Note to readers: This article first appeared on the Equipment Finance Advisor.
By Michael Toglia
Globally, businesses are making adjustments to address the impact of the coronavirus pandemic, and Key Equipment Finance is no different, including making a recent strategic move to better serve the needs of vendors and the changing market as a whole.
“Key Equipment Finance is more committed than ever to the mid-to large-ticket commercial space,” said Shawn Arnone, Senior Vice President, Commercial Vendor Group, Key Equipment Finance. “The needs of vendor clients and their customers are evolving, and we are also evolving to support them.”
Key Equipment Finance offers expertise in competitive pricing, documentation analysis, and deal structuring to close and fund opportunities in an efficient and expedited manner. To address shifting market dynamics, it recently repositioned its commercial vendor business into two groups:
- The Enterprise Vendor Group (EVG) engages manufacturers that have a focused point of contact with decisionmakers, enhancing Key Equipment Finance’s ability to facilitate acquisition of single obligor loans, leases and multi-obligor loan-and-lease portfolios.
- The Regional Captive Group (RCG) coordinates with manufacturer and reseller sales teams to facilitate finance solutions that complement the manufacturer or reseller product offerings and provide a competitive advantage in achieving sales and product goals.
The repositioning is designed to allow Key Equipment Finance to support its vendors in the evolving market, whether through competitive pricing, thoughtful documentation and review, software-as-a-service financing, or other offerings.
“Today’s vendor finance transactions are more complex, more strategic and more relationship-based than ever before,” Arnone said. “With our organizational adjustments, we are focused on helping our vendor clients navigate the financing landscape into the future.”
Key Equipment Finance also provides direct capital, innovative structures and respected industry knowledge so its clients can make decisions with confidence, according to Arnone.
With this as the backdrop, Equipment Finance Advisor wanted to take a deeper dive into the commercial vendor market in general, and the changes at Key Equipment Finance, specifically, so we asked Arnone a few additional questions.
Shawn, what’s driving the commercial vendor changes at Key Equipment Finance?
Shawn Arnone: We're really taking advantage of some of our core strengths as a technology lender, while also adjusting to a new world in which technology is increasingly integrated into multiple traditional equipment types. We had to make some tough decisions about how we structured our commercial vendor business to most effectively position us in this new environment, which I would describe as shifting away from traditionally labeled vertical markets and toward relationship-building and technology expertise across multiple markets.
We also don’t need to educate customers on technology like we did in the past. We have always been a provider of financing to technology vendors, but now that line between technology and verticals such as healthcare and industrial has faded.
At the same time, the need for expertise in deal structuring has grown, so we will engage with our vendor clients in two ways. The first way is as a traditional, single point of contact on completed and documented deals. In this role, we assist our manufacturers and resellers with their credit capacity needs or portfolio diversification efforts, or deals originated with the intention to sell. This enables the client to avoid using its own balance sheet and focus on an appropriate solution to get the asset underwritten, structured and funded.
The second way we engage with vendors is in a regional capacity, working with a direct sales force, or a captive or lease administrative group within a vendor, where they are actually the ones interacting with the manufacturer or reseller sales representatives. In this relationship, the client is interacting with a finance company regionally on how to fund and syndicate opportunities. While the vendor sales representative is talking to the end user about their technical needs, we can engage with the vendor’s finance colleagues with solutions on how to structure the deal.
What should commercial vendors expect from Key Equipment Finance going forward?
Arnone: They should expect Key Equipment Finance to continue to deliver expertise on how to thoughtfully structure and execute deals efficiently. In addition, in our regional group, vendor clients will have someone who is dedicated to a specific market, has local knowledge, can move quickly, and provides bespoke structures at market competitive prices.
How do you see the vendor market changing as a result of the global pandemic?
Arnone: The global pandemic has put a spotlight on the strength of relationships, and relationships with vendors have never been more meaningful. In this environment, finance companies and manufacturers/resellers rely on each other more, making the relationship not only about price, but also about efficiency, effectiveness and delivering solutions with a strong sense of urgency. Vendor finance companies that compete only on price are suffering now. I’ve heard about portfolios that are not that healthy, with possible spikes in delinquency or prolonged deferral periods, which suggests their margins are not enough to accommodate these types of events. The pandemic has also forced some to raise their pricing, and with that being their only differentiator, volumes have drastically slowed down, causing many to rethink their commitment to the vendor space. Entering into any relationship, it’s important for both parties to bring value through many areas (e.g., pricing, speed, efficiency, documentation, knowledge.)
At Key Equipment Finance, we encourage our team to take the time and make the effort to build relationships. This includes having live conversations about what’s happening in communities, developments in their market, or to share industry knowledge. This pandemic has forced vendor finance companies to take a more relationship-based approach, and that’s a good thing. There aren’t many good things to come out of this pandemic, but a greater focus on building trust and continuity is one of them.
There’s no doubt that 2020 has taught us all a lot. As we head into 2021, what lessons do you think we’ve learned?
Arnone: One lesson is to always make sure you bring unchanging value in good times and in bad times. This consistency, while hard to maintain when the economy may be throwing curve balls, is vitally important over the course of a relationship.
A second lesson is that we are all in this together. The equipment finance industry is collaborative, and that is a benefit when it enables relationship building with our industry colleagues. Throughout this pandemic, I’ve talked with some counterparts at other vendor finance companies, and we’ve gained knowledge through industry forums, sharing stories and seeking perspectives.
Lastly, as we look to 2021, I think we’ve learned that no single company can be everything to everyone. Within the industry, we’ve learned to reflect on each of our strategic goals and evaluate our relationships closely, focusing on those that are mutually beneficial to both parties as the market evolves. We’ve relearned the lesson that it’s ok to pass on an opportunity if the strategic fit isn’t there.
Despite the significant changes this year, what remains steadfast and true in the commercial vendor space?
Arnone: Longevity and experience remains important in our industry. As one of the largest bank-owned equipment finance providers in the U.S., Key Equipment Finance is a standout here. Countless companies have come and gone over the years, but there are a handful that have been in the business for several decades and remain committed to the industry today. Working with a vendor finance company that has gone through turbulent times, whether it’s changes to the tax code, a recession, or a global pandemic, is really important.
I also think good execution will always be valued. Vendors don’t want to see what happens behind the scenes. They want to get the deal done right and funded as quickly and efficiently as possible. When that happens, relationships flourish.
How has the pandemic and the inability to physically meet with vendors impacted the value of in-person visits in the business development process?
Arnone: That’s a really good question, and I think these unique circumstances have really clarified the answers. First, we have to leverage the relationships we’ve built over the years. Secondly, we have to leverage additional communication tools and techniques, such as LinkedIn and the Engage app from the Equipment Leasing and Finance Association. Social media is a great equalizer right now, and it is fairly easy to connect with colleagues using these platforms. This is something we might all consider.
On the flip side, I am seeing growing fatigue with webinars and virtual events, such as cocktail hours or wine-and-cheese meet-and-greets. These have their place in business development, especially as we try to create virtual replacements for trade shows and conferences, but they aren’t always the most effective medium for engaging with prospects. I think one-on-one conversations are still the best approach, even if now they have to occur over the phone or a video/Zoom call instead of face-to-face.
About the author:
Michael Toglia's experience in commercial finance spans over 30 years having held various roles in senior management, business origination, capital markets and commercial credit underwriting. Prior to entering the publishing industry, Toglia served as Vice President of Capital Markets and as the National Sales Manager for both the Equipment Finance and Asset-Based Lending Divisions of Textron Financial Corporation. He also held various roles with General Electric Capital and CIT Group.
Toglia served as the Executive Director/CEO of the National Equipment Finance Association from 2018-2020 and has been an active member of the Equipment Leasing and Finance Association having served two terms as a member of the Service Providers Business Council Steering Committee.
Toglia holds a Bachelor’s Degree in Accounting and an M.B.A. in Finance.