Technological advances coming down the pipeline for the equipment leasing and finance industry will both challenge and bolster vendor finance relationships, if the predictions described in a recent vendor finance roundtable for The Monitor come to fruition.
Monitor panel addresses key topics
In the article, Adam D. Warner, president of Key Equipment Finance, is one of three industry thought leaders describing his experiences from 2018, changes to the vendor relationship over the last 10 years, and thoughts on the vendor market in 2019.
When asked about takeaways from the past year, Warner shared that he was pleasantly surprised that business and consumer confidence remained strong in spite of federal policy uncertainty and heightened partisanship in Washington, D.C.
"I think much of that can be attributed to the positive financial impacts from tax reform," Warner said. "Additionally, Washington dysfunction almost seems to have become the status quo, so it isn’t having the same impact as it did initially."
Financing equipment is still a viable alternative to cash, even in this economy, he added.
Vendor relationships evolve
Asked how the process of developing a new vendor relationship has changed over the last decade, Warner said he doesn't think it has changed all that much.
When pitching a new vendor, the most important thing to determine is the maturity of the financing culture that exists in their sales process. Large, established manufacturers understand the benefits of offering financing at the point of sale, so finance companies must differentiate themselves with price, service levels, and training. When a newer, emerging manufacturer enters the market, the finance company must spend more time and resources helping to build the finance culture across their sales organization.
Asked his predictions for 2019, Warner described managed services financing as becoming increasingly prevalent in equipment finance markets.
Initially, it was thought that many manufacturers would fill this need by offering more rental options, he said.
"That has happened to some extent, but manufacturers selling product still want to recognize and record the initial sale, which is not possible when renting," Warner said. "Additionally, many manufacturers would prefer to receive the sale price up front rather than over time. It will be important for equipment finance companies to find the right balance of usage-based options while limiting their risk on equipment usage or essentiality."