual interest are largely dependent upon the actual
charge-off rates experienced on the leases sold to the grantor trust. The
Company holds the securitization residual interest and is typically entitled to
receive from 15.0% to 20.0% of the cash flows, net of charge-offs, of the trust.
Losses incurred on leases held by the trust are borne solely by the
securitization residual interest. As a result, relatively small fluctuations
which are in excess of estimated charge-off rates and other factors impacting
cash flows of the leases could have a material adverse effect on the Company's
ability to realize its recorded basis in the securitization residual interest.
In such event, the Company would be required to reduce the carrying amount of
the securitization residual interest and record a charge to earnings in the
period in which the event occurred or became known to management.

In each securitization transaction, the Company is entitled to substitute
performing leases for non-performing leases, subject to certain limitations. The
right of lease substitution is exercised from time to time by the Company in
order to prevent non-performing leases from exceeding specified limitations in
each securitization transaction. Should those limitations be exceeded, the
trustee has the right to accelerate the repayment of the principal outstanding
under the lease-backed notes or certificates, which would materially adversely
affect the Company's receipt of cash flow from the securitization residual
interest. As a result of the Company's exercise of the right of substitution in
prior periods, direct financing leases with full recourse to the Company have
higher delinquency rates than delinquency rates experienced by non-recourse or
limited recourse leases that have been sold to third parties or securitized. See
"Risk Factors -- Liquidity and Capital Resources -- Dependence on Securitization
Transactions" and "Business -- Servicing and Collections."

Upon closing a securitization completed through the sale of lease-backed
equity securities, such as the Company's November 1996 and March 1997
securitizations, (i) the assigned leases are removed from the Company's
consolidated balance sheet, (ii) the investment in the assigned leases is
allocated between cost of leases sold and the securitization residual interest
on a relative fair value basis on the date of sale, (iii) the resulting sales of
leases and cost of leases sold are reflected in the consolidated statement of
operations and (iv) the difference between the excess cash flows received from
the trust and the securitization residual interest is recognized over the life
of the securitized leases using the interest method. Prior to the adoption of
SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities ("SFAS No. 125"), a securitization completed
through the sale of lease-backed debt securities, such as the Company's April
1996 securitization, was accounted for as a collateralized borrowing. As a
result, upon closing the April 1996 securitization the Company recorded direct
financing leases assigned to lender of $24.8 million (which represents the
Company's investment in the assigned leases) and recorded limited recourse Class
A Notes payable of $21.7 million (which represents the principal amount of the
Class A Notes, as well as the gross securitization proceeds paid to the
Company). Gain or loss is not recognized upon the

18
<PAGE> 20

closing of such a securitization. Rather, income is recognized over the term of
the assigned leases consistent with the accounting treatment which is applied to
direct financing leases. The Company adopted SFAS No. 125 on January 1, 1997.
Pursuant to SFAS No. 125, future securitizations completed through the issuance
of lease-backed debt securities will generally be accounted for under the method
described above for equity securities.

Sales of Leases. In addition to disposing of leases through securitization
transactions, the Company has sold on a non-recourse basis lease portfolios to
institutional purchasers including an affiliate. Sales to the affiliate are
subject to the affiliate's recourse to the Company with respect to the entirety
of any leases under which a first payment default occurs and any shortfall in
the aggregate estimated residual equipment value of the leases where there is no
firm purchase obligation on the part of the lessee. Sales of leases reflect
proceeds received by the Company, net of related selling expenses, and the cost
of leases sold reflect the Company's net investment in the related leases. At
March 31, 1997, the Company's aggregate residual equipment value guarantees
totalled $759,000. See Note 3 to the Consolidated Financial Statements.

Income Taxes. Granite Financial, LLC, as the predecessor in interest to
Granite Financial, Inc., was a limited liability company taxable as a
partnership under federal and state income tax laws. As such, Granite Financial,
LLC was not subject to income taxes as a separate entity and its income or loss
was required to be included in the income tax returns of its members. Upon
consummation of the Initial Public Offering, Granite Financial, Inc. became
subject to taxation as a C Corporation. Since that time, the Company has applied
FAS 109, "Accounting for Income Taxes" ("FAS 109"). Under FAS 109, the Company
recognizes deferred tax liabilities and assets for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Deferred tax liabilities and assets are determined based on the
timing differences between financial statement accounting and tax basis
accounting.

RESULTS OF OPERATIONS

Nine months ended March 31, 1997 compared to nine months ended March 31, 1996

Revenues. Sales of leases totalled $50.3 million in the nine months ended
March 31, 1997, an increase of $33.9 million over sales of leases of $16.4
million in the nine months ended March 31, 1996. The increase in sales of leases
is due to the consistent increase in the volume of leases sold by the Company
since its inception. Income from direct financing leases totalled $2.9 million
in the nine months ended March 31, 1997, or an increase of $2.8 million from
$135,000 in the comparable 1996 period. Income from direct financing leases
primarily consists of the accretion of income on leases retained by the Company
and on the Company's securitization residual interest. Income from direct
financing leases also includes servicing fees, which to date have been nominal.

Expenses. Cost of leases sold totalled $46.9 million in the nine months
ended March 31, 1997, an increase of $31.6 million from cost of leases sold of
$15.3 million in the nine months ended March 31, 1996. The increase in cost of
leases sold is directly related to the increase in sales of leases. Cost of
leases sold includes all direct costs of funding the leases and commissions and
fees paid to the Company's independent lease originators.

Provision for credit losses for direct financing leases and direct
financing leases assigned to lender was $443,000 in the nine months ended March
31, 1997, an increase of $396,000 from $47,000 in the prior comparable period.
Provision for credit losses represented less than 1.0% of total revenues in each
period. The increase in the provision reflects the significant increase in the
volume of leases held prior to sale. The Company maintains an allowance for
credit losses which is established through a charge to earnings in the period in
which it is probable a lease asset is impaired and the amount can be reasonably
estimated.

Interest expense was $1.4 million in the nine months ended March 31, 1997,
compared to $16,000 in the nine months ended March 31, 1996. The increase in
interest expense reflects increased borrowings under the Company's bank and
other credit facilities and under the $21.7 million limited recourse note issued
in the April 1996 securitization. The increased borrowing levels were required
to support growth in the number of leases funded by the Company.

19
<PAGE> 21

Salaries and benefits totalled $1.0 million in the nine months ended March
31, 1997, an increase of $604,000 over salaries and benefits of $417,000 in the
comparable 1996 period. The increase reflects the addition of staff necessary to
support growth in the Company's business as well as certain salary increases for
existing personnel. General and administrative expenses were $762,000, an
increase of $414,000 from $348,000 in the nine months ended March 31, 1996.
General and administrative expenses include operational expenses such as office
overhead, accounting, legal and other expenses not directly attributable to
personnel. The increase is due to the overall growth in the Company's business.
Depreciation and amortization increased to $151,000 in the nine months ended
March 31, 1997, an increase of $125,000 from $26,000 in the prior comparable
1996 period. This increase was due to the addition of office and computer
equipment necessary to support continued growth in the Company's business.

Net Income. During the nine months ended March 31, 1997, pro forma net
income totalled $1.4 million, compared to pro forma net income of $230,000 in
the nine months ended March 31, 1996. As Granite Financial, LLC was not subject
to federal and state income taxes, net income represents the difference between
gross profit and other expenses. To allow comparisons with C Corporations, pro
forma federal and state income taxes have been assumed at statutory rates.
Additionally, in October 1996 the Company recorded a one-time charge against
earnings of approximately $100,000 for income taxes associated with the
Company's restructuring. Based on the foregoing assumptions, the Company would
have incurred income taxes of $983,000 in the nine months ended March 31, 1997
and $135,000 in the comparable 1996 period.

Year ended June 30, 1996

The Company was formed on February 21, 1995. Accordingly, the following
discussion describes operating results for the year ended June 30, 1996, without
attempting any comparison to operating results for the period from inception to
June 30, 1995, during which time the Company had limited operations.

Revenues. During the year ended June 30, 1996, sales of leases were $20.6
million, or 94.4% of the total revenues. Revenue is recognized in connection
with the sale of leases on the date of sale based upon the present value of the
payments to be received under the leases. The Company funded a total of 1,381
leases during the year. Income from direct financing leases was $1.2 million, or
5.6% of total revenues. Income from direct financing leases primarily consists
of the accretion of income on the Company's lease portfolio.

Expenses. During the year ended June 30, 1996, cost of leases sold was
$19.3 million, or 88.3% of total revenues. Cost of leases sold includes all
direct costs of funding the leases and commissions and fees paid to the
Company's independent lease originators. Provision for credit losses was
$95,000, or less than 1.0% of total revenues. Interest expense was $551,000, or
2.5% of total revenues. Interest expense included borrowings under the Company's
credit lines and under the $21.7 million limited recourse note issued in the
April 1996 securitization. Salaries and benefits were $643,000, or 2.9% of total
revenues. General and administrative expenses were $472,000, or 2.2% of total
revenues, and include operational expenses such as office overhead, accounting,
legal and other expenses not directly attributable to personnel. Depreciation
and amortization was $41,000, and consisted principally of the depreciation of
office and computer equipment.

Net Income. During the year ended June 30, 1996, net income was $481,000.
As Granite Financial, LLC was not subject to federal and state income taxes, net
income represents the difference between gross profit and other expenses. To
allow comparisons with C Corporations, pro forma federal and state income taxes
have been assumed at statutory rates. Based on this assumption, the Company
would have incurred income taxes of $282,000.

LIQUIDITY AND CAPITAL RESOURCES

The Company will require capital to fund increases in its lease portfolio,
fund acquisitions of complementary small-ticket equipment finance companies and
independent lease originators, support securitizations through retention of
securitization residual interests, provide for normal operating expenses and for
general working capital purposes. The capital sources available to the Company
include cash from operating activities, borrowings under bank and other credit
facilities, cash from lease sales, advances in connection with lease
securitizations and capital provided by sales of equity securities.

20
<PAGE> 22

Net cash used by operating activities was $3.8 million during the nine
months ended March 31, 1997 compared to $6.5 million during the nine months
ended March 31, 1996. For the nine months ended March 31, 1997, this was
primarily the result of a $6.1 million increase in securitization residual
interests and a $1.1 million net reduction in direct financing leases available
for sale. Net cash provided by investing activities was $4.4 million compared to
net cash used in investing activities of $131,000 in the comparable prior
period. During the nine months ended March 31, 1997, lease payments received
from leases assigned to lender contributed $5.2 million to net cash provided by
investing activities. During the nine months ended March 31, 1997, net cash
provided by financing activities was $4.2 million compared to $6.2 million in
the nine months ended March 31, 1996. Proceeds from bank and other credit
facilities provided cash of approximately $3.0 million in the nine months ended
March 31, 1997, a decrease of $1.9 million from the nine months ended March 31,
1996. This decrease is due to the Company's success in obtaining other sources
of financing, including securitizations, in the 1997 period, whereas the Company
was primarily reliant on bank financing in the 1996 period. Principal payments
on notes payable used cash of $9.5 million during the nine months ended March
31, 1997. Principal payments included $4.5 million paid on the Class A note
issued in the April 1996 securitization and $5.0 million paid on other notes
payable.

Bank and Other Credit Facilities. The Company currently maintains seven
credit facilities which permit borrowings in the aggregate amount of
approximately $48.5 million. At March 31, 1997, the Company's borrowings under
its then existing credit facilities totalled approximately $9.9 million. The
following table presents certain information regarding the Company's credit
facilities.

<TABLE>
<CAPTION>
AMOUNT
OUTSTANDING AT
LENDER TYPE OF FACILITY AMOUNT INTEREST RATE MARCH 31, 1997 EXPIRATION
- --------------------------------------------- -------------------- ------------- --------------- -------------- ---------------
(IN MILLIONS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CoreStates Bank, N.A......................... Revolving line $36.0 Bank reference $3,115 February 1998
rate plus 0.63%
Colorado National Bank, N.A. ................ Revolving line $ 2.0 Bank reference $1,800 January 1998
rate plus 0.75%
FBS Business Finance Corporation............. Term loan $ 3.0 Treasury bill -- June 1997(1)
rate plus 3.0%
Norwest Equipment Finance Corporation........ Revolving line/term $ 3.0 Treasury bill $ 837 July 1997(1)
loan rate plus 3.85%
LaSalle National Bank(2)..................... Term loan $ 2.2 8.72% $1,929 May 1999
LaSalle National Bank(2)..................... Revolving line $ 0.8(3) Bank reference $ 771 May 1997
rate plus 1.0%
Sirrom Capital, L.P.(2)...................... Term loan $ 1.5(4) 13.0% $1,500 January 2000
</TABLE>

- ---------------

(1) Represents the expiration date for funding. The lender will continue to hold
leases in its portfolio through expiration or termination dates for the
leases financed. Given the Company's access to other credit facilities, the
Company may elect not to renew these facilities.

(2) Assumed by the Company on closing of the acquisition of Global Finance.

(3) In May 1997, the lender committed to increase this revolving line to $5.0
million and to extend the term of the facility to November 1, 1998. The
commitment provides that the Company may at its election convert amounts
outstanding under the revolving line to fully amortizing four-year term
loans.

(4) The Company intends to use a portion of the proceeds from this offering to
repay the outstanding balance of such loan. See "Use of Proceeds."

The Warehouse Credit Line with CoreStates Bank and its participating
lenders established in February 1997 serves as the Company's principal warehouse
credit facility. Under the Warehouse Credit Line, the Company may borrow an
amount equal to the lesser of 95.0% of the present value of lease payments
discounted at CoreStates' reference rate plus 0.63% per annum or 75.0% of the
remaining lease receivables

21
<PAGE> 23

under the leases which form the borrowing base. The Warehouse Credit Line is
collateralized by security interests in the leases against which the borrowing
applies, as well as a security interest in the underlying equipment and all cash
and non-cash proceeds therefrom. The facility provides for recourse borrowings,
which obligates the Company to make all required payments regardless of the
performance of the pledged leases or availability of other collateral. The
Company retains ownership of the equipment during the term of the leases,
subject to the lenders' security interest.

The Company established a $2.0 million unsecured revolving credit line with
Colorado National Bank in January 1997. The credit line allows the Company to
borrow up to a maximum of $2.0 million for working capital purposes on an
unsecured basis. Borrowings may not exceed a borrowing base which is equal to
100.0% of the present value of total payments due under all unencumbered leases
owned by the Company, discounted at the lender's reference rate plus 0.75% per
annum.

The recourse credit facilities maintained with FBS Business Finance
Corporation and Norwest Equipment Finance, Inc. provide each of these lenders
with full recourse against the Company should the collateral prove to be
insufficient. Amounts outstanding under these credit facilities are
collateralized by the leases assigned to each lender simultaneously with each
advance and are similar in other respects to the Warehouse Credit Line. Given
the Company's access to other credit facilities, the Company may elect not to
renew these facilities.

The Company also assumed three credit facilities as a result of its
acquisition of Global Finance in March 1997. The Global Finance credit
facilities consist of a $2.2 million term loan and an $800,000 revolving line,
each with LaSalle National Bank, and a $1.5 million term loan with Sirrom
Capital, L.P. At March 31, 1997, borrowings by Global Finance under these credit
facilities totalled $4.2 million. In May 1997, LaSalle National Bank committed
to increase the borrowing limit under the Global Finance revolving line to $5.0
million and to extend the term of the revolving line to November 1, 1998.

The Company will renew or replace its bank credit facilities consistent
with its objectives of obtaining the lowest possible cost of funds and
maintaining diverse funding sources.

Securitizations. The Company has completed three securitizations which
provide for aggregate funding in the amount of approximately $114.2 million. As
of March 31, 1997, the Company had securitized leases under a lease-backed note
and certificates in the aggregate amount of $52.4 million.

The table below documents the Company's history of lease securitizations by
funding.

STRUCTURED LEASE SECURITIZATIONS

<TABLE>
<CAPTION>
RATING
PERIOD FUNDED RATINGS AGENCY POOL NAME
-------------------- NOTE OR CERTIFICATE -------- ------------ ---------------------
DOLLAR AMOUNT
-------------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
April 1996.......... $21.7 Aaa/AAA Moody's/S&P GF Funding Corp. I
November 1996....... $ 7.2 Aaa/AAA Moody's/S&P GF Funding Corp. II
December 1996....... $ 1.9 Aaa/AAA Moody's/S&P GF Funding Corp. II
January 1997........ $ 2.1 Aaa/AAA Moody's/S&P GF Funding Corp. II
February 1997....... $ 2.8 Aaa/AAA Moody's/S&P GF Funding Corp. II
March 1997.......... $ 1.5 Aaa/AAA Moody's/S&P GF Funding Corp. II
March 1997.......... $15.2 Aaa/AAA Moody's/S&P GF Funding Corp. III
April 1997.......... $ 2.1 Aaa/AAA Moody's/S&P GF Funding Corp. II
April 1997.......... $ 4.2 Aaa/AAA Moody's/S&P GF Funding Corp. III
</TABLE>

The Company intends in the future to undertake additional securitization
transactions because securitizations generally offer a lower cost of capital
than is available through other sources. The Company's ability to complete
additional securitizations will depend upon a number of factors, including
general conditions in the credit markets, the performance of already outstanding
asset-backed securities issued by the Company and other factors, some of which
may be beyond the Company's control. Additional asset-backed securitizations
will likely be subject to the Company's ability to obtain favorable ratings from
rating agencies, to provide credit enhancements such as insurance policies or
"overcollateralization" through the securitization residual interest, or to
deposit cash or other collateral which may have the effect of increasing the
Company's effective cost of capital.

22
<PAGE> 24

ASSET QUALITY AND STATIC POOL ANALYSIS

The Company believes that its asset quality is generally a function of
strict underwriting criteria and procedures and efficient servicing and
collection functions. The Company's underwriting criteria are intended to result
in a diverse customer base which does not exhibit dependence on a particular
geographic market or industry segment. The Company employs automated servicing
and collection methods and a proactive approach to identifying and addressing
delinquencies. Because the Company commenced operations in February 1995, there
is limited performance data available with respect to the Gross Servicing
Portfolio and, consequently, historical delinquency and charge-off statistics
are not necessarily indicative of future performance.

The Company estimates defaults on direct financing leases and securitized
leases and establishes reserves for expected losses on leases the Company either
owns or has sold on a recourse or limited recourse basis. The Company regularly
reviews its reserves and defaults are continuously monitored on a portfolio and
individual pool basis. The Company examines factors such as current
delinquencies, lease portfolio characteristics, economic conditions and trends,
historical default experience and management's expectations of future trends in
establishing reserves. The Company's reserve for credit losses on its lease
portfolio approximates $2.9 million as of March 31, 1997 ($1.6 million of which
is a reserve for credit losses for Global Finance). Included within this reserve
is approximately $477,000 in estimated losses which were established in the
assumptions underlying the accounting for the securitization residual interest
for the securitizations conducted in November 1996 and March 1997. The Company
believes its current reserves for credit losses are adequate to provide for
expected losses in the existing lease portfolio. See Note 2 to Consolidated
Financial Statements.

Since its inception, the Company has monitored its underwriting and
collection performance using "static pool" analysis. Static pool analysis is a
statistical monitoring methodology by which each month's lease originations are
treated as a unique pool and the performance of this pool is tracked separately.
The measure of performance is based on several factors which include
delinquencies over 31 days and net charge-offs.

The following table documents lease delinquencies 31 or more days past due
as of March 31, 1997. The table presents the delinquent leases for the quarters
presented as a percentage of the remaining lease receivable balance for that
pool.

STATIC POOL REPORTING(1)
31 + DAYS DELINQUENT

<TABLE>
<CAPTION>
PERCENTAGE OF REMAINING LEASE RECEIVABLE
-------------------------------------------------------------------------------------
CALENDAR PERIOD QTR 1 QTR 2 QTR 3 QTR 4 QTR 5 QTR 6 QTR 7 QTR 8 QTR 9
- ---------------------- ORIGINAL LEASE ----- ----- ----- ----- ----- ----- ----- ----- -----
RECEIVABLE
--------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995:
1st Quarter......... $ 31 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
2nd Quarter......... 1,748 0.0 0.0 0.0 0.4 0.4 0.3 0.9 2.1
3rd Quarter......... 6,082 0.0 2.5 2.1 3.5 3.9 5.6 3.0
4th Quarter......... 10,444 0.0 0.9 2.4 3.0 5.3 3.1
1996:
1st Quarter......... 15,906 0.0 0.8 2.0 3.3 3.4
2nd Quarter......... 16,849 0.0 1.2 2.6 3.8
3rd Quarter......... 15,467 0.0 0.8 2.0
4th Quarter......... 22,220 0.0 0.4
1997:
1st Quarter......... 32,361 0.0
</TABLE>

- ---------------

(1) Excludes data for Global Finance. Lease delinquencies are calculated on a
monthly basis. Monthly calculations are then averaged to create an average
delinquency rate for the period.

23
<PAGE> 25

The following table documents net charge-offs for each quarter presented as
a percentage of original net investment in leases for that quarter. Negative net
charge-off amounts indicate that recoveries exceeded charge-offs during the
quarter.

STATIC POOL REPORTING(1)
NET INVESTMENT CHARGE-OFF
<TABLE>
<CAPTION>
PERCENTAGE OF ORIGINAL INVESTMENT VALUE
-----------------------------------------------------------------
CALENDAR PERIOD QTR 1 QTR 2 QTR 3 QTR 4 QTR 5 QTR 6 QTR 7
- ---------------------------------------- ORIGINAL ----- ----- ----- ----- ----- ----- -----
INVESTMENT
VALUE
--------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995:
1st Quarter........................... $ 23 0.0 % 0.0% 0.0% 0.0 % 0.0% 0.0% 0.0%
2nd Quarter........................... 1,337 0.0 0.0 0.0 0.0 1.0 0.0 (0.4)
3rd Quarter........................... 4,755 0.0 0.0 0.0 0.0 0.0 0.5 0.6
4th Quarter........................... 8,107 0.0 0.0 0.2 0.2 2.4 0.8

1996:
1st Quarter........................... 12,377 0.0 0.0 0.1 1.0 1.6
2nd Quarter........................... 13,174 0.0 0.0 1.1 (0.1)
3rd Quarter........................... 12,077 (0.1) 0.0 0.6
4th Quarter........................... 17,338 0.0 0.0

1997:
1st Quarter........................... 25,309 0.0

<CAPTION>
CALENDAR PERIOD QTR 8 QTR 9
- ---------------------------------------- ----- -----
<S> <C<C> <C>
1995:
1st Quarter........................... 0.0% 0.0%
2nd Quarter........................... 0.8
3rd Quarter...........................
4th Quarter...........................
1996:
1st Quarter...........................
2nd Quarter...........................
3rd Quarter...........................
4th Quarter...........................
1997:
1st Quarter...........................
</TABLE>

- ---------------

(1) Excludes data for Global Finance and data related to leases sold to
Heartland Bank.

Sales to Heartland Bank. From June 1995 until completion of the April 1996
securitization, the Company's liquidity was dependent, in substantial part, on
sales of leases to Heartland Bank. In June 1995, the Company entered into a
lease sale agreement (the "Lease Sale Agreement") with Heartland Bank to sell
leases at a price equal to the remaining cash flows of the leases (including
residual equipment value), discounted to present value at an 11.5% per annum
rate. From June 1995 to March 1996, Heartland Bank purchased leases with a face
amount of approximately $16.0 million from the Company. These lease purchases
provided the Company with significant liquidity during this period. In April
1996, the Company repurchased substantially all of the lease portfolio
previously sold to Heartland Bank. The repurchase of this lease portfolio was
completed in order to facilitate the Company's first securitization. At the time
of the repurchase of this lease portfolio, Heartland Bank was an affiliate of
the Company by virtue of its ownership of Heartland Leasing Corporation of
Missouri ("Heartland Leasing"), then a member of Granite Financial, LLC. See
"Certain Transactions."

Future Cash Requirements and Capital Commitments. The Company believes that
the proceeds of this offering, funds available under existing credit facilities,
existing and anticipated securitizations, and cash from operations will be
sufficient to meet the Company's capital requirements for at least the next 12
months. If for any reason the Company is unable to sell or securitize leases, or
if the Company's available cash otherwise proves insufficient to fund operations
(because of future changes in the industry, general economic conditions,
unanticipated increases in expenses, or other factors) the Company may be
required to seek additional financing. The Company has budgeted $500,000 from
the proceeds of this offering to fund capital and other expenses associated with
computer system upgrades and implementation of interactive technology to
streamline the lease application process. The Company also expects to make
capital expenditures and incur other operating expenses in excess of fiscal 1997
levels as the Company's business continues to grow.

The Company plans to relocate its headquarters during July 1997 to a larger
facility in the Denver, Colorado area. The Company is engaged in discussions
regarding available facilities which would provide 13,000 to 18,000 square feet
of space. As a result, the Company expects to incur occupancy expenses during
fiscal 1998 which are approximately $95,000 in excess of fiscal 1997 occupancy
expenses.

24
<PAGE> 26

RECENT ACCOUNTING PRONOUNCEMENTS

In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123 establishes financial accounting and reporting
standards for stock-based employee compensation plans. SFAS No. 123 is effective
for transactions entered into in fiscal years beginning after December 15, 1995.
The Company currently accounts for stock-based compensation awards under the
provisions of Accounting Principles Board Opinion No. 25, as permitted by SFAS
No. 123, and intends to continue to do so.

In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 125
is effective for transfers and servicing of financial assets and extinguishments
of liabilities occurring after December 31, 1996 and is to be applied
prospectively. This Statement provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishments of liabilities
based on consistent application of a financial-components approach that focuses
on control. SFAS No. 125 distinguishes transfers of financial assets that are
sales from transfers that are secured borrowings. The Company adopted SFAS No.
125 effective January 1, 1997.

FORWARD-LOOKING STATEMENTS

Certain statements made above in this Management's Discussion and Analysis
of Financial Condition and Results of Operations section and elsewhere in this
Prospectus are forward-looking statements as defined in the Reform Act. Such
forward-looking statements involve risks and uncertainties that are based on
certain assumptions that may not be realized and that include or relate to the
Company's plans or expectations to: (i) capitalize on its operational
capabilities and experienced management team, (ii) increase productivity through
utilization of advanced technologies and expansion of its business using new
interactive technologies, (iii) leverage its access to lower cost funds provided
by securitizations and perhaps other sources to increase the gross profit
margins of acquired companies, (iv) increase its market share as it executes its
consolidation strategy, (v) successfully develop and implement a direct
electronic link with its independent lease originators, (vi) successfully
implement an interactive Web site and Internet marketing strategies, (vii)
implement additional marketing programs, (viii) complete future securitization
transactions or lease sales, (ix) maintain delinquency and net charge-off rates
within acceptable and estimated ranges, (x) identify, acquire and assimilate
complementary equipment leasing companies and independent lease originators,
(xi) develop additional specialty lease and vendor direct programs in the future
and (xii) commence e-commerce transactions among the Company, equipment vendors
and lessees. Actual results and outcomes may differ materially from those
discussed or anticipated. Factors that might cause such differences include, but
are not limited to, risks and uncertainties associated with management of the
Company's growth, the Company's success in concluding acquisitions of
competitors and independent lease originators, the Company's dependence on its
independent lease originators, implementation and success of the Company's
planned interactive Web site and direct electronic link with its independent
lease originators, the Company's ability to retain key management personnel,
continued access by the Company to the securitization market and other lower
cost sources of capital, and any material adverse changes in the Company's
operations or business. For a more detailed discussion of these factors and
other risk factors to which the Company is subject, see "Risk Factors."

25
<PAGE> 27

BUSINESS

GENERAL

The Company is currently implementing a consolidation strategy in the
small-ticket segment of the equipment leasing market. The Company believes a
favorable environment exists for acquisitions in this segment of the equipment
leasing market because of the highly fragmented nature of the industry, the
inability of a significant number of small equipment lease finance companies to
obtain more favorable financing rates available through the asset-backed
securities markets and the increased cost of new technologies that generally
cannot be afforded by smaller participants in the market. The Company's
consolidation strategy encompasses the purchase of other companies active in the
small-ticket segment of the equipment leasing market as well as independent
lease originators that may or may not currently conduct business with the
Company. Consistent with this consolidation strategy, the Company concluded the
acquisitions of Global Finance in March 1997 and SFR Funding in June 1997.
Founded in 1989, Global Finance specializes in providing equipment lease
financing for point-of-sale equipment which costs $2,000 or less per lease. SFR
Funding was founded in 1988 and specializes in originating equipment leases,
primarily for businesses in the hospitality industry. The Company's
consolidation strategy is designed to expand its existing business and take
advantage of its core competencies including, among other things, its highly
developed customer service program, use of sophisticated technology to achieve
efficiencies in the application, underwriting and collection processes,
development of close working relationships with lease originators, knowledge of
the equipment leasing market and experienced management team.

HISTORY

The Company's predecessor, Granite Financial, LLC, was organized in
February 1995 by William W. Wehner and James E. Lewis to enter into the
small-ticket leasing market to capitalize on Mr. Wehner's extensive experience
within the equipment leasing industry. The period from February 21, 1995
(Granite Financial, LLC's inception) through June 1995 was devoted to start-up
of lease funding operations. In June 1995, Granite Financial, LLC entered into
the Lease Sale Agreement with Heartland Bank and a letter of intent pursuant to
which Heartland Bank committed to purchase an ownership interest in Granite
Financial, LLC, subject to the satisfaction of certain conditions. Granite
Financial, LLC then began generating significant volumes of leases which were
purchased primarily by Heartland Bank from time to time through March 1996. In
January 1996, Heartland Leasing, a wholly-owned subsidiary of Heartland Bank,
purchased a 45.0% interest in Granite Financial, LLC pursuant to the letter of
intent. In April 1996, the Company repurchased approximately $16.0 million in
leases previously sold to Heartland Bank and entered into its first
securitization transaction under which a special purpose subsidiary, GF Funding
Corp. I, issued approximately $21.7 million of lease-backed notes to an
institutional investor. The notes were insured by a financial guaranty issued by
MBIA Insurance Corporation and were rated AAA by Standard & Poor's Ratings Group
and Aaa by Moody's Investors Service. In October 1996, the Company completed the
Initial Public Offering at which time the Company exchanged 2,000,000 shares of
its Common Stock for all of the outstanding membership interests of Granite
Financial, LLC. At that time, the Company succeeded to servicing and all other
activities

26
<PAGE> 28

formerly undertaken by Granite Financial, LLC. In each of November 1996 and
March 1997, the Company completed additional securitization transactions
pursuant to which two special purpose subsidiaries, GF Funding Corp. II and GF
Funding Corp. III, respectively, issued lease-backed securities aggregating
$92.5 million in principal amount to third-party institutional investors. The
securities issued in these securitizations were also insured by a financial
guaranty issued by MBIA Insurance Corporation and were rated AAA by Standard &
Poor's Ratings Group and Aaa by Moody's Investors Service. The Company has also
initiated its consolidation strategy through the closing of the acquisitions of
Global Finance in March 1997 and SFR Funding in June 1997.

INDUSTRY OVERVIEW

According to the Equipment Leasing Association and the International Trade
Administration, business investment in equipment exceeded $563.1 billion in
1996, an increase of approximately $267.0 billion from comparable 1986 data.
Equipment leasing accounted for approximately $168.9 billion of 1996 business
investment in equipment compared to $85.0 billion in 1986. Business investment
in equipment under lease is expected to account for over $176.2 billion of 1997
business investment in equipment, according to the same sources. Although the
Company is not aware of published industry statistics that specifically address
equipment leases with an original equipment cost of $100,000 or less, the
Company estimates that the market for equipment priced in this range constitutes
between approximately 25.0% and 30.0% of equipment acquisitions under lease.

The following table shows the growth in total equipment acquisitions in
billions of dollars and the growth in equipment placed under lease from 1986 to
1996 and as projected for 1997.

<TABLE>
<CAPTION>
Business In-
Measurement Period Equipment vestment in
(Fiscal Year Covered) Leasing(2) Equipment(2)
<S> <C> <C>
1986 $85.0 $296.2
1987 98.0 311.2
1988 112.7 348.4
1989 125.4 365.7
1990 124.3 388.3
1991 120.2 375.5
1992 121.7 376.2
1993 130.5 443.9
1994 140.2 487.0
1995 151.4 538.8
1996 168.9 563.1
1997E 176.2 570.1
</TABLE>

Source: U.S. Department of Commerce, Economics and Statistics Administration,
Bureau of Economic Analysis, and Equipment Leasing Association of America.
- ---------------

(1) Data for 1997 is estimated by the International Trade Administration and the
Equipment Leasing Association.

(2) Amounts stated in billions of dollars.

27
<PAGE> 29

The small-ticket equipment leasing market served by the Company is a highly
diversified market, with demand for lease financing coming from a variety of
small and mid-size businesses across the United States. This market has
experienced growth in recent years because of several factors, including (i) the
decline in prices of computers and computer peripherals and corresponding
increases in demand for this equipment; (ii) the adoption of accounting
pronouncements concerning the consolidation of earnings of manufacturers and
captive finance company subsidiaries that caused a number of manufacturers to
eliminate their captive finance companies, resulting in an increased demand for
independent financing such as that provided by the Company; (iii) the
consolidation of the banking industry, which has reduced the number of small
community banks that traditionally provided equipment financing for small to
mid-size businesses; (iv) stricter lending requirements of commercial banks; and
(v) the reduction in cost of funds for independent finance companies such as the
Company which have been able to access the asset-backed securities market and
other sources of lower cost capital. The small-ticket equipment leasing market
is highly fragmented, with no company believed to account for in excess of a
2.0% market share. As a result of efficiencies made possible by advances in
technology and access to the asset-backed securities markets, the Company
believes that the larger, better capitalized participants in the small-ticket
equipment leasing market will have opportunities to consolidate a portion of the
market. The Company believes that this consolidation will be driven by the
highly fragmented nature of the small-ticket leasing market segment; the need
for reductions in the cost of funds to remain competitive, which will require
market participants to access capital through securitizations or other low cost
sources of funds; the need for productivity gains and reductions in overhead as
a percentage of revenues by increasing the size of lease portfolios; and the
increased cost of new technologies that will not be affordable to smaller market
participants.

BUSINESS STRATEGY

The Company's objective is to become a leading provider of equipment lease
financing in the small-ticket equipment leasing market. The principal components
of the Company's strategy for achieving this objective are to:

- Increase Market Share Through Acquisitions. As a result of management's
experience in the equipment leasing industry, the Company is familiar
with a number of competitors and independent lease originators active in
the highly fragmented small-ticket equipment leasing market. The Company
has and will continue to discuss acquisitions with a number of candidates
that will complement the Company's existing operations, allow the Company
to enter new target industry segments and increase operating
efficiencies. The Company's acquisition strategy is designed to:

S Facilitate Entry into New Market Segments. As a result of its
acquisition of Global Finance, the Company is now engaged in
providing equipment lease financing for point-of-sale equipment which
costs $2,000 or less per lease. In addition, the Company's
acquisition of SFR Funding in June 1997 is expected to increase the
Company's financing of equipment leases for customers in the
hospitality industry. The Company intends to consummate other
acquisitions in order to enter complementary market segments such as
municipal leasing, early stage business leasing and vendor-affiliated
programs.

S Increase Lease Fundings. The Company intends to acquire competitors
and independent lease originators who may or may not currently
conduct business with the Company for the purpose of increasing lease
fundings. Prior to the initiation of acquisition discussions with SFR
Funding, SFR Funding had not originated leases for the Company.
Acquisitions of competitors such as Global Finance, and independent
lease originators such as SFR Funding, will expand the channels
through which the Company generates lease fundings, will result in
the Company capturing all lease funding opportunities from acquired
lease originators and thereby increase the Company's market share.

S Capitalize on Sophisticated Technology. Expansion of the Company's
business through acquisitions is expected to facilitate the Company's
continued use and implementation of sophisticated technologies. As
the Company grows by acquisition, the Company will continue to
integrate its

28
<PAGE> 30

computer system that is widely used by leaders in the equipment
leasing industry and customized off-the-shelf software products to
control costs and increase operating efficiencies of acquired
entities.

S Promote Marketing Focus of Acquired Company Management. The Company
intends to target acquisitions of competitors and independent lease
originators that will focus primarily on expanding their businesses
through new and expanded marketing initiatives by relieving them of
much of their administrative and operating responsibilities and
allowing them to rely on the Company's funding capabilities,
operating systems and advanced technologies.

- Expand Existing Business. The Company will seek to expand its existing
business through a variety of means, including implementing new marketing
initiatives and establishing strategic alliances with select equipment
vendors. The Company is currently developing an interactive Web site and
Internet marketing capabilities that are expected to increase the
Company's volume of lease applications and allow the Company in the
future to engage in e-commerce transactions with equipment vendors and
lessees.

- Support Lease Originators. The Company will maintain and enhance its
strong relationships with its approximately 50 select independent lease
originators through continuing superior customer service, developing
additional specialty leasing programs and implementing new interactive
technologies designed to maximize efficiencies in the lease application,
underwriting, approval, servicing and collection functions. The Company
currently supports its independent lease originators with approximately
35 specialty lease programs developed to meet certain needs which have
been identified by the Company's lease originators. The development of a
direct electronic link between the Company and its independent lease
originators, which is expected to be on-line in calendar 1997, is
expected by the Company to further strengthen the relationship between
the Company and its network of independent lease originators.

- Reduce and Control Cost of Capital. The Company will seek to reduce and
control its cost of capital by conducting additional securitization
transactions and through the establishment and maintenance of
relationships with a diverse group of funding sources. To date the
Company has established three securitizations which provide for aggregate
funding in the amount of approximately $114.2 million and bank and other
credit facilities which permit approximately $48.5 million in borrowings.

- Leverage Advanced Technology. The Company will continue to utilize
sophisticated data processing systems and stringent internal controls to
monitor and maintain the application of consistent underwriting criteria
throughout the credit approval process. The Company currently utilizes a
credit scoring software program and a management information system that
are well-known in the leasing industry. The Company's proposed direct
link with its independent lease originators and its proposed interactive
Web site and Internet marketing strategies will further automate the
lease application process and expand the Company's use of leading
technologies.

SALES AND MARKETING

The Company's marketing strategy is to increase its volume of lease
financing by diversifying and expanding its lease origination channels. The
Company intends to implement this strategy by (i) maintaining, selectively
expanding and supporting its high quality network of independent lease
originators, (ii) developing specialty programs in conjunction with its lease
originators for specific vendor or customer groups, including franchisees, (iii)
developing direct links with independent lease originators in order to further
automate transactions between the Company and its lease originators and (iv)
developing Internet capabilities that are expected to increase the flow of
potential lease transactions and permit e-commerce transactions among the
Company, equipment vendors and lessees.

The Company has three marketing employees who are responsible for
implementing marketing strategies, coordinating marketing activities with the
Company's independent lease originators and supervising customer service. To
establish and maintain the Company's profile in the equipment leasing industry,
the Company's

29
<PAGE> 31

marketing employees attend major equipment leasing conventions and trade shows
held each year and several officers of the Company are active in the Equipment
Leasing Association and the United Association of Equipment Lessors,
well-recognized trade associations.

Lease Originators. As of June 1997, the Company maintained a network of
approximately 50 select independent lease originators through which it markets
lease transactions. The Company developed its network of independent lease
originators as a result of the industry knowledge and experience of William W.
Wehner, Mark H. Speros and Kelly G. Long. While the Company is familiar with a
number of lease finance companies that have established large groups of sales
representatives or brokers with varying experience levels, the Company has
intentionally limited its network of lease originators to a small, highly
focused group of lease originators with extensive industry experience. Each
lease originator has had a prior relationship with senior management of the
Company within the equipment leasing industry and has in management's opinion
shown an ability to generate significant volumes of leases with a credit quality
that is consistent with the Company's stringent credit policies.

The Company's lease originators range from relatively small businesses
which account for a limited number of the Company's monthly lease transactions
to relatively large businesses which originate leases financed by the Company
and other fundings sources in an amount estimated by the Company to be in excess
of $50.0 million per year. Lease transactions generated by the Company's largest
single independent lease originator accounted for approximately 18.0% and 16.0%
of the gross dollar amount of leases funded by the Company during fiscal 1996
and the nine months ended March 31, 1997, respectively. The next four largest
independent lease originators accounted for between 5.0% and 10.0% of the gross
dollar amount of leases funded by the Company during the nine months ended March
31, 1997. Two lease originators each accounted for between 5.0% and 10.0% of the
gross dollar amount of leases funded by the Company during fiscal 1996.

The Company maintains agreements with each of its lease originators that
define each party's obligations, but which are terminable by either party on 30
days' written notice. The lease originators are compensated by the Company on a
commission basis. Because each of the lease originators is an independent
contractor, the Company cannot require its lease originators to direct lease
funding opportunities to the Company. The Company believes that a number of its
lease originators conduct business with other lease finance companies. However,
management believes that the Company's support of its independent lease
originators, such as through direct personal communications, the development of
specialty lease programs, the use of leading edge technologies and a responsive,
predictable underwriting process will continue to provide the Company with a
strong relationship with its lease originators and a basis upon which the
Company can expand the volume of lease transactions submitted by existing
originators. The Company has and will continue to focus on the development of
value-added services for its lease originators in order to enhance the Company's
positioning as a strategic partner with its originators.

Specialty Lease Programs. In conjunction with certain of the Company's
lease originators, the Company has developed specialty lease finance programs to
address the needs of specific lessees or businesses, particularly franchisees.
As of March 31, 1997, the Company had approximately 35 specialty programs in
place, each of which has unique attributes but all of which are based upon the
Company's standard lease form. Each of these programs has been developed as a
result of the Company or one of its lease originators identifying the need for a
specialty lease finance product not otherwise offered by the Company. The
principal difference between the Company's typical lease transactions and its
specialty leases is the period of time in which the lessee is required to have
been engaged in business. The Company's standard underwriting criteria typically
require that the lessee be engaged in its business for two years, while
specialty programs are available for start-up businesses. In consideration for
providing lease financing to a start-up business, certain lease terms are
adjusted to reflect the Company's increased risk. Underwriting procedures are in
other respects identical to those employed in the Company's other lease
transactions. The terms of each specialty lease program must be approved by
William W. Wehner and Mark H. Speros.

As an example, specialty programs have been developed to provide financing
for franchisees in national franchise organizations, which often have
significant equipment financing needs. Despite being a start-up business, the
new franchisee may represent a creditworthy lessee given the capital investment
required to

30
<PAGE> 32

establish the franchise, the franchisor's review of the franchisee prior to
granting a franchise, and operational and marketing support provided to the
franchisee by its franchisor. Each of the Company's specialty lease programs is
exclusive, and obligates the lease originator to source all of their customer's
lease financing requirements from the Company, and obligates the Company to do
business exclusively with the lease originator with respect to his or her
specialty program. The specialty program developed for franchisees of Domino's
Pizza illustrates the type of program offered by the Company to its originators.
This program provides the franchisee with a specially tailored lease to finance
the purchase of computer and cash register systems that are standardized
throughout the Domino's Pizza franchise system. The Company anticipates that it
will continue to develop specialty lease finance programs to meet the needs of
its lease originators and their customers, which management believes will
further strengthen the Company's relationship with its lease originators.

The Company believes that, through its network of independent lease
originators, it can introduce new lease finance products which are complementary
to those now offered by the Company. In particular, the Company believes that
small-ticket leases to municipalities, leases for start-up and early-stage
businesses and leases designed for franchise systems and chain businesses offer
significant areas in which the Company can expand its business. The Company
believes that a number of its lease originators now offer lease financing in
these market segments and that, by virtue of the Company's relationship with its
lease originators, the Company can be successful in expanding its volume of
lease financings in these market segments.

Vendor Direct Programs. The Company recently hired an in-house marketing
representative who will oversee the development of vendor direct programs. The
Company anticipates that the vendor direct programs will be focused on
establishing formal and informal relationships with equipment vendors whereby
the Company will become the financing source recommended by the vendor to its
equipment purchasers. The Company intends to promote its utilization as the
source of equipment lease financing and thereby increase the vendor's equipment
sales and its own lease fundings by offering convenient, competitive and timely
financing for equipment sales. The Company may also design vendor direct
programs in a manner similar to its specialty lease programs, under which the
Company will provide customized lease finance arrangements to respond to the
needs of a particular vendor and its equipment purchasers. The Company also
intends to pursue business-to-business lease transactions through its e-commerce
technologies now under development.

New Technologies. The Company is committed to implementing leading edge
technologies which can be used in the equipment leasing industry to streamline
and automate the lease application and approval process. The Company has
determined that, with certain exceptions, the most efficient means of achieving
this goal is by customizing off-the-shelf software applications and hardware
that can be tailored to the Company's operating requirements for a relatively
small additional investment. The Company believes that such off-the-shelf
products can be scaled to various lease funding volumes, are generally more
stable and less costly than products the Company might develop or have developed
solely for its use, and are easier to integrate with other commercially
available products. The Company generally avoids custom software programming so
as to limit costs of adapting new technology where possible. The Company
believes that by selecting and integrating superior customizable off-the-shelf
software applications, including periodic upgrades made available by software
developers at a relatively low cost, the Company will efficiently maintain its
competitive position and enhance the services it offers to its independent lease
originators. Examples of its commitment in this area include the Company's use
of a computer system developed by Decision Systems, Inc. ("DSI"), credit scoring
software licensed to the Company by Fair, Isaac and Company, Inc. ("Fair Isaac")
and lease processing software licensed to the Company by BrokerWare, Inc.
("BrokerWare"). While other large leasing companies use sophisticated management
information systems and credit scoring programs, the Company believes that the
cost of such technologies makes their use less common among smaller equipment
leasing concerns.

The Company is currently developing an interactive Web site and related
systems and protocols which will allow the Company to complete lease
transactions through a direct, on-line system with independent lease
originators. The Company has developed and is currently testing the on-line
system to be established with its independent lease originators. The on-line
system will allow lease originators to electronically transmit lease
applications to the computer system located in the Company's headquarters. The
Company's computer system

31
<PAGE> 33

will then cause the application to be electronically scored using the Fair Isaac
credit scoring program. With respect to applications approved for funding, the
Company's system would prepare and electronically transmit lease documents which
would be downloaded and printed by the originator and available for execution.
The Company anticipates that the on-line system will be fully operational in
calendar year 1997.

In addition, the Company's interactive Web site and Internet marketing
program are currently under development. The Company's Internet presence will be
designed to create a new channel of potential lease financing transactions and
to accommodate e-commerce transactions. The Company anticipates that it will
establish an icon which will appear on the Web site of various equipment
manufacturers and vendors. Viewers of the manufacturers' and vendors' sites will
be able to click on the Company's icon and connect directly to the Company's Web
site. The Company's Web site will contain information concerning equipment lease
financing available through the Company and will allow potential lessees to
submit lease applications directly to the Company entirely over the Internet.
The Company has retained certain software development and Internet consulting
firms to develop the Company's proposed Internet system. The Company does not
expect that its Internet system will be fully operational until at least
calendar year 1998.

RISK MANAGEMENT; LEASE UNDERWRITING

The Company strives to maintain diversity in its business customer base,
geographic location of lessees and type of equipment under lease as part of its
risk management program and in order to meet or exceed standards required for
securitization transactions. The Company also seeks to maintain consistently
high asset quality through its reliance on a network of independent lease
originators that are carefully selected and extensively supported by the
Company, application of stringent underwriting criteria that are consistently
applied and maintenance of highly focused servicing and collection functions.
The Company believes that development of its operational resources, management
and marketing team, and lease processing and funding capabilities have
positioned the Company to increase its market share as it executes its
consolidation and internal growth strategies. The Company applies strict
underwriting criteria and procedures, a computerized credit scoring system and
independent credit investigations, all of which are designed to target
creditworthy lessees rather than "sub-prime" or "credit impaired" lessees. The
Company has also made significant investments in management information systems
and other technologies in order to automate and improve the performance of the
Company's servicing and collection functions.

Equipment and Industry Diversity. The following table sets forth certain
information with respect to the equipment types and industries which have been
served by the Company's equipment financing for the period from February 21,
1995 (inception) through March 31, 1997:

TYPES OF EQUIPMENT FUNDED CHART

<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COMPUTERS/PERIPHERALS $17,007,114
FOOD SERVICE $8,719,977
MANUFACTURING/MACHINE WORKS $7,458,263
COIN-OPERATED $6,833,927
DRY CLEANING/WASHING $6,513,376
PERSONAL CARE $6,059,665
RADIO/TV/PHOTOGRAPHIC $5,771,751
HEAVY EQUIPMENT $5,388,330
GENERAL OFFICE $4,898,117
EXERCISE AND SPORTS $2,941,492

-- -- -- -- -- -- -- -- -- -- --
0% 3.4% 5.7% 6.2% 6.7% 7.0% 7.5% 7.9% 8.6% 10.1% 19.7%

</TABLE>
- ---------------

(1) Excludes leases funded by Global Finance.

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<PAGE> 34

The remaining leases underwritten by the Company and not reflected in the
foregoing table are divided among medical/dental, printing/typesetting,
engineering and scientific, refuse equipment, automotive and other licensed
equipment, and miscellaneous equipment. Leases underwritten in these categories
accounted for approximately $14.8 million in leases funded, or 17.1% of the
Company's lease fundings during the period from February 21, 1995 (inception)
through March 31, 1997.

Geographic Diversity. The following table sets forth certain information
with respect to the geographic distribution of leases funded by the Company from
February 21, 1995 (inception) through March 31, 1997:

<TABLE>
<CAPTION>
PERCENTAGE OF
STATE TOTAL LEASES FUNDED
------------------------------------------- LEASES FUNDED(1) -------------------
----------------
(IN THOUSANDS)
<S> <C> <C>
California................................. $ 20,353 23.6%
Texas...................................... 6,556 7.6
Florida.................................... 6,475 7.5
New York................................... 5,492 6.4
Colorado................................... 3,547 4.1
Illinois................................... 3,321 3.8
Pennsylvania............................... 3,314 3.8
Massachusetts.............................. 3,024 3.5
New Jersey................................. 2,894 3.3
Georgia.................................... 2,709 3.1
Ohio....................................... 2,444 2.8
Washington................................. 2,396 2.8
Arizona.................................... 2,117 2.5
Maryland................................... 1,713 2.0
North Carolina............................. 1,640 1.9
All other states(2)........................ 18,405 21.3
---------------- ------
Total.................................... $ 86,400 100.0%
============= ===============
</TABLE>

- ---------------

(1) Based on cost of leased equipment. Excludes leases funded by Global Finance.

(2) Of the remaining 34 states in which the Company has conducted business, none
of such states individually accounts for in excess of 1.8% of the total
leases funded since inception.

Lease Terms and Conditions. The Company uses a standard, non-cancelable,
full-payout lease, the terms and conditions of which may vary slightly from
transaction to transaction. The Company's leases are structured so as to be
profitable regardless of the disposition of the leased equipment or the recovery
of any residual equipment value upon the expiration of the lease term. Excluding
Global Finance, approximately one-half of the leases underwritten by the Company
provide that the lessee may purchase the equipment for $1.00 at the expiration
of the lease, with the remainder of the leases calling for either a mandatory
10.0% firm price buy-out or an optional fair market value buy-out. The Company
books a maximum residual value of 10.0% of the original equipment cost of leases
other than those leases with a $1.00 buy-out. No residual value is booked on
leases with a $1.00 buy-out.

The leases covering point-of-sale equipment funded by Global Finance
generally provide for a maximum residual value of 10.0% of the lease receivable.
In certain cases, the residual value may be equivalent to 10.0% of the original
equipment cost. Leases funded by Global Finance generally have a term of 48
months and provide that, at the conclusion of the lease, the lessee may continue
to utilize the leased equipment by paying a monthly rental substantially
identical to the monthly payment required under the lease. The Company believes
that leases funded by Global Finance generally carry higher credit risk and,
therefore, the Company establishes higher reserves for credit losses as a
percentage of lease receivables for leases funded by Global Finance than those
funded by Granite Financial, Inc. Leases funded by Global Finance also carry
somewhat higher implicit lease rates than those funded by Granite Financial,
Inc.

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<PAGE> 35

Substantially all of the Company's leases provide that lessees are
obligated to (i) remit all amounts due, regardless of the performance of the
equipment, (ii) operate the equipment in a careful and proper manner and in
compliance with applicable government rules and regulations, (iii) maintain and
service the equipment, (iv) insure the equipment against casualty losses, public
liability, bodily injury and property damage, and require that the Company be
named as an additional insured and as a loss payee under each insurance policy,
and (v) pay directly, or reimburse the Company for, any taxes associated with
the equipment, its use, possession or lease, except those relating to net income
derived by the Company under the lease. The Company's equipment leases provide
that in the event of a default by a lessee, the Company may declare the entire
unpaid balance of rentals due and payable immediately, and may repossess the
equipment for subsequent sale, re-lease or other disposition.

Credit and Administrative Procedures. Based upon management's experience in
the equipment leasing industry, the Company has developed credit underwriting
policies and procedures that have been effective in the selection of
creditworthy equipment lessees. The Company's credit underwriting procedures are
based upon the use of, among other things, standardized lease application
documents, a computerized credit scoring system, credit investigations, and in
certain transactions, the tax returns, financial statements and other relevant
credit documentation concerning the lessee.

The underwriting process begins with the submission of a lease application
by the lease originator, generally by facsimile or electronic transmission, at
which time the Company conducts its own independent credit investigation through
recognized commercial credit reporting agencies such as Dun & Bradstreet,
Equifax Inc. and Experian Information Solutions, Inc. (formerly TRW, Inc.). The
lease application is then processed and scored by a software program licensed to
the Company by Fair Isaac. The Fair Isaac program assigns a credit score to each
application based upon its evaluation of a broad range of factors. As a result
of its extensive experience with the Fair Isaac program, the Company is able to
identify applications under which the creditworthiness of the lessee is so
strong (or alternatively, so weak) that the independent lease originator can be
promptly notified of initial approval or rejection of the lease application.
More extensive analysis is performed by the Company's underwriters on lease
applications receiving scores within a certain range. Regardless of credit
score, the Company's underwriters perform the same extensive review and
verification procedures on all approved lease applications.

The time required for an underwriting decision varies according to the
strength of the lease application and the nature, size and complexity of the
transaction. Once a determination to fund a lease has been made, the Company
generates a standardized lease agreement and other documents. When the equipment
is shipped and installed, the vendor invoices the Company and the Company
verifies that the lessee has received and accepted the equipment before paying
the vendor's invoice. Because vendor relationships are an important part of the
Company's operations, the Company attempts to assure that vendors receive timely
payments once lessee acceptance of the equipment is received. In general, the
Company makes payments to vendors within 24 hours of receipt of lessee
acceptance. Upon the lessee authorizing payment to the vendor, the executed
lease is forwarded to the Company's funding and documentation department for
funding, transaction accounting, audit and billing procedures. The Company
requires receipt of an executed lease agreement and all related documentation
before funding. The Company's internal underwriters review all applications,
leases and associated documentation for accuracy and compliance with Company
policies. The Indenture trustee in each of the Company's securitizations has
conducted independent audits of leases submitted for funding, and has the right
to conduct additional audits in the future. The Company believes that such
audits have found a high degree of compliance with the Company's underwriting
criteria and procedures.

Each funded lease is then entered by the Company on the DSI computer
system. The DSI system is well-known in the leasing industry and is capable of
performing a wide range of monitoring and reporting functions concerning all
leases within the Company's servicing portfolio. The DSI system is scalable to
various portfolio sizes and, to the Company's knowledge, is currently used by a
number of the Company's largest competitors in the small-ticket equipment
leasing market. Reports and other data available through the DSI system are used
by the Company to analyze or track a wide range of variables. For example, the
DSI system is used to analyze various credit and demographic characteristics in
order to refine the Company's credit

34
<PAGE> 36

underwriting procedures, monitor payments under all leases, and generate
management and accounting reports. The vendor payment process is also automated
through the DSI system.

SERVICING AND COLLECTIONS

The Company services all leases that have been originated or purchased by
the Company. The Company's servicing activities, with respect to both leases
retained by the Company or leases securitized or sold to third parties, consist
of collecting, accounting for and posting of all payments received; responding
to lessee inquiries; taking all necessary action to maintain the security
interest granted in the leased equipment; investigating delinquencies and taking
appropriate action; communicating with the lessee to obtain timely payments;
repossessing and reselling the collateral when necessary; and generally
monitoring each lease. The Company's existing servicing agreements provide that
the Company will bear all costs and expenses incurred in connection with
servicing activities in exchange for a fixed monthly fee assessed on each lease.
Monthly servicing fees range from $6.00 to $12.00 on each securitized lease and
are $5.00 on each lease sold to Heartland Bank. The servicing agreements require
the Company to deliver monthly reports to the securitization trustee or holder
of the lease reflecting all payment and collection activity with respect to the
leases and reconciliation of changes in the outstanding balance owed under the
leases. The Company's bank and other credit facilities do not place servicing
requirements upon the Company other than to require that the Company service
leases pledged as collateral to the respective bank or financial institution.
The sale of leases to certain institutional lease purchasers could require the
Company to relinquish the related servicing rights as well. The servicing
agreements which relate to the Company's securitizations stipulate that Norwest
Bank Minnesota, N.A. ("Norwest Minnesota") will serve as back-up servicer in the
event the Company is terminated as servicer. The Company may be terminated as
servicer by MBIA Insurance Corporation only upon the occurrence of certain
events of default in the Company's obligations as servicer or upon other
covenant violations by the Company.

The Company believes that its ability to monitor performance and collect
payments owed by lessees is primarily a function of its collection and support
systems. Certain members of the Company's management team and support staff have
extensive experience in lease servicing and collections. The Company seeks to
identify payment difficulties as early as possible and the Company's collection
staff works closely with lessees to address these difficulties. To this end, the
Company utilizes pro-active collection procedures, which include speaking by
telephone to each lessee at the outset of each lease in order to review the
payment schedule and other material terms of each new lease and to confirm the
lessee's receipt and approval of the leased equipment; attempting to repossess
leased equipment immediately following first payment defaults; communicating
with independent lease originators concerning delinquency trends; and employing
a customer service approach to assist the lessee in meeting its obligations,
which includes attempting to identify the underlying causes of delinquency and
quickly cure them whenever possible.

Delinquencies. The Company estimates that as of March 31, 1997,
approximately 8.6% of the leases in its Gross Servicing Portfolio were financed
on a recourse basis to the Company and the remaining 91.4% had been sold or
securitized on a non-recourse or limited recourse basis. In management's
opinion, the low delinquency rates of the Company's Gross Servicing Portfolio
reflect the consistent application of strict underwriting criteria, the
diversity in the Company's Gross Servicing Portfolio and the limited time period
that the vast majority of the Company's leases have been outstanding. As the
size and age of the Company's lease

35
<PAGE> 37

portfolio increases, the Company expects to experience higher delinquency rates
in the normal course of business. At March 31, 1997, the Company's portfolio of
direct financing leases had 17 delinquent leases over 31 days. The table below
sets forth certain information concerning direct financing leases held by the
Company at March 31, 1997.

DIRECT FINANCING LEASE DELINQUENCIES(1)

<TABLE>
<CAPTION>
AT MARCH 31, 1997
--------------------------
LEASE STATUS PERCENT
-------------------------------------------------------------- DOLLARS -------
--------------
(IN THOUSANDS)
<S> <C> <C>
Current....................................................... $7,244 89.1%
1-30 days past due............................................ 87 1.1
31-60 days past due........................................... 251 3.1
61-90 days past due........................................... 286 3.5
Over 90 days past due......................................... 258 3.2
------- -------
Total............................................... $8,126 100.0%
=========== =====
</TABLE>

- ---------------

(1) Excludes data for Global Finance. Data is presented using aged lease
receivables at March 31, 1997.

A majority of the leases funded by the Company have been sold to third
parties or securitized. However, to date the Company has retained the right to
service all leases that it has underwritten, including those that have been sold
or securitized. The following table sets forth certain information concerning
such leases at March 31, 1997.

LEASE DELINQUENCIES FOR LEASES SOLD OR SECURITIZED(1)

<TABLE>
<CAPTION>
AT MARCH 31, 1997
--------------------------
LEASE STATUS PERCENT
-------------------------------------------------------------- DOLLARS -------
--------------
(IN THOUSANDS)
<S> <C> <C>
Current....................................................... $ 83,072 96.3%
1-30 days past due............................................ 2,476 2.9
31-60 days past due........................................... 525 0.6
61-90 days past due........................................... 83 --
Over 90 days past due......................................... 162 0.2
-------------- -------
Total............................................... $ 86,318 100.0%
=========== =====
</TABLE>

- ---------------

(1) Excludes data for Global Finance. Data is presented using aged lease
receivables at March 31, 1997.

As illustrated in the foregoing tables, the lease delinquency rates for
leases sold or securitized are less than the delinquency rates for direct
financing leases. This difference is primarily attributable to the Company's
exercise of its right to substitute performing leases for non-performing leases
previously securitized, at which time the non-performing lease is reflected in
the direct financing lease delinquency statistics. The Company exercises its
right of lease substitution from time to time in order to limit the risk of
acceleration of the repayment of principal under outstanding certificates or
notes. Each securitization facility permits such acceleration if delinquency or
net charge-off rates exceed specified amounts. Acceleration of principal
repayments would have a material adverse effect on the Company's financial
condition inasmuch as available cash flows from the securitization residual
interest would be diverted to the investor upon acceleration until such time as
all principal has been repaid. See "Risk Factors -- Liquidity and Capital
Resources."

Reserves for Credit Losses. The Company maintains a reserve for credit
losses in connection with payments due under leases held in the Company's
portfolio. The reserve is established by management in an amount deemed
sufficient to meet future asset write downs, based on an analysis of
delinquencies, problem

36
<PAGE> 38

accounts, overall risks and probable charge-offs associated with outstanding
leases, together with a review of the Company's historical loss experience. The
reserve relates to direct financing leases held by the Company, which include
any leases received as a result of lease substitutions in a securitized pool. At
March 31, 1997, the reserve for credit losses equaled approximately 3.0% of the
direct financing leases excluding Global Finance. Due to the higher risk
associated with leases funded by Global Finance, the Company has established
significantly higher reserves for credit losses as a percentage of lease
receivables for Global Finance leases as compared to leases funded by Granite
Financial, Inc. The reserve is evaluated by management and the Board of
Directors on a quarterly basis. The Company does not provide a reserve for
credit losses for leases sold to non-recourse lenders or for leases disposed of
through securitizations, except with respect to reserves included within the
securitization residual interest. The price paid by purchasers of leases and the
terms of securitizations give effect to estimated delinquency and net charge-off
rates.

FUNDING SOURCES

The Company purchases or originates and funds leases with the intention of
either selling the lease to an institutional purchaser, securitizing the lease
through the sale of lease-backed securities or holding the lease in the
Company's own portfolio. The Company initially funds a lease through its
existing working capital or through borrowings under the Warehouse Credit Line
or other credit facilities which are available to the Company. Upon completing a
sale or securitization of a pool of leases, the Company receives funds which are
generally used to pay down borrowings under the Company's credit facilities or
to restore the Company's working capital. Borrowings under the Company's credit
facilities and, to a lesser extent, the Company's cash and cash equivalents,
will therefore fluctuate based upon the timing and amount of lease sales and
securitizations.

Bank and Other Credit Facilities. The $36.0 million Warehouse Credit Line
with CoreStates Bank and its participating lenders serves as the Company's
principal warehouse credit line. Borrowings under the Warehouse Credit Line are
collateralized by security interests in the leases against which the borrowing
applies, as well as a security interest in the underlying equipment and all cash
and non-cash proceeds therefrom. The Company maintains a $3.0 million term loan
with FBS Business Finance Corporation and a $3.0 million revolving credit
line/term loan with Norwest Equipment Finance, Inc. These credit facilities are
collateralized by the leases assigned to each lender in connection with each
advance and are similar in certain other respects to the Warehouse Credit Line.
Given the Company's access to other credit facilities, the Company may elect not
to renew these facilities. The Company established a $2.0 million unsecured
revolving credit line with Colorado National Bank in January 1997. The credit
line allows the Company to borrow up to $2.0 million for working capital
purposes on an unsecured basis. The Company has also assumed three credit
facilities as a result of its acquisition of Global Finance in March 1997. The
Global Finance credit facilities consist of a $2.2 million term loan and an
$800,000 line of credit, each with LaSalle National Bank, and a $1.5 million
term loan with Sirrom Capital, L.P. At March 31, 1997, borrowings by Global
Finance under these credit facilities totalled $4.2 million. These credit
facilities are recourse to Global Finance, are secured by equipment leases and
can only be used by Global Finance. In May 1997, LaSalle National Bank agreed to
increase the borrowing limit under the Global Finance line of credit to $5.0
million. The Company expects to prepay the term loan owed to Sirrom Capital,
L.P. using proceeds of this offering. See "Use of Proceeds" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

Securitizations. The Company has completed three securitizations which
provide for aggregate funding in the amount of approximately $114.0 million
under which the Company had securitized leases in the aggregate amount of $52.4
million as of March 31, 1997. In each securitization, the Company transfers a
pool of leases to a wholly-owned, bankruptcy remote special purpose subsidiary
established for the limited purpose of purchasing the Company's leases and
selling lease-backed certificates or notes through a grantor trust to
institutional investors. Proceeds from the sale of lease-backed certificates or
notes are used by the subsidiary to purchase leases from the Company. Such
proceeds are generally then applied by the Company to pay down its Warehouse
Credit Line or bank and other credit facilities. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

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<PAGE> 39

The Company completed its first securitization in April 1996. The
securitization provided for the issuance of $21.7 million in 6.33% Class A
Lease-Backed Notes due November 20, 2001. At March 31, 1997, the outstanding
principal balance of such notes was approximately $16.3 million with a present
value of lease receivables of $19.4 million.

In November 1996 the Company completed its second securitization facility.
The facility provides for the issuance of up to $65.0 million in aggregate
principal amount of Class A Lease-Backed Certificates due June 20, 2003. The
certificates are issuable in two tranches, a floating rate tranche and a fixed
rate tranche. The floating rate tranche bears interest at an annual rate equal
to the LIBOR rate plus 0.50% and generally converts to the fixed rate tranche on
a quarterly basis. The fixed rate tranche bears interest at an annual rate equal
to the treasury rate, as adjusted, plus 0.70%. The initial funding under the
securitization facility was approximately $7.2 million. The Company is required
to sell a minimum of $1.5 million in leases to the securitization facility per
month and until June 1997 was subject to limitations in the amount eligible to
be securitized under this facility. At March 31, 1997, certificates had been
issued in the aggregate principal amount of $15.5 million in this
securitization.

In March 1997 the Company established its third securitization facility.
This facility was established to securitize additional leases above the
eligibility limit formerly imposed in the November 1996 securitization facility.
The facility provides for the issuance of up to $27.5 million in the aggregate
principal amount of 6.82% Class A Lease-Backed Certificates due December 20,
2002. The initial funding under the securitization facility was approximately
$14.7 million. At March 31, 1997, certificates had been issued in the aggregate
principal amount of $15.2 million in this securitization.

Payments due under the lease-backed securities issued in each of the
Company's securitizations have been insured by a financial guaranty issued by
MBIA Insurance Corporation and have been rated AAA by Standard & Poor's Ratings
Group and Aaa by Moody's Investors Service. In each securitization, the lease-
backed securities were issued pursuant to an indenture (the "Indenture") by and
among the respective funding subsidiary, Norwest Minnesota, the trustee under
the Indenture, and the Company. Contemporaneously, the Company and Norwest
Minnesota entered into a servicing agreement pursuant to which the Company was
named as the servicer for all leases that collateralized the lease-backed
securities. Norwest Minnesota functions as back-up servicer, as the trustee
under the Indenture, as custodian of the lease contracts and as the paying agent
for the leases.

Under the terms of its existing securitizations, the Company has retained
the securitization residual interest. At March 31, 1997, the net book value of
the securitization residual interest totalled approximately $6.1 million. In
each securitization, the Company receives advances based on a percentage which
is less than the aggregate present value of cash flows from an undifferentiated
pool of leases, effectively overcollateralizing the lease-backed notes or
certificates. Over the life of the lease pool securitized, the Company is
eligible to receive the excess cash flow (the "securitization residual
interest") resulting from the difference between the lease payments received,
net of defaults, and the payment of (i) principal and interest to investors in
lease-backed notes or certificates and (ii) servicing, backup servicing and
trustee fees and other securitization expenses. The Company's success in
realizing the value of the securitization residual interest will depend
primarily on the performance and cash flow of the securitized leases. The
securitization residual interest is significant to the Company, and the failure
to realize all or a portion of such securitization residual interest may
adversely affect the Company's future results of operations.

The Company estimates that the cost of capital available to the Company
through securitizations has been significantly below the cost of capital to the
Company under its bank and other credit facilities. Accordingly, the Company may
enter into securitization transactions in the future in order to reduce and
control its cost of capital.

Lease Sales. From June 1995 until completion of the Company's first
securitization in April 1996, sales of leases to Heartland Bank represented the
Company's primary source of funding. Lease sales to Heartland Bank have declined
significantly since the Company's first securitization, and totalled
approximately $17.1 million in the nine months ended March 31, 1997. The Company
may sell leases to Heartland Bank or other institutional investors from time to
time in the future, particularly those leases which are not eligible for

38
<PAGE> 40

securitization. Lease sales made by the Company to Heartland Bank are generally
non-recourse, although Heartland Bank has recourse to the Company with respect
to (i) the aggregate residual equipment value of the leases where there is no
firm purchase obligation on the part of the lessee and (ii) the entirety of the
lease in the case of a first payment default. Heartland Bank has been an
affiliate of the Company since January 1996 and two directors of the Company are
also officers and directors of Heartland Bank and Heartland Leasing. See
"Certain Transactions."

COMPETITION

Competition in the equipment lease finance market is intense. Management
believes that the small-ticket equipment leasing market is highly fragmented,
with no single competitor believed to have a market share in excess of
approximately 2.0%. The Company competes for lessees with a number of national,
regional and local finance companies, some of which are active in financing
small-ticket equipment. The Company also competes against captive finance
companies affiliated with major equipment manufacturers, banks, credit unions
that provide equipment leasing and conventional leasing companies. There also
exist a large number of financial service companies and financial institutions
which, should they choose to do so, may enter the equipment leasing business in
the future. Competition in the equipment lease finance market is based primarily
on price, service and market presence. A majority of the Company's existing and
potential competitors possess substantially greater financial, marketing,
personnel and other resources than the Company. In general, many of the
Company's competitors and potential competitors are larger, more established
companies that have a lower cost of capital than the Company and which may be
able to access capital markets and funding sources that are unavailable to the
Company. Although the Company expects that future securitizations will have the
effect of making capital available at a cost which will allow the Company to
continue to offer competitive lease rates, there can be no assurance that the
Company will be successful in completing future securitizations or that such
securitizations will allow the Company to realize increased proceeds from lease
sales. The Company has and will encounter significant competition and there can
be no assurance the Company will be successful in competing in its chosen market
segments. In addition, as the Company enters new markets such as the municipal
leasing market, the Company will encounter substantial competition.

The Company believes it currently maintains a competitive advantage in the
small-ticket market segment based on the high level of service provided to its
independent lease originators and its emphasis on the use of computer systems
and software specially designed for the equipment leasing market. The Company
believes its use of specialized computer systems and related technologies
provides the Company with a competitive advantage over smaller finance
companies. The Company believes that the principal competitive factors affecting
the lease originator's decision to offer leases through a particular financing
source are the purchase price offered for the leases, the reasonableness of
underwriting guidelines and documentation requests, the predictability and
timeliness of financing and the financial stability of the funding source.
Management has devoted considerable time and effort to the development of
comprehensive underwriting guidelines and documentation and to the streamlining
of the lease underwriting process to provide its independent lease originators
with efficient, prompt and predictable outcomes.

INTELLECTUAL PROPERTY

The Company relies on a combination of common law trade secret and
trademark rights and nondisclosure agreements to protect its proprietary marks
and information. The Company has not registered any of its trademarks or service
marks, and does not believe that any such marks are necessary to the successful
operation of its business. The Company has developed certain specialty lease
programs for which the Company may register service marks in the future. There
can be no assurance the Company will receive service mark registrations on any
terms applicable to its specialty lease programs. The Company's non-exclusive
license agreements with Fair Isaac and DSI grant the Company limited
non-exclusive licenses to the respective trademark or servicemark of the
licensor for the duration of the agreement. In December 1996, the Company also
entered into a non-exclusive license for software developed by BrokerWare.

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<PAGE> 41

REGULATION

The Company's business is subject to numerous federal and state regulations
which, among other things, require the Company to obtain and maintain certain
licenses and qualifications. These regulations also address collection
practices, including the rights to repossess and sell equipment. Under certain
circumstances, the Company may also be required to comply with the Equal Credit
Opportunity Act ("ECOA"). Pursuant to the terms of the ECOA, the Company is
required to give all credit applicants notice of the right to receive a written
statement of reasons if their application for credit is denied, unless the
applicant had gross revenues exceeding $1.0 million during its last fiscal year.
The Company is also required by the ECOA to give oral or written notice of a
credit denial within 30 days after receipt of a completed lease application, or
within a reasonable time for applicants whose gross revenues exceeded $1.0
million during its last fiscal year. Although the Company believes that it is
currently in compliance with applicable statutes and regulations, there can be
no assurance that the Company will be able to maintain such compliance. The
failure to comply with such statutes and regulations could have a material
adverse effect upon the Company. Furthermore, the adoption of additional
statutes and regulations, changes in the interpretation and enforcement of
current statutes and regulations or the expansion of the Company's business into
new lease funding activities which are subject to more stringent regulatory
requirements than those which govern the Company's existing business could have
a material adverse effect upon the Company.

One of the Company's principal stockholders, Heartland Leasing, is a
wholly-owned subsidiary of Heartland Bank. Heartland Bank is a federally
chartered savings association and subject to the jurisdiction of the Office of
Thrift Supervision ("OTS"). Under authority granted by the Federal Deposit
Insurance Act, OTS regulates federally chartered savings associations as well as
wholly or partly owned subsidiaries. At May 31, 1997, Heartland Leasing owned
approximately 28% of the outstanding Common Stock of the Company and, by virtue
of such ownership, the Company may be considered a partly owned subsidiary of
Heartland Bank by OTS. To facilitate compliance by Heartland Bank with OTS
regulations and the Federal Deposit Insurance Act, the Company has agreed to
engage solely in activities that are permissible for affiliates of federally
chartered savings associations as determined by OTS or applicable regulations in
effect from time to time. The Company does not believe its operations as
currently conducted, or as proposed to be conducted, will place the Company or
Heartland Bank in violation of applicable laws or OTS regulations. Heartland
Bank's indirect affiliation with the Company may subject the Company to
examinations and could subject the Company to civil enforcement proceedings or
other action by OTS if the Company engaged in conduct impermissible for
affiliates of federally chartered savings associations. See "Principal
Stockholders."

EMPLOYEES

At June 21, 1997, the Company had 36 full-time employees. Of these, six are
principally engaged in management, three are engaged in sales and marketing and
the remainder are engaged in operations, accounting and administration. None of
the Company's employees are subject to collective bargaining agreements. The
Company believes its employee relations are excellent.

PROPERTY

The Company's offices are located in Westminster, Colorado and consist of
approximately 6,800 square feet. The offices are leased for an annual base rent
of $37,000 through July 31, 1998, subject to extension for an additional two
years at market rental rates then prevailing. The Company is also obligated to
pay its pro rata share of taxes, assessments and maintenance expenses
attributable to the building in which its offices are located. The Company plans
to relocate its headquarters during July 1997 to a larger facility in the
Denver, Colorado area. The Company is engaged in discussions regarding available
facilities which would provide approximately 13,000 to 18,000 square feet of
office space. As a result, the Company expects to incur occupancy expenses
during fiscal 1998 which are approximately $95,000 in excess of fiscal 1997
occupancy expenses.

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<PAGE> 42

LITIGATION

The Company is not a party to any litigation and is not aware of any
threatened or pending legal proceeding which would have a material adverse
effect on the Company's business, operations or financial condition.

IMPORTANT FACTORS RELATED TO FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS

Certain statements made above in this Business section and elsewhere in
this Prospectus are forward-looking statements as defined in the Reform Act.
Those forward-looking statements involve risks and uncertainties that are based
on certain assumptions that may not be realized. Those forward-looking
statements include or relate to the Company's plans or expectations to: (i)
capitalize on its operational capabilities and experienced management team, (ii)
increase productivity through utilization of advanced technologies and expansion
of its business using new interactive systems, (iii) leverage its access to
lower cost funds through securitizations and perhaps other sources to increase
the gross profit margins of acquired companies, (iv) increase its market share
as it executes its consolidation strategy, (v) successfully develop and
implement a direct electronic link with its independent lease originators, (vi)
successfully implement an interactive Web site and Internet marketing
strategies, (vii) implement additional marketing initiatives, (viii) complete
future securitization transactions and lease sales, (ix) maintain delinquency
and net charge-off rates within acceptable ranges, (x) identify, acquire and
assimilate complementary equipment leasing companies and independent lease
originators, (xi) develop additional specialty lease and vendor direct programs
in the future and (xii) commence e-commerce transactions among the Company,
equipment vendors and lessees.

The forward-looking statements included herein are based on current
expectations that involve a number of risks and uncertainties that are based on
assumptions that the Company will continue to be able to provide lease financing
at competitive rates, that the Company will be able to successfully develop its
interactive Web site and Internet marketing strategies, that the Company will be
able to locate and successfully negotiate acquisitions of complementary
equipment leasing companies and independent lease originators, that the Company
will continue to be able to provide a high level of service to its independent
lease originators, that the Company will continue to be able to attract
qualified and experienced management personnel, that the Company is more
advanced in the development of its technology-based systems than its competitors
and that it can successfully develop and implement those systems before its
competition, that competitive conditions within the industry will not change
materially or adversely, that demand for the Company's lease financing will
remain strong, that the Company will retain its existing independent lease
originators and key management personnel, that the Company's forecasts will
accurately anticipate market demand for equipment lease financing in the
small-ticket market, that the Company will continue to have access to the
asset-backed securities markets or other lower cost sources of capital, and that
there will be no material adverse change in the Company's operations or
business. Assumptions relating to the foregoing involve judgments with respect
to, among other things, future economic, competitive and market conditions, and
future business decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond the control of the Company and its
management. Although the Company believes that the assumptions underlying the
forward-looking statements made in this Prospectus are reasonable, any of those
assumptions could prove inaccurate and, therefore, there can be no assurance
that the results contemplated in any of the forward-looking statements made
herein will be realized. In addition, as disclosed elsewhere under "Risk
Factors," the business and operations of the Company are subject to substantial
risks that increase the uncertainty inherent in such forward-looking statements.
Any of the other factors disclosed under "Risk Factors" could cause the
Company's revenues or net income, or the growth in revenues or net income, to
differ materially from prior results. Growth in absolute amounts of cost of
leases sold or charge-offs or the occurrence of extraordinary events could cause
actual results to vary materially from the results contemplated by the
forward-looking statements contained herein. Budgeting and other management
decisions are subjective in many respects and thus susceptible to
interpretations and periodic revisions based on actual experience and business
developments, the impact of which may cause the Company to alter its funding,
marketing, capital expenditure or other budgets, which may in turn materially
affect the Company's results of operations. In light of the significant
uncertainties inherent in the forward-looking statements included herein, the
inclusion of such information should not be regarded as a representation by the
Company or any other person or entity that the objectives or plans of the
Company can or will be achieved.

41
<PAGE> 43

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The current directors and executive officers of the Company are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------- --- -----------------------------------------------
<S> <C> <C>
William W. Wehner........... 55 Chairman of the Board and Chief Executive
Officer
Larry K. White.............. 42 President and Chief Operating Officer
William S. Cobb............. 41 Senior Vice President of Corporate Development
and Chief Financial Officer
Mark H. Speros.............. 57 Senior Vice President of Credit Administration
Kelly G. Long............... 32 Senior Vice President and Chief Marketing
Officer
William W. ("Skip") Wehner.. 28 Senior Vice President and Senior Operations
Officer
Mark A. Miyasaki............ 33 Vice President and Chief Accounting Officer
James E. Lewis.............. 48 Director
Laurence A. Schiffer........ 57 Director
Andrew S. Love, Jr.......... 53 Director
Samuel R. Freeman........... 67 Director
</TABLE>

WILLIAM W. WEHNER has been the Chairman of the Board of the Company since
its formation in June 1996. Mr. Wehner co-founded and was the managing member of
Granite Financial, LLC, the Company's predecessor, from 1995 to 1996. From 1989
through 1994, Mr. Wehner served in several capacities with the Concord group of
companies. In 1990, Mr. Wehner formed and was the senior executive officer of
First Concord Acceptance Corporation, an equipment leasing company and an
affiliate of the Concord group of companies. From 1984 through 1989, Mr. Wehner
was the President of First Centennial Leasing Corporation, a joint venture with
The Hathaway Company which specialized in leasing high technology and office
equipment products. Mr. Wehner was President and Chief Executive Officer of
Colorado National Leasing, Inc. from 1972 through 1984. Mr. Wehner is a
Certified Lease Professional and is a member of the Equipment Leasing
Association ("ELA") and the United Association of Equipment Lessors ("UAEL").
Mr. Wehner is the father of William W. ("Skip") Wehner.

LARRY K. WHITE has been the President and Chief Operating Officer of the
Company since May 1997. From August 1995 to May 1997, Mr. White was Senior Vice
President of Operations and Chief Operating Officer of Rockford Industries,
Inc., a publicly-held specialty finance company. From June 1985 to August 1995,
he was director of operations of Tokai Financial Services, Inc., an equipment
leasing company.

WILLIAM S. COBB has been the Senior Vice President of Corporate Development
of the Company since April 1997 and Chief Financial Officer since June 1997. Mr.
Cobb also served as the Chief Financial Officer of the Company from June 1996 to
April 1997, and was the chief financial manager of Granite Financial, LLC from
February 1995 to October 1996. He was also a director of the Company from
September 1996 to April 1997. Mr. Cobb served as the Chief Financial Officer of
the JELTEX group of companies from 1995 to September 1996. From 1994 to 1995,
Mr. Cobb was acting Chief Financial Officer of Ramtron International
Corporation. From 1988 through 1993, Mr. Cobb was Vice President of Finance for
the Concord group of companies. From 1983 to 1988, Mr. Cobb was a commercial
lending officer for Bank of the Southwest and MBank.

MARK H. SPEROS has been the Senior Vice President of Credit Administration
of the Company since April 1997 and served as Senior Vice President of
Operations from June 1996 to April 1997. From February 1995 to June 1996, he was
the Director of Operations for Granite Financial, LLC. From 1993 to 1995, he was
Vice President of Operations and credit manager of Cypress Financial
Corporation, an equipment leasing firm. From 1988 through 1993, Mr. Speros was
Director of Operations for Fleet Credit and Denrich, an equipment leasing
company.

42
<PAGE> 44

KELLY G. LONG has been Senior Vice President since June 1996 and Chief
Marketing Officer of the Company since April 1997. He was a marketing director
for Granite Financial, LLC from February 1995 to June 1996. From 1991 until
1995, Mr. Long was marketing director for First Concord Acceptance Corporation.
From 1987 through 1991, Mr. Long was a sales director for Business Credit
Leasing.

WILLIAM W. ("SKIP") WEHNER has been Senior Vice President and Senior
Operations Officer of the Company since April 1997. He was Vice President of
Marketing from June 1996 to April 1997, and was marketing director for Granite
Financial, LLC from February 1995 to June 1996. From 1992 through February 1995,
Mr. Wehner was a marketing representative for First Concord Acceptance
Corporation. William W. Wehner, the Chief Executive Officer, is his father.

MARK A. MIYASAKI has been Vice President and Chief Accounting Officer of
the Company since April 1997 and served as the Company's chief accountant from
April 1996 to April 1997. From April 1992 to April 1996, Mr. Miyasaki was a
Second Vice President of Corporate Planning for Life Partners Group, a publicly-
held life insurance company. Mr. Miyasaki is a certified public accountant and,
from September 1986 to April 1992, he was employed by Gelfond Hochstadt Pangburn
Stark & Co. (formerly Laventhol & Horwath).

JAMES E. LEWIS has been a director of the Company since its formation in
June 1996, and was a member of the managing board of Granite Financial, LLC from
its inception. Since 1991, Mr. Lewis has been the Chairman of the Board and
President of the JELTEX group of companies, a group of firms engaged in
vegetable farming, fresh produce distribution and vegetable canning. From 1991
to 1993, Mr. Lewis was a consultant to the Concord group of companies. From 1986
to 1991, Mr. Lewis was Vice Chairman and Executive Director of the Concord group
of companies. Mr. Lewis is a certified public accountant and is a member of the
American Institute of CPAs and the Colorado Society of CPAs.

LAURENCE A. SCHIFFER has been a director of the Company since its formation
in June 1996, and was a member of the managing board of Granite Financial, LLC
from January 1996 until October 1996. Mr. Schiffer is the Chairman of the Board
of Heartland Bank, a wholly-owned subsidiary of Love Savings Holding Company.
Mr. Schiffer is President of Love Savings Holding Company and has been a member
of its Board of Directors since 1985. He currently is the Chairman of the Board
of Love Funding Corporation. Mr. Schiffer is also Chairman of the Board of
Heartland Leasing Corporation of Missouri, a wholly-owned subsidiary of
Heartland Bank. Mr. Schiffer has served as President of Love Investment Company
and Love Real Estate Company since 1971.

ANDREW S. LOVE, JR. has been a director of the Company since its formation
in June 1996, and was a member of the managing board of Granite Financial, LLC
from January 1996 until October 1996. Mr. Love is the Chairman of the Board of
Love Savings Holding Company. Mr. Love is also Chairman of the Finance
Committee of Heartland Bank, where he has been a director since 1985. Mr. Love
has been a member of the Board of Directors of Heartland Leasing Corporation of
Missouri since its formation in December 1995. Mr. Love engaged in the private
practice of law and was a partner of Bryan Cave, St. Louis, Missouri, from 1969
to 1992. Mr. Love is also the Chairman of the Board of Love Investment Company
and Love Real Estate Company. Mr. Love currently serves as a trustee of the
Missouri Investment Trust, and has been a director and secretary of Love Funding
Corporation since 1984.

SAMUEL R. FREEMAN has been a director of the Company since May 1997. Mr.
Freeman has been a principal of the JELTEX group of companies since December
1996. From 1994 to 1996, he served as Chairman of the Denver Research Institute
of the University of Denver. Mr. Freeman was a consultant to the Southern
Pacific Railroad Company from 1993 to 1996 and to the Concord group of companies
from 1989 to 1991 and from 1992 to 1993. From 1991 to 1992, Mr. Freeman served
as Chairman of the Board and President of Belcaro Bank. From 1973 to 1989, he
was Vice President and General Counsel of Rio Grande Industries and the Denver
Rio Grande Railroad. Mr. Freeman engaged in the private practice of law from
1959 to 1973, and is a former Assistant Attorney General in Colorado. He
currently serves as an arbitrator with the American Arbitration Association and
the National Association of Securities Dealers, Inc.

On February 23, 1995, Oren L. Benton and certain affiliates of Mr. Benton
which constitute a portion of the Concord group of companies filed for
protection under Chapter 11 of the United States Bankruptcy Code. The officers
and directors of the Company who had various affiliations with the Concord group
of companies,

43
<PAGE> 45

as described above, were not officers or directors of the Concord group of
companies at or within two years of the time of such bankruptcy filings.

The Board of Directors has established a Compensation Committee and an
Audit Committee. The members of the Compensation Committee are James E. Lewis
and Laurence A. Schiffer, both non-management directors. This Committee reviews
and makes recommendations to the Board of Directors as to general levels of
compensation for all employees of the Company, the annual salary and bonuses of
each of the executive officers of the Company, and reviews and approves
compensation and benefit plans of the Company.

The members of the Audit Committee are William W. Wehner, James E. Lewis
and Andrew S. Love, Jr. The Audit Committee is empowered by the Board of
Directors to review the financial books and records of the Company in
consultation with the Company's accounting and auditing staff and its
independent auditors, and to review with the accounting staff and independent
auditors any questions raised with respect to accounting, auditing policy and
procedure. The Audit Committee reports to the Board of Directors with respect to
such matters and recommends the selection of independent auditors.

EXECUTIVE COMPENSATION AND OTHER MATTERS

The following table provides the specified information concerning the
compensation earned by the Company's Chief Executive Officer, the only executive
officer of the Company whose total salary and bonus exceeded $100,000 for the
fiscal year ended June 30, 1996.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION -------------
------------------------------ SECURITIES ALL OTHER
SALARY BONUS UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) OPTIONS/SARS ($)
- ------------------------------------ ---- -------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C>
William W. Wehner................... 1996 $196,000 $ -- 90,000 $ 10,037(1)
Chairman of the Board and Chief
Executive Officer
</TABLE>

- ---------------

(1) Such amount consists of an automobile allowance, club dues and
associated expenses.

OPTION/SAR GRANTS TABLE

The following table provides the specified information concerning stock
options granted to the person named in the Summary Compensation Table during the
fiscal year ended June 30, 1996.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
NUMBER PERCENT OF TOTAL
OF SECURITIES OPTIONS GRANTED EXERCISE OR
UNDERLYING OPTIONS TO EMPLOYEES IN BASE PRICE
NAME GRANTED(#)(1) FISCAL YEAR ($/SHARE) EXPIRATION DATE
------------------------- --------------------- ----------------- ----------- ---------------
<S> <C> <C> <C> <C>
William W. Wehner........ 90,000 51.0% $ 6.55(1) June 22, 2001
</TABLE>

- ---------------

(1) Represents options granted pursuant to the Company's Option Plan. All
options listed were incentive stock options granted at 110.0% of fair market
value at the date of grant. These options became exercisable at the time of
grant.

44
<PAGE> 46

The following table provides the specified information concerning
unexercised stock options held as of June 30, 1996 by the person named in the
Summary Compensation Table. No options were exercised by such person in the year
ended June 30, 1996.

FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDER- VALUE OF UNEXERCISED
LYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
AT FISCAL YEAR-END(#) FISCAL YEAR-END($)(1)
----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
William W. Wehner.................. 90,000 -0- $85,500 $ --
</TABLE>

- ---------------

(1) Based upon the deemed fair value of the Common Stock at June 30, 1996, less
the exercise price payable per share. At June 30, 1996, there was no public
market for the Common Stock and the acquisition of Granite Financial, LLC
had not been completed. Accordingly, the fair value of the Company's Common
Stock at June 30, 1996 is deemed for purposes of this table to be the
Initial Public Offering price of $7.50 per share.

EMPLOYMENT CONTRACTS

Effective April 1, 1997, the Company entered into a three-year employment
agreement with William W. Wehner. The agreement provides for, among other
things: (a) a base salary of $250,000 per year, subject to increases at the
discretion of the Board of Directors; (b) a discretionary annual bonus based
upon the Company's performance, as measured by goals and objectives established
annually by the Board of Directors; (c) payment to Mr. Wehner of his base salary
(reduced by the amount received by him from state disability insurance or
workers' compensation or other similar insurance through policies provided by
the Company) for a period of 12 months and payment of $10,000 per month for 12
months thereafter if he becomes disabled so that he is unable to perform his
duties; (d) four weeks annual vacation; (e) reimbursement of life insurance
premiums in an amount up to $10,000 per year; (f) an automobile allowance in the
amount of $10,000 per year; and (g) reimbursement for ordinary and necessary
expenses incurred by Mr. Wehner in connection with his employment. The agreement
further provides that Mr. Wehner will not, directly or indirectly, compete with
the Company in the equipment lease financing business for a period of one year
following the termination of the agreement within 75 miles of the Company's
offices or the offices of any of the Company's independent lease originators.
The agreement may be terminated by the Company only with cause. Mr. Wehner may
terminate the agreement with or without cause. Upon termination of the agreement
by Mr. Wehner for cause, and after failure by the Company to remedy any
noncompliance, Mr. Wehner shall be entitled to receive his base salary and
benefits during the remaining term of the agreement. The agreement further
provides that in the event Mr. Wehner's employment is terminated following a
change in control of the Company, Mr. Wehner will be entitled to receive
severance compensation in an amount equal to 2.9 times his compensation during
the 12 months immediately preceding the change in control.

Effective April 28, 1997, the Company entered into an employment agreement
with Larry K. White. The agreement provides for, among other things: (a) a base
salary of $120,000 per year, subject to annual increases at the discretion of
the Board of Directors; (b) annual bonuses at the discretion of the Board of
Directors and guaranteed bonuses of $5,000 and $30,000 on June 30, 1997 and
1998, respectively; (c) four weeks annual vacation; (d) the grant of an
incentive stock option to purchase 10,000 shares of Common Stock at a price of
$9.50 per share in accordance with an annual vesting schedule; and (e) a term
expiring on June 30, 1998, subject to extension by the Company for an additional
one-year period. The agreement further provides that the employee will not
engage in certain competitive activities commencing as of the date of the
agreement and continuing for one year following the date on which the employee
ceases to be employed by the Company.

OPTION PLAN

The Company's Board of Directors has adopted the Option Plan in order to
offer incentives and awards to those persons who are key to the Company's
growth, development and financial success. The Option Plan permits the grant of
options to purchase an aggregate of 450,000 shares of Common Stock to directors,

45
<PAGE> 47

officers, employees, agents and consultants of the Company. The Option Plan
combines the features of an incentive and a nonqualified stock option plan, a
stock award plan and a stock appreciation rights ("SAR") plan.

The Option Plan provides for the granting of incentive stock options
("Incentive Stock Options") within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code") and non-qualified stock options.
Non-qualified stock options may be granted to employees, directors and
consultants of the Company, while Incentive Stock Options may be granted only to
employees. The Option Plan is administered by the Board of Directors, which
determines the terms and conditions of the options granted under the Option
Plan, including the exercise price, number of shares subject to the option and
the exercisability thereof. The Board of Directors may delegate administration
of the Option Plan to the Compensation Committee thereof. The Option Plan was
approved by the sole stockholder of the Company as of June 22, 1996. The Option
Plan was amended and restated in April 1997 in order to make certain technical
modifications thereto and was further amended in June 1997 to increase the
number of shares of Common Stock reserved for issuance thereunder to 900,000
shares.

The exercise price of all Incentive Stock Options granted under the Option
Plan must be at least equal to the fair market value of the Common Stock of the
Company on the date of grant, and must be 110.0% of fair market value when
granted to a 10.0% or more stockholder. The exercise price of all non-qualified
stock options granted under the Option Plan shall be not less than 85.0% of the
fair market value of the Common Stock on the date of grant. The term of all
options granted under the Option Plan may not exceed ten years, except the term
of Incentive Stock Options granted to a 10.0% or more stockholder may not exceed
five years. The Option Plan may be amended or terminated by the Board of
Directors, but no such action may impair the rights of a participant under a
previously granted option.

The Option Plan provides for the award of SARs. A SAR is an incentive award
that permits the holder to receive (per share covered thereby) the amount by
which the fair market value of a share of Common Stock on the date of exercise
exceeds the fair market value of such share on the date the SAR was granted or
at such date as the Compensation Committee designates. The Compensation
Committee may grant SARs independently, in addition to, or in tandem with (such
that the exercise of the SAR or related stock option will result in forfeiture
of the right to exercise the related stock option or SAR for an equivalent
number of shares) a stock option award.

The Option Plan provides the Board of Directors or the Compensation
Committee with the discretion to determine when options granted thereunder shall
become exercisable and the vesting period of such options. Upon termination of a
participant's employment or consulting relationship with the Company, all
unvested options terminate and are no longer exercisable. Vested non-qualified
options remain exercisable for a period not to exceed three months following the
termination date.

The Option Plan provides that, in the event the Company enters into an
agreement providing for the merger of the Company into another corporation or
the sale of substantially all of the Company's assets, any outstanding
unexercised option shall become immediately exercisable as of the date of such
agreement. Upon the consummation of the merger or sale of assets such options
shall terminate unless they are assumed or another option is substituted
therefor by the successor corporation.

COMPENSATION OF DIRECTORS

No employee of the Company receives any additional compensation for his
services as a director. Non-employee directors each receive an annual retainer
of $10,000 per year payable monthly, $1,000 per meeting attended, $500 per
committee meeting attended and options to purchase 10,000 shares of Common
Stock. The Board of Directors has also authorized payment of reasonable travel
or other out-of-pocket expenses incurred by non-management directors in
attending meetings of the Board of Directors and the committees thereof. The
Board of Directors may consider alternative director compensation arrangements
from time to time.

46
<PAGE> 48

CERTAIN TRANSACTIONS

In June 1995, Granite Financial, LLC entered into the Lease Sale Agreement
with Heartland Bank, St. Louis, Missouri. The Lease Sale Agreement called for
Heartland Bank to purchase leases from Granite Financial, LLC at a price which
was equal to the remaining cash flows of the leases purchased (including
residual equipment values), discounted to present value at an 11.5% per annum
rate. Lease sales were made in accordance with schedules prescribed by the Lease
Sale Agreement. The Lease Sale Agreement provided that the sale of leases was on
a non-recourse basis to the Company with the exception of any leases under which
a first payment default occurred. The Lease Sale Agreement also provided that,
in the event of any shortfall in the aggregate estimated residual equipment
value of the equipment underlying the leases, Heartland Bank would have recourse
to the Company to the extent of any such shortfall, but only with respect to
those leases without firm buy-out obligations on the part of the lessees. From
June 1995 to March 1996, Heartland Bank purchased leases with a face amount of
approximately $16.0 million from Granite Financial, LLC. Immediately prior to
the execution of the Lease Sale Agreement, Heartland Bank had entered into a
letter of intent with Granite Financial, LLC pursuant to which Heartland Bank
had committed to purchase an ownership interest in Granite Financial, LLC,
subject to the satisfaction of certain conditions.

In January 1996, Heartland Leasing, a wholly-owned subsidiary of Heartland
Bank, closed a purchase agreement with the members of Granite Financial, LLC,
Laurence A. Schiffer and Andrew S. Love, Jr., pursuant to which Heartland
Leasing purchased an interest in Granite Financial, LLC equal to 45.0% of the
total outstanding membership interests of Granite Financial, LLC. Concurrently
with such purchase, Messrs. Schiffer and Love became members of the board of
managers of Granite Financial, LLC. In connection with the purchase of such
membership interests by Heartland Leasing, Messrs. Wehner and Lewis and
Heartland Leasing entered into an agreement granting each other the right of
first refusal to purchase any membership interests any of them proposed to sell
on substantially the same terms as a third-party offer. Such right of first
refusal was extinguished by agreement of the parties on the date of the Initial
Public Offering.

In April 1996, Granite Financial, LLC and Heartland Bank entered into a
lease purchase agreement (the "Lease Purchase Agreement"), pursuant to which
Granite Financial, LLC repurchased approximately $16.0 million in leases
previously sold to Heartland Bank under the Lease Sale Agreement. The Lease
Purchase Agreement provided for price and discount terms which were identical to
the price and discount terms contained in the Lease Sale Agreement. However,
Heartland Bank received the income from payments under the leases during the
period from the date of sale to Heartland Bank until consummation of the Lease
Purchase Agreement. Granite Financial, LLC repurchased the leases from Heartland
Bank in order to facilitate its first securitization which was completed in
April 1996. The terms of the Lease Purchase Agreement were negotiated on behalf
of Granite Financial, LLC by Mr. Wehner and approved by Messrs. Wehner and
Lewis. Neither of Messrs. Schiffer or Love participated in the approval of the
Lease Purchase Agreement by Granite Financial, LLC. Although Granite Financial,
LLC did not secure an independent determination of the fairness and
reasonableness of such transaction, and believed that individual leases could
have been purchased from unaffiliated third parties at a price more favorable
than that negotiated with Heartland Bank, the Company's disinterested directors
believed that the Company could not have purchased a similarly sized lease
portfolio with comparable delinquency and charge-off performance on terms more
favorable than that negotiated with Heartland Bank.

Subsequent to the closing of the April 1996 asset securitization and until
completion of the Initial Public Offering, the Company continued to sell leases
to Heartland Bank in the ordinary course of business. Leases sold to Heartland
Bank from April 1996 to the date of the Initial Public Offering were sold at
prices and on identical terms to the leases sold from June 1995 to March 1996.
The sale of these leases includes a stream of payments and any residual
equipment value under the leases. However, in the event that estimated residual
equipment value is less than projected by the Company, Heartland Bank will have
recourse to the Company to the extent of any shortfall in the aggregate residual
equipment value estimated by the Company, but only with respect to those leases
without firm buy-out obligations on the part of lessees and with respect to the
entirety of the purchase price of leases experiencing a first payment default.

47
<PAGE> 49

In September 1996, Messrs. Wehner and Lewis and Heartland Leasing advanced
an aggregate of $300,000 to Granite Financial, LLC. The advances were evidenced
by promissory notes in the amounts of $57,000 and $108,000 to Messrs. Wehner and
Lewis, respectively, and in the amount of $135,000 to Heartland Leasing. The
promissory notes were unsecured, accrued interest at the rate of 11.0% per
annum, and were repaid out of the proceeds of the Initial Public Offering.

William S. Cobb, the Senior Vice President of Corporate Development and
Chief Financial Officer of the Company, has been employed by the Company since
its inception. Until September 1996, Mr. Cobb devoted approximately 50.0% of his
time to the operations of the Company. From February 1995 to September 1996, Mr.
Cobb's salary was paid in full by the JELTEX group of companies, of which James
E. Lewis, a director and principal stockholder of the Company, is a director and
principal stockholder. The Company has reimbursed the JELTEX group of companies
$76,000 paid to Mr. Cobb on the Company's behalf.

Granite Financial, LLC was formed as a limited liability company in order
to permit its members to recognize certain tax benefits, including the taxation
of earnings at the member level, as opposed to both the corporate and
stockholder level. In connection with completion of the Initial Public Offering,
the Company was reorganized from a limited liability company to a C Corporation
under the Code. The board of managers of Granite Financial, LLC declared a
distribution of approximately $100,000 payable to the members of Granite
Financial, LLC immediately prior to the Initial Public Offering of the Company
(the "Distribution"). The Distribution was equal to tax liabilities as a result
of income deemed received by certain of the members of Granite Financial, LLC
prior to the date of the Initial Public Offering. A portion of the net proceeds
received by the Company from the Initial Public Offering was used to pay the
Distribution.

48
<PAGE> 50

PRINCIPAL STOCKHOLDERS

The following table sets forth information as of June 21, 1997 concerning
beneficial ownership of the Company's Common Stock by (i) each person known by
the Company to own beneficially more than 5.0% of the Company's outstanding
Common Stock, (ii) each director and executive officer of the Company, and (iii)
all directors and executive officers of the Company as a group. Except as noted,
each person has sole voting and sole investment power with respect to the shares
shown. The address of each person listed is 6424 West 91st Avenue, Westminster,
Colorado 80030, except as otherwise indicated.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
------------------------
NUMBER OF PERCENTAGE
NAME AND ADDRESS SHARES OF CLASS
- --------------------------------------------- --------- ----------
<S> <C> <C>
William W. Wehner(1)......................... 520,000 13.5%
Larry K. White............................... -- --
William S. Cobb(2)........................... 23,000 *
Mark H. Speros(3)............................ 2,000 *
William W. ("Skip") Wehner(3)................ 2,000 *
Kelly G. Long(3)............................. 2,000 *
Mark A. Miyasaki(4).......................... 2,900 *
James E. Lewis(5)............................ 765,000 20.3%
Heartland Leasing Corporation of Missouri.... 1,050,000 28.2%
212 South Central Avenue
St. Louis, Missouri 63105
Laurence A. Schiffer(6)(7)................... 1,080,000 28.8%
212 South Central Avenue
St. Louis, Missouri 63105
Andrew S. Love, Jr.(6)(7).................... 1,080,000 28.8%
212 South Central Avenue
St. Louis, Missouri 63105
Samuel R. Freeman(8)......................... 10,000 *
Kramer Spellman, L.P......................... 550,500 14.8%
2050 Center Avenue
Fort Lee, New Jersey 07024
All Directors and Officers as a Group (11
persons)(9)................................ 2,436,900 60.8%
</TABLE>

- ---------------

* Less than 1.0%

(1) Includes 140,000 shares of Common Stock issuable upon exercise of options
that are currently exercisable or will become exercisable within 60 days of
the date of this Prospectus.

(2) Includes 20,000 shares of Common Stock issuable upon exercise of options
that are currently exercisable or will become exercisable within 60 days of
the date of this Prospectus.

(3) Consists of 2,000 shares of Common Stock issuable upon exercise of options
that are currently exercisable or will become exercisable within 60 days of
the date of this Prospectus.

(4) Includes 1,900 shares of Common Stock issuable upon exercise of options that
are currently exercisable or will become exercisable within 60 days of the
date of this Prospectus.

(5) Includes 45,000 shares of Common Stock issuable upon exercise of options
that are currently exercisable or will become exercisable within 60 days of
the date of this Prospectus.

(6) Includes shares owned of record by Heartland Leasing Corporation of
Missouri, a wholly-owned subsidiary of Heartland Bank. Mr. Schiffer is
Chairman of the Board of Heartland Leasing Corporation of Missouri and
Heartland Bank. Mr. Love is a director of Heartland Leasing Corporation of
Missouri and a director of Heartland Bank. Heartland Bank is wholly-owned by
Love Savings Holding Company, of which Mr. Love is Chairman of the Board and
a principal shareholder.

(7) Includes 30,000 shares of Common Stock issuable upon exercise of options
that are currently exercisable or will become exercisable within 60 days of
the date of this Prospectus.

(8) Consists of 10,000 shares of Common Stock issuable upon exercise of options
that are currently exercisable or will become exercisable within 60 days of
the date of this Prospectus.

(9) Includes 282,900 shares of Common Stock issuable upon exercise of options
that are currently exercisable or will become exercisable within 60 days of
the date of this Prospectus.

49
<PAGE> 51

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 20,000,000 shares
of Common Stock, par value $.001 per share, and 2,000,000 shares of Preferred
Stock, par value $.01 per share. As of March 31, 1997, 3,725,000 shares of
Common Stock were issued and outstanding. No shares of Preferred Stock are
outstanding. The following description of the Company's capital stock is
qualified in its entirety by reference to the Certificate of Incorporation and
the Bylaws of the Company.

COMMON STOCK

The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. The Company's
Certificate of Incorporation denies cumulative voting rights in the election of
directors. Accordingly, holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Subject to preferences that may be applicable to any
then-outstanding Preferred Stock, holders of Common Stock will be entitled to
receive ratably such dividends as may be declared by the Board of Directors out
of funds legally available therefor. In the event of a liquidation, dissolution
or winding up of the Company, holders of Common Stock are entitled to share
ratably in the assets remaining after payment of liabilities and the liquidation
preference of any then-outstanding Preferred Stock. Holders of Common Stock have
no preemptive, conversion or redemption rights. All of the outstanding shares of
Common Stock are, and the shares to be sold in this offering when issued and
paid for will be, fully paid and non-assessable.

PREFERRED STOCK

Pursuant to the Company's Certificate of Incorporation, the Board of
Directors has the authority, without further stockholder approval, to issue up
to 2,000,000 shares of Preferred Stock from time to time in one or more series,
to establish the number of shares to be included in each such series, and to fix
the designation, powers, preferences and rights of the shares of each such
series and the qualifications, limitations or restrictions thereof. The issuance
of Preferred Stock may have the effect of delaying or preventing a change in
control of the Company. The issuance of Preferred Stock, while providing
flexibility in connection with possible acquisitions and other corporate
purposes could, among other things, decrease the amount of earnings and assets
available for distribution to the holders of Common Stock, adversely affect the
rights and powers, including voting rights, of the holders of the Common Stock,
and, under certain circumstances, make it more difficult for a third party to
gain control of the Company, discourage bids for Common Stock at a premium or
otherwise adversely affect the market price of the Common Stock.

DELAWARE BUSINESS COMBINATION PROVISIONS

As a Delaware corporation, the Company is subject to Section 203 of the
Delaware General Corporation Law ("Section 203"), which regulates corporate
takeovers. Section 203 may have the effect of significantly delaying or
discouraging a hostile takeover of the Company. In general, Section 203 prevents
an "Interested Stockholder" (defined generally as a person with 15.0% or more of
a Delaware corporation's outstanding voting stock) from engaging in a "Business
Combination" with a Delaware corporation for three years following the date such
person became an Interested Stockholder. For purposes of Section 203, the term
"Business Combination" is defined broadly to include certain significant
business transactions (such as mergers, asset sales and certain other
transactions) with or caused by the Interested Stockholder. The three-year
restriction generally does not apply if the transaction is approved in the
manner prescribed by Section 203. Under Section 203, the restrictions described
above do not apply if, among other things, the corporation's original
certificate of incorporation contains a provision expressly electing not to be
governed by Section 203. The Company's Certificate of Incorporation does not
contain such a provision.

OUTSTANDING WARRANTS AND REGISTRATION RIGHTS

As of March 31, 1997, there were outstanding warrants to purchase an
aggregate of 150,000 shares of Common Stock at an exercise price of $10.50 per
share. In conjunction with the Initial Public Offering, the

50
<PAGE> 52

Company registered the warrants and the shares of Common Stock underlying such
warrants. However, the holder may not exercise such warrants and sell the
underlying Common Stock until October 25, 1997, and only pursuant to a then
currently effective registration statement. The warrants are exercisable through
October 2001 and are entitled to certain additional demand and incidental
registration rights during the exercise period. The warrants were issued to
Cruttenden Roth Incorporated, an Underwriter of this offering and the
representative of the underwriters in the Initial Public Offering.

Upon closing of this offering, the Company has agreed to issue Piper
Jaffray Inc. and Raymond James & Associates, Inc. warrants (the "Underwriters'
Warrants") exercisable for an aggregate of 150,000 shares of Common Stock. The
Underwriters' Warrants will be exercisable for a period of four years commencing
one year after the effective date of the Registration Statement of which this
Prospectus forms a part, at a price per share equal to 125.0% of the Price to
Public. During the exercise period, holders of the Underwriters' Warrants are
entitled to certain demand and incidental registration rights with respect to
the securities issuable upon exercise of the Underwriters' Warrants. The Common
Stock issuable on exercise of the Underwriters' Warrants is subject to
adjustment in certain events to prevent dilution. The Underwriters' Warrants
cannot be transferred, assigned or hypothecated for a period of one year from
the date of issuance except to Underwriters, selling group members and their
officers or partners.

LIMITATION OF LIABILITY AND INDEMNIFICATION

Pursuant to the provisions of the Delaware General Corporation Law, the
Company has adopted provisions in its Certificate of Incorporation which provide
that directors of the Company shall not be personally liable for monetary
damages to the Company or its stockholders for a breach of fiduciary duty as a
director, except for liability as a result of (i) a breach of the director's
duty of loyalty to the Company or its stockholders; (ii) acts or omissions not
in good faith or which involve intentional misconduct or knowing violation of
law; (iii) an act related to the unlawful stock repurchase or payment of a
dividend under Section 174 of the Delaware General Corporation Law; and (iv)
transactions from which the director derived an improper personal benefit. Such
limitation of liability does not affect the availability of equitable remedies
such as injunctive relief or rescission.

The Company's Certificate of Incorporation also authorizes the Company to
indemnify its officers, directors and other agents, by bylaws, agreements or
otherwise, to the full extent permitted under Delaware law. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Company pursuant
to the foregoing provisions, or otherwise, the Company has been advised that in
the opinion of the Securities and Exchange Commission (the "Commission"), such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Company's Common Stock is American
Securities Transfer & Trust, Inc.

51
<PAGE> 53

SHARES ELIGIBLE FOR FUTURE SALE

Sale of a substantial number of shares of Common Stock in the public market
after this offering could adversely affect the market price of the Common Stock.
Upon completion of this offering, the Company will have 5,825,000 shares of
Common Stock outstanding. Of these shares, the 2,100,000 shares sold in this
offering (and any shares sold upon exercise of the Underwriters' over-allotment
option) and approximately 1,725,000 of the currently outstanding shares will be
freely transferable without restriction or further registration under the
Securities Act, unless held by "affiliates" of the Company, as that term is
defined in Rule 144 of the Securities Act, in which case they will be subject to
resale limitations.

The remaining 2,000,000 outstanding shares of Common Stock are "restricted
securities" within the meaning of Rule 144 under the Securities Act and may not
be sold in the absence of registration under the Securities Act unless an
exemption from registration is available, including the exemption contained in
Rule 144. All of such shares are eligible for sale under Rule 144 commencing
October 25, 1997. The Company and its officers, directors and certain
stockholders have agreed that they will not sell any Common Stock without the
prior consent of Piper Jaffray Inc. for a period of 180 days after the date of
this Prospectus.

In general, under Rule 144 as currently in effect, a person who has
beneficially owned shares for at least one year would be entitled to sell,
within any three-month period, that number of "restricted" shares that does not
exceed the greater of 1.0% of the issuer's then-outstanding securities or the
average weekly trading volume in the securities during the four calendar weeks
preceding such sale, subject to certain manner of sale limitations, notice
requirements and the availability of current public information about the
issuer. In addition, Rule 144(k) provides that a person who is not deemed an
"affiliate" at any time during the three months preceding a sale, and who has
beneficially owned shares for at least two years is entitled to sell such shares
at any time under Rule 144 without regard to the limitations described above.

In addition to the shares of Common Stock that are currently outstanding, a
total of 900,000 shares of Common Stock have been reserved for issuance upon
exercise of options granted under the Option Plan, under which options to
acquire 410,000 shares of Common Stock have been granted as of June 21, 1997.
The holders of options to purchase 303,000 shares may exercise their options and
immediately sell these shares in compliance with Rule 701 of the Securities Act
without restriction under the Securities Act, except for shares held by an
"affiliate" of the Company, which remain subject to certain restrictions.

The Company can make no prediction as to the effect, if any, that sales of
shares of Common Stock or the availability of shares of Common Stock for sale
will have on the market price prevailing from time to time. Nevertheless, sales
of substantial amounts of Common Stock in the public market or the perception
that such sales may occur could have an adverse impact on the prevailing market
price of the Common Stock.

52
<PAGE> 54

UNDERWRITING

The Company has entered into a Purchase Agreement (the "Purchase
Agreement") with Piper Jaffray Inc., Raymond James & Associates, Inc. and
Cruttenden Roth Incorporated (the "Underwriters"). Subject to the terms and
conditions set forth in the Purchase Agreement, the Company has agreed to sell
to the Underwriters, and each of the Underwriters have severally agreed to
purchase, the number of shares of Common Stock set forth opposite each
Underwriter's name in the table below.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- ---------------------------------------- ---------
<S> <C>
Piper Jaffray Inc. .....................
Raymond James & Associates, Inc. .......
Cruttenden Roth Incorporated............

---------
Total......................... 2,100,000
========
</TABLE>

Subject to the terms and conditions of the Purchase Agreement, the
Underwriters have agreed to purchase all of the Common Stock being sold pursuant
to the Purchase Agreement if any is purchased (excluding shares covered by the
over-allotment option granted therein). In the event of a default by any
Underwriter, the Purchase Agreement provides that, in certain circumstances,
purchase commitments of the nondefaulting Underwriters may be increased or
decreased or, in certain instances, the Purchase Agreement may be terminated.

The Underwriters have advised the Company that the Underwriters propose to
offer the Common Stock to the public at the Price to Public set forth on the
cover page of this Prospectus and to certain dealers at such price less a
concession of not in excess of $ per share. Additionally, the
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $ per share to certain other brokers and dealers. After the
offering, the Price to Public, concession and reallowance may be changed by the
Underwriters.

The Company has granted to the Underwriters an option, exercisable by the
Underwriters during the 30-day period after the date of this Prospectus, to
purchase up to an additional 315,000 shares of Common Stock at the Price to
Public less Underwriting Discount set forth on the cover page of this
Prospectus. If the Underwriters purchase any of such additional shares pursuant
to this option, each Underwriter will be committed to purchase such additional
shares in approximately the same proportion as set forth in the table above. The
Underwriters may exercise such option solely for the purpose of covering
over-allotments, if any.

Certain of the Underwriters that currently act as market makers for the
Company's Common Stock may engage in "passive market making" in the Common Stock
on the Nasdaq National Market in accordance with Rule 103 of Regulation M under
the Exchange Act. Subject to certain conditions, Rule 103 permits underwriters
participating in a distribution to engage in limited market making transactions
during the period when Regulation M would otherwise prohibit such activity. Rule
103 generally prohibits underwriters engaged in passive market making activities
from entering a bid or effecting a purchase at a price which exceeds the highest
bid by a market maker not participating in the distribution. Rule 103 also
limits the volume of purchases which may be made by an underwriter in passive
market making activities. Subject to these limitations, certain Underwriters and
other members of the selling group intend to engage in passive market making in
the Company's Common Stock.

The Company has also agreed to issue to two of the Underwriters, Piper
Jaffray Inc. and Raymond James & Associates, Inc., for nominal consideration,
the Underwriters' Warrants to purchase 150,000 shares of Common Stock. See
"Description of Capital Stock."

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments which the Underwriters may be required to make in respect thereof.

53
<PAGE> 55

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Berliner Zisser Walter & Gallegos, P.C., Denver,
Colorado. A partner of such firm owns 5,250 shares of Common Stock and holds
options to acquire 10,000 shares of Common Stock. Certain legal matters will be
passed upon for the Underwriters by LeBoeuf, Lamb, Greene & MacRae, L.L.P., a
limited liability partnership including professional corporations, Denver,
Colorado.

EXPERTS

The consolidated financial statements of the Company as of June 30, 1996
and for the period ended June 30, 1995 and the fiscal year ended June 30, 1996,
have been included herein in reliance upon the report of Ehrhardt Keefe Steiner
& Hottman PC, independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in auditing and
accounting. With respect to the unaudited interim consolidated financial
information for the nine months ended March 31, 1996 and 1997, the independent
certified public accountants have not audited or reviewed such consolidated
financial information and have not expressed an opinion or any other form of
assurance with respect to such consolidated financial information.

ADDITIONAL INFORMATION

The Company has filed with the Commission a registration statement (the
"Registration Statement") under the Securities Act with respect to the
securities offered by this Prospectus. This Prospectus, which constitutes a part
of the Registration Statement, does not contain all of the information set forth
in the Registration Statement. For further information with respect to the
Company and the securities offered hereby, reference is made to the Registration
Statement and to the exhibits filed therewith, which may be inspected without
charge at the principal office of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and copies of the material contained therein may be
obtained from the Commission upon payment of applicable copying charges.
Statements contained in this Prospectus as to the contents of any contract or
other document referred to herein are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement.

The Company is subject to the reporting and other informational
requirements of the Exchange Act and, in accordance therewith, files reports and
other information with the Commission. Such reports, proxy statements and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at the offices of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices at Northwest Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World
Trade Center, New York, New York 10048. The Commission also maintains a Web site
on the Internet that contains reports, proxy and information statements and
other information regarding issuers, including the Company, that file
electronically with the Commission. The address of such site is
http://www.sec.gov. Copies of such materials can also be obtained by written
request to the Public Reference Section of the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.

54
<PAGE> 56

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.......................................................... F-2
Consolidated Balance Sheets as of June 30, 1996 and March 31, 1997 (unaudited)........ F-3
Consolidated Statements of Operations for the period February 21, 1995 (inception) to
June 30, 1995, the year ended June 30, 1996 and the nine months ended March 31, 1996
and 1997 (unaudited)................................................................ F-4
Consolidated Statements of Changes in Members'/Stockholders' Equity for the period
February 21, 1995 (inception) to June 30, 1995, the year ended June 30, 1996 and the
nine months ended March 31, 1997 (unaudited)........................................ F-5
Consolidated Statements of Cash Flows for the period February 21, 1995 (inception) to
June 30, 1995, the year ended June 30, 1996 and the nine months ended March 31, 1996
and 1997 (unaudited)................................................................ F-6
Notes to Consolidated Financial Statements............................................ F-8
</TABLE>

F-1
<PAGE> 57

INDEPENDENT AUDITORS' REPORT

To the Members and Manager
Granite Financial, LLC and Subsidiary
Denver, Colorado

We have audited the accompanying consolidated balance sheet of Granite
Financial, LLC and Subsidiary as of June 30, 1996 and the related consolidated
statements of operations, members' equity and cash flows for the period February
21, 1995 (inception) through June 30, 1995 and the year ended June 30, 1996.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Granite
Financial, LLC and Subsidiary as of June 30, 1996 and the results of their
operations and their cash flows for the period from February 21, 1995
(inception) through June 30, 1995 and for the year ended June 30, 1996 in
conformity with generally accepted accounting principles.

Ehrhardt Keefe Steiner & Hottman PC

August 9, 1996, except for Note 9
as to which the date is September 27, 1996
and except for Note 6 as to which the date is
October 23, 1996
Denver, Colorado

F-2
<PAGE> 58

GRANITE FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
MARCH 31,
1997
JUNE 30, -----------
1996
----------- (UNAUDITED)
<S> <C> <C>
Cash and cash equivalents....................................... $ -- $ 4,774,653
Direct financing leases (Notes 2 and 3)......................... 8,671,869 11,194,158
Direct financing leases assigned to lender (Note 2)............. 22,575,827 17,340,624
Securitization residual interest (Note 2)....................... -- 6,107,119
Other receivables............................................... -- 897,207
Prepaid and other assets........................................ 255,716 389,786
Equipment held for sale......................................... -- 349,628
Furniture and equipment, net of accumulated depreciation of
$37,350 (1996) and $130,210 (1997)............................ 399,150 780,793
Loan origination and securitization fees, net of accumulated
amortization of $20,885 (1996) and $76,354 (1997)............. 450,342 1,072,183
Goodwill........................................................ -- 2,588,567
----------- -----------
Total assets.......................................... $32,352,904 $45,494,718
========== ==========

LIABILITIES AND EQUITY

Line-of-credit (Note 4)......................................... $ 3,690,618 $ 5,685,655
Checks written in excess of bank balance........................ 288,848 --
Accounts payable and accrued expenses........................... 761,460 1,114,798
Security deposits............................................... -- 401,570
Due to trustee.................................................. -- 514,266
Due to seller of acquired business.............................. -- 1,884,000
Income taxes payable (Note 7)................................... -- 20,997
Deferred income taxes payable (Note 7).......................... -- 597,063
Limited recourse Class A note payable (Note 2).................. 20,761,785 16,293,489
Notes payable (Note 4).......................................... 4,090,818 4,236,982
----------- -----------
29,593,529 30,748,820
----------- -----------

Commitments and contingency (Notes 3 and 5)

Preferred stock, $.01 par value; 2,000,000 shares authorized;
none issued or outstanding.................................... -- --
Common stock, $.001 par value; 20,000,000 shares authorized;
3,725,000 shares issued and outstanding....................... -- 3,725
Additional paid-in capital...................................... -- 13,750,310
Members' equity/retained earnings............................... 2,759,375 991,863
----------- -----------
Total stockholders' and members' equity (Note 6)...... 2,759,375 14,745,898
----------- -----------
Total liabilities and equity.......................... $32,352,904 $45,494,718
========== ==========
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE> 59

GRANITE FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 21,
1995 FOR THE NINE MONTHS ENDED
(INCEPTION) TO YEAR ENDED MARCH 31,
JUNE 30, JUNE 30, ---------------------------
1995 1996 1996 1997
-------------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues
Sales of leases (Notes 2 and 3)....... $1,260,821 $20,638,040 $16,380,270 $50,307,716
Income from direct financing leases... 7,595 1,223,798 135,200 2,918,388
-------------- ----------- ----------- -----------
Total revenues................ 1,268,416 21,861,838 16,515,470 53,226,104
-------------- ----------- ----------- -----------
Costs
Cost of leases sold (Notes 2 and 3)... 1,171,645 19,296,885 15,296,597 46,876,077
Provision for credit losses........... 28,381 95,107 46,619 442,686
Interest expense...................... -- 550,776 15,631 1,376,999
Amortization.......................... -- -- -- 257,157
-------------- ----------- ----------- -----------
Total costs................... 1,200,026 19,942,768 15,358,847 48,952,919
-------------- ----------- ----------- -----------
Gross profit............................ 68,390 1,919,070 1,156,623 4,273,185
Other expenses
Salaries and benefits................. 194,212 642,556 417,456 1,021,790
General and administrative............ 51,728 472,144 347,726 762,070
Depreciation and amortization......... -- 40,963 26,896 151,380
-------------- ----------- ----------- -----------
Total other expenses.......... 245,940 1,155,663 792,078 1,935,240
-------------- ----------- ----------- -----------
Net (loss) income....................... (177,550) 763,407 364,545 2,337,945
Pro forma adjustment -- provision for
income taxes (Note 7)................. -- 282,000 134,880 982,563
-------------- ----------- ----------- -----------
Pro forma net (loss) income............. $ (177,550) $ 481,407 $ 229,665 $ 1,355,382
========== ========== ========== ==========
Pro forma net income per share.......... $ .24 $ .11 $ .44
========== ========== ==========
Weighted average number of pro forma
shares outstanding (Notes 1 and 6).... 2,000,000 2,000,000 3,093,900
========== ========== ==========
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE> 60

GRANITE FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN MEMBERS'/STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
TOTAL
COMMON STOCK ADDITIONAL MEMBERS'/
MEMBERS' ------------------ PAID-IN RETAINED STOCKHOLDERS'
EQUITY SHARES AMOUNT CAPITAL EARNINGS EQUITY
----------- --------- ------ ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, February 21, 1995
(inception)................. $ -- -- $ -- $ -- $ -- $ --
Equity contribution........... 945,000 -- -- -- -- 945,000
Net loss for the period
February 21, 1995
(inception) to June 30,
1995........................ (177,550) -- -- -- -- (177,550)
----------- --------- ------ ----------- -------- -------------
Balance June 30, 1995......... 767,450 -- -- -- -- 767,450
Equity contribution, net of
costs of $76,482............ 1,228,518 -- -- -- -- 1,228,518
Net income for the year....... 763,407 -- -- -- -- 763,407
----------- --------- ------ ----------- -------- -------------
Balance, June 30, 1996........ 2,759,375 -- -- -- -- 2,759,375
Net income for the period July
1, 1996 to October 25, 1996
(unaudited)................. 363,519 -- -- -- -- 363,519
Distribution to members
(unaudited)................. (111,000) -- -- -- -- (111,000)
Restructuring of Granite
Financial, LLC into Granite
Financial, Inc.
(unaudited)................. (3,011,894) 2,000,000 2,000 3,009,894 -- --
Issuance of common stock
pursuant to initial public
offering (net of offering
costs of $2,195,357)
(unaudited)................. -- 1,725,000 1,725 10,740,416 -- 10,742,141
Net income for the period
October 26, 1996 to March
31, 1997 (unaudited)........ -- -- -- -- 991,863 991,863
----------- --------- ------ ----------- -------- -------------
Balance, March 31, 1997
(unaudited)................. $ -- 3,725,000 $3,725 $13,750,310 $991,863 $ 14,745,898
========== ======== ====== ========== ======== ==========
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE> 61

GRANITE FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 21,
1995 FOR THE NINE MONTHS ENDED
(INCEPTION) TO YEAR ENDED MARCH 31,
JUNE 30, JUNE 30, -------------------------
1995 1996 1996 1997
-------------- ------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net (loss) income........................ $ (177,550) $ 763,407 $ 364,545 $ 1,355,382
-------------- ------------ ----------- -----------
Adjustments to reconcile net (loss)
income to net cash used in operating
activities
Provision for losses.................. 28,381 95,107 46,619 442,686
Loan fees amortized................... -- 54,984 -- --
Depreciation and amortization......... -- 40,963 16,343 638,634
Changes in operating assets and
liabilities
Direct financing leases............. (341,436) (8,453,921) (8,545,283) 1,135,407
Securitization residual interest.... -- -- -- (6,107,119)
Other receivables................... -- -- -- (885,860)
Prepaids and other assets........... (27,915) (20,224) (55,505) (218,107)
Equipment held for sale............. -- -- -- (333,778)
Securitization loan fees............ -- -- -- (1,096,344)
Accounts payable and accrued
expenses......................... 83,945 553,537 1,703,341 (252,205)
Due to trustee...................... -- -- -- 514,266
Current and deferred income taxes... -- -- -- 597,063
Security deposits................... -- -- -- 401,570
-------------- ------------ ----------- -----------
(257,025) (7,729,554) (6,834,485) (5,163,787)
-------------- ------------ ----------- -----------
Net cash used in operating
activities..................... (434,575) (6,966,147) (6,469,940) (3,808,405)
-------------- ------------ ----------- -----------
Cash flows from investing activities
Leases assigned to lender................ -- (24,793,127) -- --
Payments received on leases assigned to
lender................................ -- 2,217,300 -- 5,235,203
Acquisition of subsidiary net of cash
acquired.............................. -- -- -- (410,725)
Expenditures for organization costs...... (13,009) (6,826) -- --
Purchase of furniture and equipment...... (53,759) (382,742) (131,336) (404,379)
-------------- ------------ ----------- -----------
Net cash used by investing
activities..................... (66,768) (22,965,395) (131,336) 4,420,099
-------------- ------------ ----------- -----------
Cash flows from financing activities
Checks written in excess of bank
balance............................... -- 288,848 -- --
Proceeds from notes payable.............. -- 4,298,418 -- 1,032,255
Principal payments on notes payable...... -- (207,600) -- (5,056,627)
Net proceeds from line-of-credit......... -- 3,690,618 4,919,950 1,995,037
Proceeds from Class A note payable....... -- 21,688,993 -- --
Principal payments on Class A note
payable............................... -- (927,208) -- (4,468,296)
Expenditures for loan origination fees... -- (505,326) -- (68,316)
Members' equity contribution net of
related costs......................... 945,000 1,228,518 1,237,669 --
Net proceeds of common stock
issuance.............................. -- -- -- 10,839,906
Distributions to members................. -- -- -- (111,000)
Deferred offering costs paid............. -- (67,376) -- --
-------------- ------------ ----------- -----------
Net cash provided by financing
activities..................... 945,000 29,487,885 6,157,619 4,162,959
-------------- ------------ ----------- -----------
Net increase (decrease) in cash............ 443,657 (443,657) (443,657) 4,774,653
Cash -- beginning of period................ -- 443,657 443,657 --
-------------- ------------ ----------- -----------
Cash -- end of period...................... $ 443,657 $ -- $ -- $ 4,774,653
========== =========== ========== ==========
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE> 62

GRANITE FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)

Supplemental disclosure of cash flow information:

Cash paid during the period ended June 30, 1995 and the year ended June 30,
1996 for interest was $0 and $471,130, respectively, and during the nine months
ended March 31, 1996 and 1997 was $15,631 and $1,379,775, respectively.

Cash paid during the nine month periods ended March 31, 1996 and 1997 for
income taxes was $0 and $385,500, respectively.

Non cash investing and financing activities:

Deferred offering costs of $30,389 are included in accrued expenses during
the year ended June 30, 1996.

Concurrently with the consummation of the initial public offering and the
related restructuring from an LLC to a regular corporation, members' equity of
$3,011,894 was reclassified to common stock of $2,000 and additional paid-in
capital of $3,009,894. In addition, deferred offering costs of $97,765 were
reclassified to additional paid-in capital upon consummation of the initial
public offering.

On March 31, 1997, the Company acquired all of the assets and recorded
liabilities of Global Finance & Leasing, Inc. for cash of $2,334,000 ($1,884,000
of the cash was paid subsequent to period end). The assets and liabilities
acquired were as follows:

<TABLE>
<S> <C>
ASSETS ACQUIRED
-------------
Cash........................................................... $ 39,275
Direct financing leases........................................ 4,100,382
Other receivables.............................................. 11,347
Prepaid and other assets....................................... 16,684
Equipment held for sale........................................ 15,850
Furniture and equipment........................................ 70,124
----------
4,253,662
----------
LIABILITIES ASSUMED
----------------
Accounts payable............................................... 316,696
Income taxes payable........................................... 20,997
Notes payable.................................................. 4,170,536
----------
4,508,229
----------
(254,567)
Aggregate purchase price....................................... 2,334,000
----------
Goodwill....................................................... $2,588,567
=========
</TABLE>

See notes to consolidated financial statements.

F-7
<PAGE> 63

GRANITE FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Granite Financial, LLC. was organized in Colorado on February 21, 1995 and
is principally engaged in the business of originating, funding, acquiring,
selling, securitizing and servicing non-cancelable, full-payout equipment leases
for a broad range of businesses located throughout the United States. All
equipment leased is acquired from unrelated parties.

In June 1996, Granite Financial, Inc. ("GFI") was incorporated.
Concurrently with the consummation of the public offering (Note 6), GFI
exchanged 2,000,000 shares of its common stock for all of the outstanding
membership interests of Granite Financial, LLC, as a result of which GFI is the
sole member. Contemporaneously, GFI caused Granite Financial, LLC to be
liquidated and the assets were distributed to GFI as the sole member.

Interim Financial Statements

In the opinion of Granite Financial, Inc. and Subsidiaries (the Company),
the accompanying unaudited consolidated financial statements contain all
adjustments (consisting of only normal recurring accruals) necessary to present
fairly the financial position of the Company at March 31, 1997 and the results
of their operations and changes in cash flows for the nine months ended March
31, 1996 and 1997. The results of operations for the nine months ended March 31,
1997 are not necessarily indicative of the results to be expected for the full
year.

Principles of Consolidation

The Company's consolidated financial statements include the accounts of
Granite Financial, Inc. and its wholly-owned subsidiaries, GF Funding Corp. I
("GF Funding I"), GF Funding Corp. II ("GF Funding II"), GF Funding Corp. III
("GF Funding III") and Granite Financial Acquisitions Corp. I ("Granite
Acquisitions"). All intercompany accounts and transactions have been eliminated
in consolidation. The assets of GF Funding I, GF Funding II and GF Funding III
are not available to satisfy creditors of the Company.

Checks Written in Excess of Bank Balance

At June 30, 1996, the Company maintained a $0 cash balance and had written
checks in excess of its bank balance totaling approximately $289,000. Prior to
or at the time these checks are presented for payment, the Company makes
arrangements with its banks to transfer funds as necessary to permit the payment
of all outstanding checks. In the case of one bank credit facility, the Company
maintains an arrangement with the bank under which an automatic transfer is made
from the bank credit facility to the Company's checking account as checks are
presented for payment.

Direct Financing Leases

The Company has entered into various lease agreements which, in accordance
with Statement No. 13 of the Financial Accounting Standards Board, meet the
criteria of capitalization and are accounted for as direct financing leases.
Under this method, the amount by which gross lease rentals exceed the cost of
the related assets, less the estimated recoverable residual value at the
expiration of the lease, is recognized as income from direct financing leases
over the life of the lease using the interest method. Any permanent reduction in
the estimated residual equipment value of leased property is charged to
operations in the period it occurs.

Sales of Leases

The Company generally sells the leases it acquires or originates through
securitization transactions or on a portfolio basis to Heartland Bank on a
non-recourse basis. The Company may also sell leases to other financial
institutions either on a recourse or nonrecourse basis. In a securitization
transaction, the Company

F-8
<PAGE> 64

GRANITE FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

sells and transfers a pool of leases to a wholly-owned, bankruptcy remote,
special purpose subsidiary. This subsidiary in turn simultaneously sells and
transfers its interest in the leases to a trust which issues beneficial
interests in the leases in the form of senior and subordinated securities. The
Company generally retains the right to receive any excess cash flows of the
trust (the Securitization Residual Interest).

Proceeds from the sale of leases sold through securitization transactions
are reflected as sales of leases. The cost basis of the leases is allocated
between the portion sold and the securitization residual interest in the cash
flows based on a relative fair value basis on the date of sale. The fair value
of the portion sold is based on the price at which the related securities are
sold through private placement transactions, while the fair value of the
securitization residual interest is based on the Company's estimate of its fair
value using a risk adjusted discounted cash flow approach.

On January 1, 1997, the Company adopted SFAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities"
("SFAS 125"). SFAS 125 provides consistent standards for distinguishing
transfers of financial assets that are sales from transfers that are secured
borrowings. Under SFAS 125, after a transfer of financial assets, an entity
recognizes the financial and servicing assets it controls and the liabilities it
has incurred, derecognizes financial assets when control has been surrendered,
and derecognizes liabilities when extinguished. SFAS 125 prohibits early
application and, accordingly, the Company adopted this standard for transactions
which occurred after December 31, 1996. Under SFAS 125, a transfer of lease
assets in which the transferor surrenders control of the lease assets is
accounted for as a sale and the transferred lease assets are removed from the
balance sheet with the resulting gain or loss on sale reflected in the statement
of operations.

Direct Financing Leases Assigned to Lender

As SFAS 125 prohibits early application, prior to January 1, 1997, direct
financing leases sold as part of a securitization to a special-purpose entity
that issued debt securities were accounted for as collateralized borrowings. The
securitized leases, recorded as Direct Financing Leases Assigned to Lender, and
the related debt are reflected in the consolidated balance sheets.

Securitization Residual Interest

Securitization residual interest represents the excess cash flow resulting
from the difference between lease payments received in the Trust, net of
defaults, and the payment of principal and interest to investors in lease backed
notes or certificates and servicing, backup servicing, trustee fees and other
securitization expenses. Income from the Securitization Residual Interest is
recognized over the life of the securitized leases using the interest method.

Furniture and Equipment

Furniture and equipment are recorded at cost and are depreciated on a
straight-line basis over the estimated useful lives of the equipment ranging
from five to seven years.

Organization Costs

Organization costs are recorded at cost and will be amortized on a
straight-line basis over five years.

Goodwill

Goodwill is recorded as the difference between net assets acquired and the
related purchase price and will be amortized over the estimated useful life of
twenty years.

F-9
<PAGE> 65

GRANITE FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Loan Origination Fees

Fees incurred to originate loans are deferred and amortized to interest
expense on the interest method over the term of the loan.

Lease Acquisition Costs and Broker Commissions

Lease acquisition costs consist of broker bonuses and commissions paid upon
the origination of the lease contracts. These costs are included in direct
financing leases held for sale and are amortized to expense over the life of the
related lease contracts on the interest method.

Income Taxes

Granite Financial, LLC was taxable as a partnership under federal and state
income tax laws. As such, it was not subject to income taxes as a separate
entity and its income or loss was required to be included in the income tax
returns of its members. Upon consummation of the public offering, Granite
Financial, LLC was liquidated and the successor corporation, Granite Financial,
Inc., is taxed as a regular corporation. The 1996 statements of operations
reflect pro-forma information which present proforma income taxes as if computed
at the statutory rate.

Upon liquidation of the LLC, the successor Company applied SFAS 109,
"Accounting for Income Taxes". Under SFAS 109, the Company recognized deferred
tax liabilities and assets for the expected future tax consequences of events
that have been included in the financial statements or tax returns. Deferred tax
liabilities and assets are determined based on the difference between the
financial statement and tax basis of assets and liabilities using enacted tax
rates in effect. The measurement of deferred tax assets is reduced, if
necessary, by the amount of any tax benefits that, based on available evidence,
are not expected to be realized.

Allowance for Credit Losses

An allowance for credit losses is maintained at a level which is estimated
by the Company to be necessary and adequate to provide for expected losses in
the existing portfolio of leases the Company either owns or has sold on a
recourse basis. The leases are collateralized by the equipment under lease and
lessees generally are required to personally guarantee lease payments. The
Company's risk of loss is partially mitigated by recovering collateral and
enforcing guarantees. However, the resale value of leased equipment generally
declines at a rate greater than the principal of the lease, so full recovery on
defaulted leases is usually not possible.

Net Income Per Common Share

The computation of net income per common and common equivalent share is
based upon the Treasury Stock Method using the weighted average number of common
shares outstanding during the period plus (in periods in which they have a
dilutive effect) the effect of common shares contingently issuable, primarily
from stock options and warrants.

Stock Option Plan

Prior to January 1, 1996, the Company accounted for its stock option plan
in accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, accounting for stock issued to employees, and related interpretations.
As such, compensation expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price. On
January 1, 1996, the Company adopted SFAS No. 123, Accounting for Stock-Based
Compensation, which permits entities to recognize as expense over the vesting
period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25

F-10
<PAGE> 66

GRANITE FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

and provide pro forma net income and pro forma earnings per share disclosures
for employee stock option grants made in 1995 and future years as if the
fair-value based methods defined in SFAS No. 123 had been applied. The Company
has elected to continue to apply the provisions of APB Opinion No. 25 and to
provide the pro forma disclosure provisions of SFAS No. 123.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

(2) DIRECT FINANCING LEASES

The Company's direct financing leases consist of the following:

<TABLE>
<CAPTION>
DIRECT FINANCING LEASES
DIRECT FINANCING LEASES ASSIGNED TO LENDER
-------------------------- --------------------------
JUNE 30, JUNE 30,
1996 MARCH 31, 1996 MARCH 31,
----------- 1997 ----------- 1997
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Minimum lease payments receivable....... $10,793,832 $15,205,315 $27,531,023 $20,224,799
Estimated residual equipment values of
leased property....................... 225,425 2,455,620 852,588 803,302
Lease acquisition costs and broker
commissions........................... 1,110,393 1,297,248 656,584 394,719
Unearned income......................... (2,680,359) (5,167,651) (6,170,385) (3,894,033)
Reserve for credit losses............... (660,000) (2,338,896) (88,213) (40,609)
Security deposits....................... (117,422) (257,478) (205,770) (147,554)
----------- ----------- ----------- -----------
Net direct financing leases............. $ 8,671,869 $11,194,158 $22,575,827 $17,340,624
========== ========== ========== ==========
</TABLE>

Included in direct financing leases at March 31, 1997 are the following
amounts related to Global Finance & Leasing, Inc.

<TABLE>
<CAPTION>
GLOBAL
-----------
<S> <C>
Minimum lease payments receivable....... $ 5,530,270
Estimated residual equipment values of
leased property....................... 2,146,697
Lease acquisition costs and broker
commissions........................... --
Unearned income......................... (3,105,723)
Reserve for credit losses............... (470,862)
Security deposits....................... --
-----------
Net direct financing leases............. $ 4,100,382
==========
</TABLE>

F-11
<PAGE> 67

GRANITE FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Scheduled collections of minimum lease payments receivable as of March 31,
1997 are as follows:

<TABLE>
<CAPTION>
DIRECT
FINANCING
DIRECT LEASES
YEAR ENDING FINANCING ASSIGNED TO
JUNE 30, LEASES LENDER
---------------------------------------------------------- ----------- -----------
<S> <C> <C>
1997 (remaining three months)............................ $ 1,289,764 $ 1,954,016
1998..................................................... 3,818,830 7,824,494
1999..................................................... 3,516,554 5,561,259
2000..................................................... 2,687,470 3,652,029
2001..................................................... 3,480,382 1,190,896
Thereafter............................................... 412,315 42,105
----------- -----------
$15,205,315 $20,224,799
========== ==========
</TABLE>

The Company is required to estimate the amount of leases expected to result
in default and to estimate the amount of loss that will be incurred under each
default. The Company currently provides reserves for these losses based on the
historical performance of the leases. These losses relate both to leases that
are held by the Company to maturity along with losses that could result on
leases sold to third parties. The actual losses incurred could differ materially
from the amounts that the Company has estimated in preparing the historical
financial statements.

Securitization residual interest consists of the following at March 31,
1997:

<TABLE>
<S> <C>
Future remaining cash flows............. $ 8,934,164
Estimated losses........................ (477,015)
-----------
Future remaining cash flows, net of
estimated losses...................... 8,457,149
Unearned income......................... (2,350,030)
-----------
Securitization residual interest........ $ 6,107,119
==========
</TABLE>

Asset Securitizations

The Company funds leases with the intention of selling the leases to
investors or securitizing the leases through lease-backed securities. The
Company has completed three securitizations which provide for aggregate funding
in the amount of approximately $114,000,000. In each securitization, the Company
transfers leases to a wholly-owned, bankruptcy remote special purpose subsidiary
established for the limited purpose of purchasing the Company's leases. The
subsidiary then sells the leases to a grantor trust, which in turn sells
lease-backed notes or certificates to institutional investors. Proceeds from the
sale of lease-backed notes or certificates are used by the trust to purchase
leases from the subsidiary, which uses such proceeds to purchase the leases from
the Company. The securitization may also be completed by the subsidiary without
the use of a trust, in which case the subsidiary issues the lease-backed
security directly to the investor. The lease-backed securities are promissory
notes or equity certificates which are generally collateralized by or represent
an undivided interest in the leases, the leased equipment and certain collateral
accounts. Payments due under the lease-backed securities issued in each of the
Company's securitizations have been insured by a financial guaranty policy which
provides an unconditional guarantee of the Class A note payments in the case of
defaults or prepayments on the lease assets.

In April 1996, the Company's wholly-owned subsidiary, GF Funding I, issued
$21,688,993 of 6.33% Class A Lease-Backed Term Notes due November 20, 2001 (the
Notes) in a private placement. The Notes are collateralized by (i) payments to
be made under leases contributed by Granite Financial, LLC to GF Funding I, (ii)
all of GF Funding I's rights and interest in the leased equipment, (iii) a cash
collateral

F-12
<PAGE> 68

GRANITE FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

account (which generally does not increase the overall level of credit
enhancement, but rather accommodates changes that may occur from time to time in
the form of credit enhancement from excess implicit principal balance of lease
receivables to cash) and (iv) a financial guaranty insurance policy. Under the
terms of the insurance policy, the monthly payments of interest and final
payment of principal at maturity are unconditionally guaranteed. As this
securitization was completed through the issuance of a debt security prior to
the adoption of SFAS 125, the transaction is accounted for as a collateralized
borrowing. Accordingly, the underlying lease assets, recorded as direct
financing leases assigned to lender, and the related limited recourse note
payable are reflected in the accompanying consolidated balance sheets. The
underlying assets are comprised of the Company's net investment in the leases of
$22,575,827 and $17,340,624 as of June 30, 1996 and March 31, 1997,
respectively. The related limited recourse note payable was $20,761,785 and
$16,293,489 as of June 30, 1996 and March 31, 1997, respectively.

In November 1996, GF Funding II was formed to establish the Company's
second securitization facility. The facility provides for the issuance of up to
$65 million in aggregate principal amount of Class A Lease-Backed Certificates
due June 20, 2003 (the 1996 Certificates) in a private placement. For purposes
of computing interest, the 1996 Certificates are issued in two tranches,
consisting of the Floating Rate Tranche and the Fixed Rate Tranche. The
principal amount of the Floating Rate Tranche will generally convert to the
Fixed Rate Tranche on a quarterly basis. The Floating Rate Tranche bears
interest at an annual rate equal to the LIBOR Rate, as adjusted from time to
time, plus .50%. The Fixed Rate Tranche bears interest at an annual rate equal
to the Treasury Rate, as adjusted from time to time, plus .70%. The annual
interest rate on each tranche is subject to a maximum annual rate of 10%. The
1996 Certificates represent an undivided interest in a trust estate created by
GF Funding II comprised of (i) payments to be made under leases contributed to
GF Funding II, (ii) all of GF Funding II's right and interest in the leased
equipment, (iii) a cash collateral account and (iv) a financial guaranty
insurance policy. The initial funding under the securitization facility was
approximately $7,200,000. The Company is required to sell a minimum of
$1,500,000 in leases to the securitization facility per month. As this
securitization was completed through the issuance of equity certificates and the
Company and GF Funding II have surrendered control over the future cash flows
from these lease assets for the benefit of the holders of the Certificates, the
transfer of the lease assets is accounted for as a sale. Accordingly, the
portion of the underlying lease assets sold were removed from the consolidated
balance sheet and the resulting sales of leases and cost of leases sold are
reflected in the consolidated statement of operations. The sales of leases
represent the gross proceeds from the certificate holders and the cost of leases
sold represent the Company's net investment in the portion of the lease assets
sold. The Company has recorded sales of leases and a cost of leases sold with
respect to this securitization of $17,095,885 and $15,767,796, respectively,
during the nine months ended March 31, 1997. Included in the consolidated
balance sheet is the allocated portion of the Company's net investment in the
lease assets which represents the securitization residual interest retained in
the lease assets. The allocation between the cost of leases sold and the
securitization residual interest retained is based on their relative fair values
on the date of sale. The securitization residual interest for this
securitization was $3,278,415 at March 31, 1997.

In March 1997, GF Funding III was formed to establish the Company's third
securitization facility. The facility provides for the issuance of up to
$27,500,000 in the aggregate principal amount of 6.82% Class A Lease-Backed
Certificates due December 20, 2002 (the 1997 Certificates) in a private
placement. The 1997 Certificates represent an undivided interest in a trust
estate created by GF Funding III comprised of (i) payments to be made under
leases contributed to GF Funding III, (ii) all of GF Funding III's right and
interest in the leased equipment, (iii) a cash collateral account, a capitalized
interest account, a prefunding account and a collection account and (iv) a
financial guaranty insurance policy. The Company and GF Funding III have
surrendered control over all future cash flows of the underlying lease assets
and, under SFAS 125, the securitization is accounted for as a sale. The Company
has recorded sales of leases and cost of leases sold with respect to this
transfer of $15,181,487 and $14,057,988, respectively, during the nine months
ended March 31, 1997. Included in the consolidated balance sheet is the
allocated portion of the Company's

F-13
<PAGE> 69

GRANITE FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

net investment in the lease assets which represents the securitization residual
interest retained in the lease assets. The allocation between the cost of leases
sold and the securitization residual interest retained is based on their
relative fair values on the date of sale. The securitization residual interest
for this securitization was $2,828,704 at March 31, 1997.

The source of repayment for the Notes and Certificates is the stream of
payments to be made on the equipment leases included in the corresponding pool
of transferred leases. The value of the securitization residual interest of the
collateral enhancement leases in the pool will be realized by the Company once
all principal and interest due under the Notes or Certificates and associated
expenses are paid. The collateral enhancement leases are not a separate and
distinct pool of individual leases, but rather are part of the undifferentiated
pool of leases.

(3) SALE OF LEASES

The Company entered into agreements with certain financial institutions to
sell, on an ongoing basis, certain leases, either on a recourse or non-recourse
basis. The purchase price of the leases is determined on a transaction by
transaction basis based upon the present value of the payments to be received
under the lease. Revenue, in the amount of the purchase price, is recognized on
the date of sale. The Company retains servicing of all leases under the
agreements. Sales of leases and the cost of leases sold during the period ended
June 30, 1995, the year ended June 30, 1996 and the nine months ended March 31,
1996 and 1997 were $1,260,821 and $1,171,645, $20,638,040 and $19,296,885,
$16,380,270 and $15,296,597, and $18,030,344 and $17,050,293, respectively.

Sales and cost of leases sold to Heartland Bank during the period ended
June 30, 1995, the year ended June 30, 1996 and the nine month periods ended
March 31, 1996 and 1997 were $641,993 and $605,134, $19,259,557 and $18,044,325,
$15,001,786 and $14,044,037 and $17,077,686 and $16,133,232, respectively.
Heartland Bank purchased an equity interest in the Company in January 1996. The
costs and related sales amounts are included in the accompanying consolidated
statements of operations. With respect to the leases sold to Heartland Bank,
there is recourse to the Company for the amount of the equipment residual
guarantees of approximately $759,000 at March 31, 1997.

F-14
<PAGE> 70

GRANITE FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(4) CREDIT FACILITIES

Lines-of-Credit

<TABLE>
<CAPTION>
MARCH 31,
1997
JUNE 30, -----------
1996
----------- (UNAUDITED)
<S> <C> <C>
$36,000,000 line-of-credit to a
consortium of lenders, due February
1998. Interest at the lead lender's
prime rate plus 5/8 of one percent
(9.125% at March 31, 1997) payable
monthly. The line is collateralized by
a first security interest in specific
leases pledged and the underlying
equipment............................. $ -- $ 3,114,805
$5,000,000 line-of-credit to a bank, due
June 30, 1997. Interest at the bank's
reference rate plus 1% (9.25% at June
30, 1996) payable monthly. The line is
collateralized by a security interest
in certain eligible leases, as
defined, in the agreement, including a
security interest in the equipment
covered by such leases. In February
1997, the outstanding balance of this
line was transferred into the
Company's $36 million
line-of-credit........................ 3,690,618 --
$2,000,000 unsecured line-of-credit to a
bank due January 1998. Interest is at
the bank's reference rate plus .75%
(9.25% at March 31, 1997) payable
monthly............................... -- 1,800,000
$800,000 line-of-credit to a bank, due
May 1997. Interest at the prime rate
plus 1% (9.5% at March 31, 1997)
payable monthly. The line is
collateralized by all tangible and
intangible property of a subsidiary... -- 770,850
----------- -----------
$ 3,690,618 $ 5,685,655
========= =========
</TABLE>

F-15
<PAGE> 71

GRANITE FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
MARCH 31,
1997
JUNE 30, -----------
1996
----------- (UNAUDITED)
<S> <C> <C>
Notes Payable
Note payable to bank; the note requires
a minimum monthly payment of $86,700,
as defined in the agreement, and
interest at 11%, with all unpaid
principal and interest due July 31,
1997. As part of the note agreement,
the Company assigned a portion of its
interest in the private offering of
lease-backed term notes as described
in Note 2. This agreement is evidenced
by an irrevocable proxy between the
bank and GF Funding I with respect to
all the shares of capital stock in GF
Funding I. The notes were paid in full
in November 1996 using proceeds from
the initial public offering........... $ 1,126,600 $ --
Note payable to bank, payable in monthly
installments of $28,303, including
interest of 9.80% through January
2000. The note is collateralized by
certain leases including a security
interest in the underlying equipment.
The Company has a total of a
$3,000,000 line-of-credit with the
bank to be funded in increments of
$500,000 or more...................... -- 837,296
Note payable to a limited partnership,
monthly interest only payments at 13%.
All unpaid principal and interest due
at maturity in January 2000. The note
is collateralized by all equipment,
inventory, accounts and intangibles of
a subsidiary.......................... -- 1,470,615
Note payable to a bank, payable in
monthly installments of $83,000,
including interest at 8.72% through
May 1999. The note is collateralized
by all tangible and intangible
property of a subsidiary.............. -- 1,929,071
Note payable to a bank, payable in
monthly installments of $78,754,
including interest at the Treasury
Rate plus 3% (9% at June 30, 1996),
through February, 2000 when all unpaid
principal and interest is due;
collateralized by certain leases
including a security interest in the
underlying equipment. Note was repaid
in full in November 1996 as part of a
sale of leases into the Company's
second securitization................. 2,964,218 --
----------- -----------
$ 4,090,818 $ 4,236,982
========= =========
</TABLE>

Maturities due on the notes payable as of March 31, 1997 are as follows:

<TABLE>
<CAPTION>
YEAR ENDING
JUNE 30,
-----------
<S> <C> <C>
1997 (remaining three months)................................... $ 272,469
1998............................................................ 1,154,900
1999............................................................ 1,147,193
2000............................................................ 1,662,420
-----------
$ 4,236,982
=========
</TABLE>

Each of the Company's available credit facilities contain certain financial
and reporting covenants. As of March 31, 1997, the Company was not in violation
of any reporting covenants.

F-16
<PAGE> 72

GRANITE FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(5) COMMITMENTS

Leases

The company has entered into various operating lease agreements for office
space and equipment and has an annual commitment for a software license.
Subsequent to year end, the Company renewed their office lease agreement for the
existing and additional office space. The minimum scheduled lease payments as of
March 31, 1997 are as follows:

<TABLE>
<CAPTION>
YEAR ENDING
JUNE 30,
-----------
<S> <C> <C>
1997 (three months remaining)..................................... $ 11,850
1998.............................................................. 47,123
1999.............................................................. 48,862
2000.............................................................. 4,787
---------
$ 112,622
========
</TABLE>

Rental expense included in general and administrative costs was $8,532 and
$60,717 for the period ended June 30, 1995 and the year ended June 30, 1996,
respectively, and $43,897 and $58,299 for the nine month periods ended March 31,
1996 and 1997, respectively.

Other

The Company has approved contingent fundings of approximately $31 million
in leases at March 31, 1997.

(6) MEMBERS'/STOCKHOLDERS' EQUITY

Initial Public Offering

In October 1996, the Company completed a public offering of 1,725,000
shares of common stock at $7.50 per share. The proceeds of the offering were
approximately $10,742,000, net of offering costs of $2,195,000. Additionally,
the Company issued warrants to the underwriter to purchase 150,000 shares at
$10.50.

Stock Option Plans

In June 1996, the Company adopted a Stock Option Plan (the Plan) allowing
for the issuance of qualified and non-qualified stock options to purchase an
aggregate of 450,000 shares of common stock to directors, officers, employees,
agents and consultants of the Company. The Plan is administered by the Board of
Directors. The Plan provides that qualified stock options be granted at an
exercise price equal to fair market value of the common shares of the Company on
the date of the grant, and must be at least 110% of fair market value when
granted to a 10% or more shareholder. The term of all qualified stock options
granted under the Plan may not exceed ten years, except the term of qualified
stock options granted to a 10% or more shareholder which may not exceed five
years.

The Plan provides that non-qualified stock options be granted at an
exercise price not less than 85% of the fair market value of the common shares
of the Company on the date of grant. The term of all non-qualified stock options
granted under the Plan may not exceed ten years, except the term of
non-qualified stock options granted to a 10% or more shareholder which may not
exceed five years.

F-17
<PAGE> 73

GRANITE FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In April 1997, the Plan was amended and restated in order to make certain
technical modifications thereto and was further amended in June 1997 to increase
the shares of common stock reserved for issuance to 900,000. The following is a
summary of options and warrants:

<TABLE>
<CAPTION>
EXERCISE
OPTIONS WARRANTS PRICE
-------- -------- ---------------
<S> <C> <C> <C>
Outstanding, June 30, 1996........................ 250,000 -- $5.95 to 6.55
Granted........................................... 45,000 150,000 $8.375 to 10.50
-------- -------- ---------------
Outstanding, March 31, 1997....................... 295,000 150,000 5.95 to 10.50
======= ======= =============
</TABLE>

Subsequent to March 31, 1997, the Company granted 115,000 options under the
Plan at exercise prices ranging from $9.00 to $10.45 and increased the number of
shares reserved for the Plan to 900,000 shares.

The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." Accordingly, no compensation cost has been recognized for the
stock option plan. Had compensation cost for the Company's stock option plan
been determined based on the fair value at the grant date consistent with the
provisions of SFAS No. 123, the Company's net earnings and earnings per share
would have been reduced to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30,
1996
---------- NINE MONTHS
ENDED
MARCH 31,
1997
-----------
(UNAUDITED)
<S> <C> <C>
Net income applicable to common stockholders -- as
reported.................................................. $481,407 $1,355,382
======== =========
Net income (loss) applicable to common stockholders -- pro
forma..................................................... (366,234) 1,126,309
======== =========
Earnings per share -- as reported........................... .24 .44
======== =========
Earnings (loss) per share -- pro forma...................... (.18) .36
======== =========
</TABLE>

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants: dividend yield of 0%; expected volatility of 37.8%;
discount rate of 9.0%; and expected lives of 10 years.

(7) INCOME TAXES

The Company's status as an LLC was terminated upon the completion of the
initial public offering. At that time, the deferred tax liabilities were
recorded, and a charge to earnings of approximately $100,000 was included in
continuing operations during the period of the change in tax status. The Company
distributed $111,000 to certain of the members of the LLC to provide the members
with sufficient funds to pay the tax liabilities arising as a result of income
received prior to the date of the public offering.

F-18
<PAGE> 74

GRANITE FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED
MARCH 31,
1997
------------
(UNAUDITED)
<S> <C>
Current tax provision
Federal............................................................ $335,500
State.............................................................. 50,000
Deferred tax provision
Federal............................................................ 514,218
State.............................................................. 82,845
------------
$982,563
===========
</TABLE>

Deferred taxes result from sales treatment of securitized leases for
financial reporting purposes and debt treatment for tax purposes, reserve for
bad debts and depreciation for tax purposes in excess of depreciation for
financial reporting purposes. The income tax effects of items comprising
deferred income tax expense (benefit) are as follows:

<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED
MARCH 31,
1997
------------
(UNAUDITED)
<S> <C>
Direct financing leases.............................................. $666,683
Depreciation......................................................... 21,500
Bad debts............................................................ (91,120)
------------
$597,063
===========
</TABLE>

The Company had a net deferred tax liability of $0 and $597,063 as of June
30, 1996 and March 31, 1997, respectively.

The difference between the Company's effective income tax rate and the
United States Statutory rate is as follows:

<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED
MARCH 31,
1997
------------
(UNAUDITED)
<S> <C>
United State statutory rate.......................................... 34.0%
State income tax, net of federal income tax benefit.................. 3.3
Permanent differences................................................ 4.7
-----
42.0%
===========
</TABLE>

(8) FAIR VALUE OF FINANCIAL INSTRUMENTS

Notes Payable

The fair value of the line-of-credit and bank notes payable at June 30,
1996 and March 31, 1997 approximated the carrying value because of the
short-term nature of these instruments. The fair value of the Class A
lease-backed term notes is determined based upon current market rates.

F-19
<PAGE> 75

GRANITE FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Cash and Cash Equivalents

<TABLE>
<CAPTION>
JUNE 30, 1996 MARCH 31, 1997
----------------------------- -----------------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash and cash equivalents............... $ -- $ -- $ 4,774,653 $ 4,774,653
Line-of-credit.......................... (3,690,618) (3,690,618) (5,685,655) (5,685,655)
Notes payable........................... (4,090,818) (4,090,818) (4,236,982) (4,236,982)
Limited recourse Class A note payable... (20,761,785) (20,761,785) (16,293,489) (16,575,750)
</TABLE>

The preceding methods and assumptions were used to estimate the fair value
to each class of financial instruments for which it is practicable to estimate
that value. Fair value estimates are made at a specific point in time for the
Company's financial instruments; they are subjective in nature and involve
uncertainties, matters of significant judgment and, therefore, cannot be
determined with precision. Fair value estimates do not reflect the total value
of the Company as a going concern.

(9) MAJOR SUPPLIER

The Company's leases are originated through a network of approximately 50
independent lease originators located throughout the United States. Transactions
generated by a single independent lease originator accounted for approximately
17.9% and 15.7% of the Company's leases funded during the year ended June 30,
1996 and the nine months ended March 31, 1997, respectively. Transactions
generated by the Company's ten largest independent lease originators accounted
for approximately 58.3% and 61.1% of leases funded during the year ended June
30, 1996 and the nine months ended March 31, 1997, respectively.

(10) ACQUISITIONS

On March 31, 1997, the Company acquired the assets and recorded liabilities
of Global Finance & Leasing, Inc. (Global) for an aggregate cash purchase price
of $2,334,000. The acquisition has been accounted for using the purchase method
of accounting. Under the purchase method of accounting, the results of Global
will be included in the Company's results from the acquisition date (March 31,
1997). The allocation of the purchase price to the fair market value of the net
assets is based on preliminary estimates of fair market value and may be revised
as additional information is obtained.

The acquisition agreement provides for additional contingent consideration
of $916,000 based on the collection of certain receivables. The Company believes
the collection of the certain receivables is remote; therefore, no liability is
recorded at this time.

F-20
<PAGE> 76

GRANITE FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table reflects, on an unaudited pro forma basis, the combined
operations of the Company and Global for the periods shown as if the
acquisitions had taken place at the beginning of periods shown. Appropriate
adjustments have been made to reflect the cost basis used in recording these
acquisitions. These pro forma results have been prepared for comparative
purposes only and do not purport to be indicative of the results of operations
that would have resulted had the combinations been in effect on the dates
referred to above, that have resulted since the dates of the acquisitions or
that may result in the future (in thousands, except per share amounts):

<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION NINE MONTHS ENDED
(FEBRUARY 21, YEAR ENDED MARCH 31,
1995 TO JUNE 30, JUNE 30, -----------------
1995 1996 1996 1997
---------------- ---------- ------- ------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues............................... 2,231 24,427 18,351 55,237
Net (loss) income allocated to common
stockholders......................... (151) 734 219 2,491
(Loss) income per common and common
equivalent share..................... (.08) .37 .11 .81
</TABLE>

(11) SUBSEQUENT EVENTS

In June 1997, the Company entered into a memorandum of understanding to
acquire a lease origination company located in the State of New York. The
acquisition is subject to completion of due diligence, execution of a definitive
agreement and customary closing conditions. If completed, the acquisition will
not have a material effect on the Company's financial position and results of
operations.

(12) RELATED PARTY TRANSACTION

In September 1996, two officers and Heartland Leasing advanced an aggregate
of $300,000 to Granite Financial, LLC. The promissory notes were unsecured,
accrued interest at the rate of 11% per annum, and were repaid out of the
proceeds of the initial public offering.

F-21
<PAGE> 77

(This page intentionally left blank)
<PAGE> 78

(This page intentionally left blank)
<PAGE> 79

(This page intentionally left blank)
<PAGE> 80

No dealer, salesperson or other person is authorized to give any information or
to make any representations not contained in this Prospectus in connection with
the offer made by this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the Company
or any Underwriter. This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, any of the securities offered hereby by anyone
in any jurisdiction in which such offer or solicitation is not authorized or in
which the person making such offer or solicitation is not qualified to do so, or
to anyone to whom it is unlawful to make such an offer or solicitation. Neither
the delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that the affairs of the Company since the
date hereof or the information contained in this Prospectus is correct as of any
time subsequent to the date of this Prospectus.

------------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 7
Use of Proceeds....................... 14
Dividend Policy....................... 14
Price Range of Common Stock........... 14
Capitalization........................ 15
Selected Consolidated Financial
Data................................ 16
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 17
Business.............................. 26
Management............................ 42
Certain Transactions.................. 47
Principal Stockholders................ 49
Description of Capital Stock.......... 50
Shares Eligible for Future Sale....... 52
Underwriting.......................... 53
Legal Matters......................... 54
Experts............................... 54
Additional Information................ 54
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>

2,100,000 SHARES

GRANITE LOGO

GRANITE
FINANCIAL, INC.

COMMON STOCK

-----------------------

PROSPECTUS
-----------------------

PIPER JAFFRAY INC.

RAYMOND JAMES &
ASSOCIATES, INC.

CRUTTENDEN ROTH
INCORPORATED

, 1997
<PAGE> 81

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Delaware General Corporation Law permits a corporation organized
thereunder to indemnify its directors and officers for certain of their acts.
The Certificate of Incorporation of the Company has been framed so as to conform
to the Delaware General Corporation Law.

In general, any officer, director, employee or agent may be indemnified
against expenses, fines, settlements or judgments arising in connection with a
legal proceeding to which such person is a party, if that person's actions were
in good faith, were believed to be in the Company's best interest and were not
unlawful. Unless such person is successful upon the merits in such an action,
indemnification may be awarded only after a determination by independent
decision of the Board of Directors, by legal counsel or by a vote of the
stockholders that the applicable standard of conduct was met by the person to be
indemnified.

The circumstances under which indemnification is granted in connection with
an action brought on behalf of the Company are generally the same as those set
forth above; however, with respect to such actions, indemnification is granted
only with respect to expenses actually incurred in connection with the defense
or settlement of the action. In such actions, the person to be indemnified must
have acted in good faith, in a manner believed to have been in the Company's
best interest and with respect to which such person was not adjudged liable for
negligence or misconduct.

Indemnification may also be granted pursuant to the terms of agreements
which may be entered into in the future pursuant to a vote of stockholders or
directors. The Delaware General Corporation Law and the referenced portion of
the Certificate of Incorporation also grant the power to the Company to purchase
and maintain insurance which protects its officers and directors against any
liabilities incurred in connection with their services in such a position, and
such a policy may be obtained by the Company in the future.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the costs and expenses other than
underwriting discounts, payable by the Company in connection with the sale and
distribution of the Common Stock being registered hereby. All amounts shown are
estimates, except the SEC registration fee, the NASD filing fee and the Nasdaq
listing fee.

<TABLE>
<CAPTION>
AMOUNT PAYABLE
BY THE
ITEM COMPANY
- ---------------------------------------- ---------------
<S> <C>
S.E.C. Registration Fees................ $ 7,492.30
N.A.S.D. Filing Fees.................... 2,972.46
State Securities Laws (Blue Sky) Legal
Fees.................................. 2,500.00*
Printing and Engraving.................. 120,000.00*
Legal Fees.............................. 120,000.00
Nasdaq Additional Registration Fee...... 10,000.00
Accounting Fees and Expenses............ 80,000.00*
Transfer Agent's Fees................... 5,000.00*
Miscellaneous Expenses.................. 27,035.24*
---------------
Total......................... $375,000.00*
============
</TABLE>

- ---------------

* Estimated for the purpose of filing.

II-1
<PAGE> 82

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.

(a) The Company has made the following sales of its Common Stock within the
past three years to the following persons for the cash or other consideration
indicated, which sales were not registered under the Securities Act of 1933.

<TABLE>
<CAPTION>
DATE OF NUMBER OF
NAME ISSUANCE CONSIDERATION SHARES
- ---------------------------------------- -------- ------------------------ ---------
<S> <C> <C> <C>
1. William W. Wehner(1)................. 07/11/96 $2,000 200,000
10/07/96 Membership interest in 180,000
Granite Financial, LLC
2. James E. Lewis(1).................... 10/07/96 Membership interest in 720,000
Granite Financial, LLC
3. Heartland Leasing Corporation of 10/07/96 Membership interest in 900,000
Missouri.............................. Granite Financial, LLC
</TABLE>

- ---------------

(1) Director or officer.

All the foregoing sales were made to individuals or entities which had
access to information enabling them to evaluate the merits and risks of the
investment by virtue of their relationship to the Company or their economic
bargaining power.

The Company relied on Section 4(2) of the Securities Act of 1933 for the
exemption from the registration requirements of such Act. Each investor was
furnished with information concerning the operations of the Company and each had
the opportunity to verify the information supplied. Additionally, the Company
obtained a signed representation from each of the foregoing persons or entities
of his or its intent to acquire the Common Stock of the Company for the purpose
of investment only, and not with a view toward the subsequent distribution
thereof; each of the certificates representing the Common Stock issued to the
foregoing persons or entities has been stamped with a legend restricting
transfer of the Common Stock represented thereby, and the Company issued stop
transfer instructions to American Securities Transfer & Trust, Inc., the
Transfer Agent for the Common Stock of the Company, concerning all the
certificates representing the Common Stock of the Company issued and outstanding
as represented by the foregoing table.

ITEM 27. EXHIBITS.

The following is a complete list of Exhibits filed as part of this
Registration Statement and which are incorporated herein.

II-2
<PAGE> 83

<TABLE>
<CAPTION>
EXHIBIT
NO. PAGE NO.
- ---------- -----------
<C> <S> <C>
-5. -- Opinion of Berliner Zisser Walter & Gallegos, P.C., regarding
legality of the securities covered by this Registration Statement.
*10.1.1 -- Form of Employment Agreement, dated April 1, 1997, by and between
William W. Wehner and the Company.
*10.1.2 -- Employment Agreement, dated April 28, 1997, by and between Larry K.
White and the Company.
+10.2 -- Form of Indemnification Agreement entered into between the Company
and each officer and director of the Company.
+10.3 -- 1996 Omnibus Stock Option Plan, as amended effective April 24, 1997,
authorizing 900,000 shares of Common Stock for issuance pursuant to
the Plan.
+10.4.1 -- Membership Units Purchase Agreement, dated January 31, 1996, by and
among Heartland Leasing Corporation of Missouri, Granite Financial,
LLC, James E. Lewis, William W. Wehner, Andrew S. Love, Jr., Laurence
A. Schiffer and Heartland Bank.
+10.4.2 -- Members' Agreement of Granite Financial, LLC, dated January 31, 1996,
by and among Granite Financial, LLC, James E. Lewis, William W.
Wehner and Heartland Leasing Corporation of Missouri.
+10.4.3 -- Lease Purchase Agreement, dated June 14, 1995, by and between Granite
Financial, LLC and Heartland Bank.
+10.4.4 -- Lease Sale Agreement, dated April 1, 1996, by and between Heartland
Bank and Granite Financial, LLC.
+10.4.5 -- Lease Service Agreement, dated June 14, 1995, by and between
Heartland Bank and Granite Financial, LLC.
++10.5.1 -- Loan and Security Agreement, dated February 4, 1997, by and between
CoreStates Bank, N.A. and Granite Financial, Inc.
++10.5.2 -- Unsecured Revolving Credit Agreement, dated January 30, 1997, by and
between Colorado National Bank, and Granite Financial, Inc.
+10.6 -- Lease of Space, dated June 26, 1995, by and between Arbor Lake
Limited Partnership, a Colorado limited partnership, and Granite
Financial, LLC.
+10.7 -- Form of Broker/Lessor Partnership Agreement, dated various dates, by
and between Lease Originators and Granite Financial, LLC.
+10.8.1 -- Servicing Agreement, dated April 1, 1996, by and among GF Funding
Corp. I, Norwest Bank Minnesota, National Association and Granite
Financial, LLC.
+10.8.2 -- Indenture, dated April 1, 1996, by and among GF Funding Corp. I,
Norwest Bank Minnesota, National Association and Granite Financial,
LLC.
+10.8.3 -- Lease Acquisition Agreement, dated April 10, 1996, by and between
Granite Financial, LLC and GF Funding Corp. I.
++10.9.1 -- Trust and Security Agreement, dated November 1, 1996, among G.F.
Funding Corp. II, the Company, Norwest Bank Minnesota, National
Association.
++10.9.2 -- Lease Acquisition Agreement, dated November 1, 1996, between the
Company and G.F. Funding Corp. II.
++10.9.3 -- Servicing Agreement, dated November 1, 1996, among G.F. Funding Corp.
II, the Company, Norwest Bank Minnesota, National Association.
++10.10.1 -- Trust and Security Agreement, dated March 1, 1997, by and among GF
Funding Corp. III, the Company and Norwest Bank Minnesota, National
Association.
++10.10.2 -- Lease Acquisition Agreement, dated March 1, 1997, by and between the
Company and GF Funding Corp. III.
++10.10.3 -- Servicing Agreement, dated March 1, 1997, by and among the Company,
GF Funding Corp. III and Norwest Bank Minnesota, National
Association.
</TABLE>

II-3
<PAGE> 84

<TABLE>
<CAPTION>
EXHIBIT
NO. PAGE NO.
- ---------- -----------
<C> <S> <C>
+10.11.1 -- CreditDesk(R) License Agreement, dated September 22, 1995, by and
between Fair, Isaac and Company, Inc. and Granite Financial, LLC.
+10.11.2 -- InfoLease License Agreement, dated October 5, 1995, by and between
Decision Systems, Inc. and Granite Financial, LLC.
++10.12 -- Asset Purchase Agreement, dated March 31, 1997, by and among Granite
Financial Acquisition Corp. I, Global Finance & Leasing, Inc. and
Thomas Mannes.
*10.13 -- Agreement, dated December 13, 1996, by and between BrokerWare, Inc.
and the Company.
*22. -- List of Subsidiaries.
-23.1 -- The consent of Berliner Zisser Walter & Gallegos, P.C., to the use of
its opinion with respect to the legality of the securities covered by
this Registration Statement and to the references to such firm in the
Prospectus filed as part of this Registration Statement will be
included in Exhibit 5.
**23.2 -- Consent of Ehrhardt Keefe Steiner & Hottman PC, independent certified
public accountants for the Company.
*24. -- The Power of Attorney is included in the signature page of this
Registration Statement.
++27. -- Financial Data Schedule.
</TABLE>

- ---------------

<TABLE>
<S> <C>
* Previously filed.

** Filed herewith.

- - To be filed by amendment.

+ Incorporated by reference from the Company's Registration Statement on Form SB-2
(S.E.C. File No. 333-5264-D).

++ Incorporated by reference from the Company's Form 10-QSB filed February 14, 1997
(S.E.C. File No. 1-21591).

+ Incorporated by reference from the Company's Form 10-QSB filed December 6, 1996 (S.E.C.
File No. 1-21591).

++ Incorporated by reference from the Company's Form 10-QSB filed May 15, 1997 (S.E.C.
File No. 1-21591).
</TABLE>

ITEM 28. UNDERTAKINGS.

(e) Indemnification.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

II-4
<PAGE> 85

(f) Rule 430A.

The undersigned Registrant hereby undertakes that:

(i) For the purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of Prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and
contained in a form of Prospectus filed by the Registrant under Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time the Commission declared
it effective.

(ii) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
Prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-5
<PAGE> 86

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form SB-2 and authorized this Registration Statement
or Amendment to be signed on its behalf by the undersigned in the City of
Westminster, State of Colorado on June 23, 1997.

GRANITE FINANCIAL, INC.

By: /s/ WILLIAM W. WEHNER
----------------------------------
William W. Wehner,
Chairman of the Board and
Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints, jointly and severally, William W. Wehner
or James E. Lewis, or any of them, with full power to act alone, his true and
lawful attorneys-in-fact, with full power of substitution, and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement or any Registration Statement filed pursuant to Rule 462 under the
Securities Act of 1933, and file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact full power and authority to do and perform
each and every act and thing requisite and necessary to be done as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact, or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or Amendment has been signed below by the following
persons in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- --------------------------------- --------------
<C> <S> <C>

/s/ WILLIAM W. WEHNER Chairman of the Board and Chief June 23, 1997
- --------------------------------------------- Executive Officer (Principal
William W. Wehner Executive Officer)

/s/ WILLIAM S. COBB Senior Vice President of June 23, 1997
- --------------------------------------------- Corporate Development and Chief
William S. Cobb Financial Officer (Principal
Financial and Accounting
Officer)

/s/ JAMES E. LEWIS* Director June 23, 1997
- ---------------------------------------------
James E. Lewis

/s/ LAURENCE A. SCHIFFER* Director June 23, 1997
- ---------------------------------------------
Laurence A. Schiffer

/s/ ANDREW S. LOVE, JR.* Director June 23, 1997
- ---------------------------------------------
Andrew S. Love, Jr.

/s/ SAMUEL R. FREEMAN* Director June 23, 1997
- ---------------------------------------------
Samuel R. Freeman

*By: /s/ WILLIAM W. WEHNER
- ---------------------------------------------
William W. Wehner
Attorney-in-fact
</TABLE>

II-6
<PAGE> 87

EXHIBIT INDEX

The following is a complete list of Exhibits filed as part of this
Registration Statement and which are incorporated herein.

<TABLE>
<CAPTION>
EXHIBIT
NO. PAGE NO.
- ---------- -----------
<C> <S> <C>
*1.1 -- Form of Purchase Agreement by and between Granite Financial, Inc.
(the "Company"), Piper Jaffray Inc., Raymond James & Associates, Inc.
and Cruttenden Roth Incorporated.
+2.1 -- Exchange Memorandum, dated October 7, 1996 regarding the
reorganization of the Registrant from a Colorado limited liability
company to a Delaware corporation (the "Exchange Memorandum").
+3.1 -- Certificate of Incorporation of the Company as filed on June 20, 1996
with the Secretary of State of the State of Delaware.
+3.2 -- By-laws of the Company.
+4.1.1 -- Form of specimen certificate for Common Stock of the Company.
+4.1.2 -- Form of Representative's Warrant issued by the Company to Cruttenden
Roth Incorporated in connection with the Company's initial public
offering.
-4.1.3 -- Underwriters' Warrant to be issued by the Company to Piper Jaffray
Inc. and Raymond James & Associates, Inc.
-5. -- Opinion of Berliner Zisser Walter & Gallegos, P.C., regarding
legality of the securities covered by this Registration Statement.
*10.1.1 -- Form of Employment Agreement, dated April 1, 1997, by and between
William W. Wehner and the Company.
*10.1.2 -- Employment Agreement, dated April 28, 1997, by and between Larry K.
White and the Company.
+10.2 -- Form of Indemnification Agreement entered into between the Company
and each officer and director of the Company.
+10.3 -- 1996 Omnibus Stock Option Plan, as amended effective April 24, 1997,
authorizing 900,000 shares of Common Stock for issuance pursuant to
the Plan.
+10.4.1 -- Membership Units Purchase Agreement, dated January 31, 1996, by and
among Heartland Leasing Corporation of Missouri, Granite Financial,
LLC, James E. Lewis, William W. Wehner, Andrew S. Love, Jr., Laurence
A. Schiffer and Heartland Bank.
+10.4.2 -- Members' Agreement of Granite Financial, LLC, dated January 31, 1996,
by and among Granite Financial, LLC, James E. Lewis, William W.
Wehner and Heartland Leasing Corporation of Missouri.
+10.4.3 -- Lease Purchase Agreement, dated June 14, 1995, by and between Granite
Financial, LLC and Heartland Bank.
+10.4.4 -- Lease Sale Agreement, dated April 1, 1996, by and between Heartland
Bank and Granite Financial, LLC.
+10.4.5 -- Lease Service Agreement, dated June 14, 1995, by and between
Heartland Bank and Granite Financial, LLC.
++10.5.1 -- Loan and Security Agreement, dated February 4, 1997, by and between
CoreStates Bank, N.A. and Granite Financial, Inc.
++10.5.2 -- Unsecured Revolving Credit Agreement, dated January 30, 1997, by and
between Colorado National Bank, and Granite Financial, Inc.
+10.6 -- Lease of Space, dated June 26, 1995, by and between Arbor Lake
Limited Partnership, a Colorado limited partnership, and Granite
Financial, LLC.
</TABLE>

<PAGE> 88

<TABLE>
<CAPTION>
EXHIBIT
NO. PAGE NO.
- ---------- -----------
<C> <S> <C>
+10.7 -- Form of Broker/Lessor Partnership Agreement, dated various dates, by
and between Lease Originators and Granite Financial, LLC.
+10.8.1 -- Servicing Agreement, dated April 1, 1996, by and among GF Funding
Corp. I, Norwest Bank Minnesota, National Association and Granite
Financial, LLC.
+10.8.2 -- Indenture, dated April 1, 1996, by and among GF Funding Corp. I,
Norwest Bank Minnesota, National Association and Granite Financial,
LLC.
+10.8.3 -- Lease Acquisition Agreement, dated April 10, 1996, by and between
Granite Financial, LLC and GF Funding Corp. I.
++10.9.1 -- Trust and Security Agreement, dated November 1, 1996, among G.F.
Funding Corp. II, the Company, Norwest Bank Minnesota, National
Association.
++10.9.2 -- Lease Acquisition Agreement, dated November 1, 1996, between the
Company and G.F. Funding Corp. II.
++10.9.3 -- Servicing Agreement, dated November 1, 1996, among G.F. Funding Corp.
II, the Company, Norwest Bank Minnesota, National Association.
++10.10.1 -- Trust and Security Agreement, dated March 1, 1997, by and among GF
Funding Corp. III, the Company and Norwest Bank Minnesota, National
Association.
++10.10.2 -- Lease Acquisition Agreement, dated March 1, 1997, by and between the
Company and GF Funding Corp. III.
++10.10.3 -- Servicing Agreement, dated March 1, 1997, by and among the Company,
GF Funding Corp. III and Norwest Bank Minnesota, National
Association.
+10.11.1 -- CreditDesk(R) License Agreement, dated September 22, 1995, by and
between Fair, Isaac and Company, Inc. and Granite Financial, LLC.
+10.11.2 -- InfoLease License Agreement, dated October 5, 1995, by and between
Decision Systems, Inc. and Granite Financial, LLC.
++10.12 -- Asset Purchase Agreement, dated March 31, 1997, by and among Granite
Financial Acquisition Corp. I, Global Finance & Leasing, Inc. and
Thomas Mannes.
*10.13 -- Agreement, dated December 13, 1996, by and between BrokerWare, Inc.
and the Company.
*22. -- List of Subsidiaries.
-23.1 -- The consent of Berliner Zisser Walter & Gallegos, P.C., to the use of
its opinion with respect to the legality of the securities covered by
this Registration Statement and to the references to such firm in the
Prospectus filed as part of this Registration Statement will be
included in Exhibit 5.
**23.2 -- Consent of Ehrhardt Keefe Steiner & Hottman PC, independent certified
public accountants for the Company.
*24. -- The Power of Attorney is included in the signature page of this
Registration Statement.
++27. -- Financial Data Schedule.
</TABLE>

- ---------------

<TABLE>
<S> <C>
* Previously filed.

** Filed herewith.

- - To be filed by amendment.

+ Incorporated by reference from the Company's Registration Statement on Form SB-2
(S.E.C. File No. 333-5264-D).
</TABLE>

<PAGE> 89

<TABLE>
<S> <C>
++ Incorporated by reference from the Company's Form 10-QSB filed February 14, 1997
(S.E.C. File No. 1-21591).

+ Incorporated by reference from the Company's Form 10-QSB filed December 6, 1996 (S.E.C.
File No. 1-21591).

++ Incorporated by reference from the Company's Form 10-QSB filed May 15, 1997 (S.E.C.
File No. 1-21591).
</TABLE>

<PAGE> 1
EXHIBIT 23.2

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

We have issued our report dated August 9, 1996 (except for Note 9, as to which
the date is September 27, 1996 and except for Note 6 as to which the date is
October 23, 1996), accompanying the consolidated financial statements of
Granite Financial, Inc. and Subsidiaries contained in the Registration
Statement and Prospectus. We consent to the use of the aforementioned report in
the Registration Statement and Prospectus, and to the use of our name as it
appears under the caption "Experts."

/s/ EHRHARDT KEEFE STEINER & HOTTMAN PC
Ehrhardt Keefe Steiner & Hottman PC

Denver, Colorado
June 23, 1997