Original equipment manufacturers, or OEMs, saw investment increase a relatively mild 1.5% in the third quarter of 2021, according to the Equipment Leasing and Financing Association. While that’s a plucky outcome after four consecutive quarters of double-digit growth, the EFLA views the pace set in Q3 2021 as a herald of peaking or slowing growth through Q1 2022.
Beyond this initial pause, however, the ELFA sees 2022 as “an above-average year” for capital-equipment providers, with pent-up consumer demand edging out the uncertainty of another winter wave of Covid-19 amid the emergence of new variants, an ongoing labor shortage, weak supply chains, and the specter of notably higher inflation rates.
One leading technology executive isn’t too sure pent-up demand will be enough to ensure net growth next year. “With the coronavirus lockdowns back in focus in many markets around the world, it’s a challenging landscape for OEMs, which are rightfully described at the backbone of the US economy,” says Elena Ionenko, co-founder and operations chief of TurnKey Lender, a cloud-based lending-technology provider that caters to equipment makers and distributors around the globe.
Ionenko adds: “Whether we’re looking at feast, famine, or something in-between, OEMs need to increase efficiency, dexterity, and capacity in their financing operations if they want to participate in a post-Covid economy characterized by heightened demand and higher expectations from consumers and businesses alike.”
[download]
[related-solutions]
‘Intel Inside’ doesn’t tell the full story of how OEM dealers interrelate
There’s ambiguity around the term “OEM.” The most widely accepted definition, according to Wikipedia, is “a company that produces components and equipment that may be marketed by another manufacturer.”
Want another way to understand the concept? Think of parts. Carmakers, for example, buy some parts from other manufacturers to go in their vehicles. It can be cheaper for carmakers to source from other manufacturers than to set up manufacturing facilities for every little part, especially when many of these out-of-view widgets are common to different makes of automobile. In turn, this commoditization allows car-parts makers to be more efficient and competitive.
This arrangement can improve for a parts maker if the end-product producer (in our example, a car maker) endorses the part maker’s components, making them recommended replacement parts. These endorsed parts then compete with “aftermarket” parts. Meanwhile, some consumers won’t use aftermarket parts for their cars, others wouldn’t use anything else, and some decide case by case.
Although it’s tempting to use the “Intel Inside” slogan to explain how parts suppliers (Intel) and end-product manufacturers (laptop maker Dell, let’s say) work together, roles can get blurred in practice.
Some chip companies also sell consumer-ready devices under their own brands, and some computer makers also make semiconductors — though not necessarily all the chips they might need for a finished product. In this way, a company like Dell — which makes some of the chips it uses in its buyer-ready wares, buys others from third-party suppliers, and sells other chips to other end-product manufacturers — can be on any side of a given OEM equation, depending on the circumstances.
Equipment-financing capabilities have a direct application for almost 80% of companies
The OEM space is vast with nearly four-fifths of US businesses leasing or financing the equipment they need to function and thrive. Top OEM sectors include:
- Vessels and containers
- Trucks and transportation equipment
- Rail cars and rolling stock
- Mining machinery
- Medical technology and equipment
- Materials handling
- Manufacturing and industrial machinery
- IT equipment and software
- Construction and off-road equipment
- Business, retail, and office equipment
- Aircraft and unmanned aerial vehicles (drones)
- Agricultural equipment
“Each of these industries has special requirements for financing, and our modular and configurable SaaS financing platform is meeting these diverse needs,” says Ionenko. “Our offering is easy to use, compatible with different system softwares, and our technology is continuously updated so our clients never have to play catch-up with their competitors on the tech front.”
OEM financing that’s powered by artificial intelligence and machine learning
For consultancy Deloitte, the big difference between traditional and the enhanced technology for in-house lending comes down to artificial intelligence and machine learning, which “help companies efficiently discover patterns, reveal anomalies, make predictions and decisions, and generate insights — and are increasingly becoming key drivers of organizational performance.”
TurnKey Lender’s Ionenko agrees. “AI is a fulcrum for advances in in-house equipment-financing technology,” according to the executive. “Along with machine learning, AI empowers companies involved with equipment finance and equipment leasing to draw sound conclusions from a large and varied array of inputs, putting it at the heart of advanced lending capabilities.”
As a result, OEMs can improve their equipment financing with an in-house, white-label, user-friendly, and custom-configurable lending platform that provides full automation of your processes and instant credit decisioning.
Saving money and boosting efficiencies through smart lending: an OEM exec’s testimonial
OEMs that use TurnKey Lender for their equipment financing can count on:
- Streamlined and automated legacy processes
- Less human error and fewer operational inefficiencies
- Increased sales and repeated business
- Bank-grade credit scoring that meets your company’s terms and specifications
- Ability to create credit products, promotions, and risk-based pricing for your loans or leases
And, on average, outcomes for OEMs that use TurnKey Lender include:
- 58% increase to the average order value
- 44% increase in sales conversion
- 20% increase in purchase frequency within 30 days
Plus the OEM keeps the transaction fees (and any additional interest, fees, and penalties) that third-party providers usually claim for themselves.
For John Lam, head of finance and risk at Windmill Microlending, “TurnKey Lender has changed how our team works.” The OEM executive adds that TurnKey Lender is “user-friendly, cost-effective, works in the cloud, and it ‘plugs into’ other pieces of software that you are currently using or wish to use.” As a result, says Lam, Windmill Microlending has “reduced its cost-per-loan by 55%.”
