By Vladimir Kovacevic
The COVID-19 pandemic has forced many lenders who finance construction equipment to pivot their strategies to the online or digital environment. This may include payment modifications, self-service capabilities, and increased bandwidth for online transactions. The construction industry has been traditionally slow to embrace new technologies, relying on legacy philosophies and outdated systems. For many, COVID-19 has exposed critical technological gaps in their lender business tools, systems, and processes. Lenders who remain ahead of the curve are utilizing digital transformation to enhance their overall performance to streamline their processes.
The key to consistent growth and stability of any powerful company or organization is built by a strong foundation. This remains true for construction equipment finance lenders in the supply chain. In theory, lenders should have the capability to build from their existing processes, procedures, and platforms. However, not all of them do. Advanced technology will allow for more sophisticated additions to be built from simple foundations. According to ABI Research, now more than ever, strategies need to be reshaped and plans need to be adjusted.
Identifying Areas of Need
Lenders who service the construction industry are affected differently depending on their market segment and their loan origination process. Considering this recent shift in business spending habits – now would be an ideal time for lenders to re-evaluate their lending strategy. When the market is down, lenders experience even more competition and uncertainty. To remain competitive themselves, lenders will need to connect with potential buyers across all shopping channels including online, mobile, and through the equipment manufacturers. Making quick lending decisions can be the difference between a borrower choosing one lender over another.
Engaging your borrowers at different levels through the various channels that they utilize most should be a top priority. For example, shoppers today spend much of their time utilizing mobile and online channels to shop various equipment manufacturers and options. They will research through non- traditional methods, and many will look to secure financing online – a process that will continue as we all practice “social distancing.”
Other companies are looking to change their financing structures altogether. According to a recent survey from Fleet Advantage, a provider of lease financing for fleets, roughly 50 percent of fleets have trucks older than 2017 and are leveraging equipment lease finance programs as a way to upgrade and save on the bottom line.
Merging Antiquated Systems
Today’s loan origination platforms and solutions can support all market channels to access borrowers from construction businesses of all sizes. They can also be integrated with manufacturer software so borrowers can initiate loan applications at any time from the convenience of their mobile phones, opening new lending opportunities that may otherwise be missed. What’s more, the built-in AI technology will also help ensure the lender is offering the right terms for each individual customer or business.
In the wake of COVID-19, lenders should expect that transactions will be moved to the online marketplace. Not only in the near term, but in the future post-pandemic. The transactions will not simply be handled the way they were in years past, where a lender requests information from a customer such as business financials. Instead, the entire process from application to delivery of equipment will be handled online. Lenders utilizing technology to approach the market in a more direct way will have a competitive advantage and will be ready to take advantage of new business buying patterns and behaviors.
Strengthening Digital Solutions
Now more than ever, businesses are looking for ways to relieve themselves of payments in the near-term. Strong lending technology partners are offering creative ways for lenders to not only retain business but win new business during this time. Some lending technology partners are offering their customers curated programs that allow them to contact existing customer businesses to offer them refinancing on their construction equipment finance loans.
For example, if a business is a long-term customer with a specific bank, yet their equipment is financed through another vendor, that bank would be smart to contact that customer regarding the refinance of their loan. If the bank can offer incentives such as no short-term payments, the customer is likely to take advantage of the offer, which only further solidifies the customers loyalty to that bank. With interest rates seemingly low, anything the bank refinances now will be a better deal than what the business could finance two or three years ago.
Planning for Recovery
The sudden shift in working environments has only amplified the need for construction equipment finance lenders to update their tools and processes. It is critical to include digital and cloud-based options for customers who are now forced into remote working situations. The industry need for technological advancement is clearer than ever before. Companies that learn from the current business challenges and adopt agile solutions will remain more flexible and fluid in times of economic recession and can better prepare themselves for recession recovery.
About the Author:
Vladimir Kovacevic is the co-founder and Managing Partner of Inovatec, a leading software provider of cloud-based lending solutions in the USA and Canada. Inovatec’s products are designed for origination, processing and management of loans and leases across a broad spectrum of credit quality and asset types.
This material appears in the March 2021 issues of the ACP Magazines:
California Builder & Engineer, Construction, Construction Digest, Construction News, Constructioneer,Dixie Contractor, Michigan Contractor & Builder, Midwest Contractor, New England Construction, Pacific Builder & Engineer, Rocky Mountain Construction, Texas Contractor, Western Builder