It’s emblematic of economic growth, the view of a machine — a building crane, say, or a log loader — toiling against otherwise immovable objects to meet the demands of the marketplace.
It’s hard not to stand and marvel.
So it’s fitting that capital-equipment financiers (CEFs), which help enterprises acquire capital equipment, are gearing up to play a major role in the global economy’s recovery from the coronavirus pandemic. For many of these lenders, however, the status quo is inadequate. They’re hobbled by last-generation lending technology that’s slow, cumbersome, and rigid. Here, we’ll show how some CEFs use breakthrough fintech to help companies on the economy’s front lines prepare for a post-Covid recovery.
Lay of the land for CEFs disrupted by Covid
For many businesses, purchasing equipment outright makes less sense than paying by installment. That way, installment payments can be offset by commercial gains derived from using the equipment. And it’s not just large corporations looking to control the immediate costs of capital equipment — a category encompassing everything from farm machinery to medical devices, assembly-line robots, transportation equipment, enterprise software, and even mowing machines.
Middle-market companies seem equally keen to continue a 2019 trend that, despite generally slower capital-investment spending, still saw a 4.7% increase in equipment financing last year, as low-interest rates fueled a rise in financing software and equipment purchases, according to the Equipment Leasing & Finance Foundation.
Despite suffering in the early days of the pandemic, CEFs seem to have benefited since then from even lower interest rates, and stimulus payments to consumers and businesses in much of the developed world. In the US, for example, the Federal Reserve cut the prime lending rate to zero, and Congress enacted the $3-trillion CARES Act to help keep households and vulnerable businesses afloat. While CEF verticals like mining gear, aircraft, mining equipment found no respite from a Covid-induced slowdown, computers and software roared back to meet the demand for remote-office equipment for around 35% of the working population.
Fresh off the sharpest drop in GDP since World War II, CEF outlook for 2021 “is among the most uncertain on records,” says the Washington, D.C.-based Equipment Leasing & Finance Foundation. But the industry group expects general improvement for equipment financiers next year. That said, it expects large banks “to step back from smaller-ticket deals and focus on core markets.” This, says the group– providing, the group says, “an opportunity for independents to increase market share” with small- and mid-size businesses.
What small- and mid-size enterprises need from a CEF
CEFs targeting a vast middle market of businesses that need machines, software, and other equipment to provide core lending functions need to digitize loan-approval processes that also provide better insights on risk and more dynamism around loan terms, says Dmitry Voronenko, CEO and co-founder of an industry-leading lending-tech company, TurnKey Lender:
“It’s case by case, but we frequently advise capital-equipment financiers, especially those that work with small- to medium-size enterprises to look for solutions that are broad and flexible,” says Dmitry Voronenko, CEO and co-founder of lending-tech innovator TurnKey Lender. “They need a solution that will digitize loan-approval processes, be tailored to their specific needs, and then get them to market very quickly.”
Generally, CEFs look for lending tech that:
- Automates legacy processes across each loan’s life cycle
- Provides nearly instant approvals
- Boosts sales
- Is configurable to your specifications
- Eliminates manual processes
- Actively and accurately assesses risk
- Doesn’t require specialist employees
While most of these attributes are easy to understand, it’s worth underlining the value of a lending system’s flexibility. For industries that face periodic stress — like the medical field in flu season, or, indeed, during a 100-year pandemic — or seasonality, the ability to provide incentives such as zero down, and in-season-only payments can be a lifeline, and a nice way for a CEF to stand out from rivals.
At TurnKey Lender, this wider view, coupled with pervasive digitization, speeds and integrates all processes, from initial application to the loan’s discharge. The integration and automation needed for such outcomes are bolted to the tech company’s Unified Lending Solution. This digital platform includes application processing, risk assessment, approval, loan origination, underwriting, servicing, collection, reporting, archiving, compliance, and more. It also serves to pre-qualify applicants in minutes using the AI-driven credit-approvals engine, improving the user’s experience with the system.
TurnKey Lender’s Unified Lending Solution for CEFs
In this way, TurnKey Lender applies proprietary machine-learning algorithms and deep-neural networks to help CEF clients evaluate loan applicants. While scorecards and their underlying decision rules are built into the TurnKey Lender’s platform, these can be fine-tuned to meet the particular needs of a given CEF. Customization also comes to the fore in the form of “modularity” — which lets CEFs focus on the parts of the platform they use most while enjoying the benefits of an intuitive white-label interface that preserves their branding.
This flexibility can be crucial in some sectors for other reasons. Medical and dental practices that provide proprietary financing with help from robust lending technology can spend more time with patients and less time on onerous payment negotiations — and the same can be said for mining operations, agri-businesses, or logistics companies.
“We exist to help everyone on the value chain do what they do best and most profitably. More important, point-of-treatment financing means end-customers get the products, services, or treatments they need rather than the care they happen to be able to afford at the moment,” says Voronenko.
But all businesses that require major capital expenditures to compete need CEFs with access to lending systems that busy staff members can use without a major investment of time and energy.
“It’s true that a lot of the capital-equipment financiers we speak with are looking now — and I mean right now — for tech advantages they previously thought they’d be assessing five or 10 years down the line as a way to function more efficiently,” says Voronenko. “Now, because we’re all operating in a landscape that’s been bulldozed by the coronavirus, they say the 10-years-off upgrades our system provides are needed now, and not just as a nice-to-have upgrade, but as a must-have reset to compete in a post-Covid world.”
Learn about the TurnKey Lender Unified Lending Management solution for end-to-end automation of any type of crediting process and schedule a demo tailored to your business today.