Equipment financing is a market sector that is often overlooked and taken for granted by investors who get caught up in the glamour of stocks and commodities.
But with an estimated market value of more than $1 trillion, that’s all set to change as early adopters look for new post-recession investment opportunities.
So, is equipment financing the right investment opportunity for you? And how can you learn from market innovators like Currency in order to maximize your returns before everyone catches on to this hidden gem?
Understanding the Market
One of the biggest reasons why the equipment financing sector is about to blow up is because it’s remained relatively unchanged for decades.
The model is simple. A business requires fundamental equipment to keep going. A butcher needs cold storage and cutting tools. A masseuse needs a table. These are examples of business equipment. Businesses need specific types of equipment in order to be successful.
Traditionally, startups would either raise capital to invest in the equipment they needed, or get a loan to cover the cost. But following the 2008 recession, banks were reluctant to extend financing – plus they were still operating on a traditional lending model built on an outdated approval process
Equipment finance firm Currency saw an opportunity to digitize and enhance the approval process by building a complete picture of the applicant’s needs and loan requirements upfront, and deciding what financing could be extended instantly.
The result? A fundamental shift in the way equipment is financed.
Following Currency’s Example
Although the underlying principles of the lending model haven’t really changed, the way in which these transactions are structured has moved into the digital space.
Having seen the convenience and ease of the Currency platform and API, lending companies who specialize in equipment finance have also stepped into the world of ecommerce in an attempt to invigorate the market and identify new opportunities. From online applications and research to connecting potential investors with those looking for finance, it’s a much faster, driven way of operating.
What Currency have managed to do is improve bottom lines by not only sourcing significant funding, but also by reducing down time while waiting for approval.
Best in Its Class
Much like the rich days of the .com boom, there seems to be a varied approach to capitalizing on the opportunities within the equipment financing sector, but the truth is that these are all interpretations of the Currency business model.
One of the reasons why Currency has been so successful is that they understand the need to market to the millennial mindset. It’s important to remember that business owners are younger, and operate on their terms.
By reducing the need for physical application documents and making their service available online, Currency met the need for immediacy that drives the modern entrepreneur – and then delivered the investment needed to take their ambition up to the next level.
With so much value waiting it’s no surprise that sector confidence is up, but it is still difficult to predict how long the market surge around equipment financing is going to last.
What remains clear is that the rise of the micro-entrepreneur and an increasingly self-sufficient market of small business mean the demand for affordable equipment finance will remain solid.
It’s highly likely that the Currency model will be replicated and amended in the search for profitable innovation. Crowdsourcing platforms have already shown the viability of connecting entrepreneurs to capital, but it is difficult to see an innovation that knocks Currency off the top spot they earned by entering the market first.
As more businesses become digital and explore the possibilities of virtual operation, the need for personalized machinery and functional, industry-specific equipment will slow.
Although there will always be industries built on actual equipment, the opportunity lies in the finance of software as a critical component of almost every business.
Another reason why Currency has been so effective at disrupting the equipment finance market is that they have not only developed a platform, but numerous software tools that can be purchased and embedded into third-party websites.
They have created the software that other companies need in order to follow their example, creating an almost infinite loop of buy-in to the Currency way of working. This stroke of genius means that even their competitors are relying on them to succeed, creating an equipment finance revolution rooted in a monopoly.
This means that, for Currency, the future of equipment finance is bright. The question is, are you going to join them or try to follow their example to try and stake your claim in the market share?
Featured image courtesy of Flickr.