Many small businesses struggle with cash flow and gaining access to capital to finance their operation and to acquire equipment. According to the Equipment Leasing & Finance Foundation, approximately eight out of 10 businesses use financing as a means to acquire equipment. However, traditional routes are failing to keep up with small businesses and their behavioral shifts when they are looking to secure equipment financing. Shopping for equipment financing online allows businesses to eliminate many barriers to accessing capital they have encountered in the past.
Problems with conventional equipment financing
Traditionally, the primary way of obtaining equipment financing was to get a loan or line of credit form your bank or explore equipment leasing options through the supplier. While both of these options support the utility of equipment financing, they fall short in meeting what has become the expected “customer experience” like in many other traditional industries that have now been “disrupted”.
- Traditional Banks can be slow and usually require a lot internal financial details, financial statements, and personal guarantees
- Banks can have lengthy turnaround times for reviewing applications
- You are required to physically be present to initiate and move through the process
- Lack user experience when compared to other industries such as access points, mobile, and execution
- Time and resource constrained business owners cannot shop and compare equipment financing options effectively through conventional channel
- Business owners often settle for equipment financing only offered through the equipment supplier or their bank
- Business owners are disconnected from market options and rates and this can lead to ill-informed decisions
Small business trends in equipment financing
Finding the best equipment financing rates and a great user experience are now becoming a fundamental part of the journey for small business owners seeking capital. Many business owners are now beginning their search online to secure financing much they would shopping for any other product. Traditional banks and other lending institutions are also realizing they need to explore their options in order to offer customers online opportunities for financing.
Mobile is also becoming more relevant for small businesses to access financing options. Kabbage, a technology company that connects small businesses with capital, reported that 17% of small businesses are now through mobile and growing.
- Continued trend to seeking equipment financing online to find the best rates and user experience
- Increasing adoption of mobile apps and mobile browsing to search and secure equipment financing
- Niche or disruptive online finance companies are wining customers because of the value and experience they provide vs. the rates they provide
- Equipment suppliers are partnering with equipment finance companies that give their customers means to apply for financing directly from their website
- Traditional banks are now taking the technology revolution serious and exploring their own options to get in front of customers online by exploring new services, partnerships, and integrations
- Generational shift in business ownership will further solidify online and mobile as core channels to securing equipment financing
The benefits to going online for equipment financing
Small business owners are going online for the best equipment leasing services for many of the same reasons they already use other online services for their business like accounting (i.e. Quickbooks), office supplies (i.e. Staples), Shipping (i.e. FedEx), Marketing Automation (i.e. Active Campaign), Project Management (i.e. Trello), and Sales CRM (i.e. Salesforce).
- Business owners want quick and effortless access to the best equipment financing options with the least amount of input
- Convenience and time savings is one of the biggest reasons business owners first turn to online (schedule, time of day when the get around to it is often outside traditional business hours)
- Applying for credit can be a self-preserving means to capital because business owners can be more open when completing their applications and not having to be self-conscience about credit woes or financial details if completing in person at the dealer level
- Equipment leasing marketplaces can provide interest, time and cost savings by comparison shopping lenders much like shopping for hotels or flights
- Support for many different credit profiles and business types
- Access points to credit and capital; mobile, web, dealer portals
- Online convenience versus offline burden
- Privacy — only those that need to see the information have access to it
There are many online equipment financing options: EquipmentWallet.com, LeaseQ.com, Fundera.com, Lendio.com are just a few that construction contractors may look into.
The trend to move online and mobile for small business equipment financing will continue to become more common place and eventually the norm. As lenders and mobile technology become more aligned to service small business demands, this will further increase use cases and the adoption of small businesses. The generational shift in business ownership will further solidify online and mobile as core channels to securing equipment financing. Customer experience, comfortability with technology and convenience will continue to be the driving factors in the shift; customers want what they want when they want it.
John Elliott has worked for both private and bank-owned equipment leasing companies as well as co-founded a private equipment leasing company and founded a technology-based equipment leasing marketplace. He has also been instrumental in developing other digital assets such as dealer web application solutions in the equipment financing industry.
