Mitsubishi HC Capital America reported that it is experiencing record growth with its assignment financing programs, which allow OEMs, manufacturers, resellers and vendors to receive upfront cash payments for their customer’s as-a-service (aaS) contracts.
The company’s number of new assignment financing programs has more than doubled since 2020, under the leadership of Jim Teal, senior vice president of healthcare, technology and franchise with Mitsubishi HC Capital America’s vendor solutions division. Now, almost three-quarters of the division’s portfolio is in assignment financing due to the rapid demand for aaS models.
Last year, the aaS market was valued at $559 billion and is projected to grow from nearly $700 billion in 2023 to $3,221 billion in 2030, according to a market analysis report by Fortune Business Insights. Investments in digital transformation initiatives aimed at improving business agility and operational efficiencies are expected to be a significant driver for the projected growth, with demand stemming directly from manufacturers in the technology space, particularly within robotics and automation.
“These companies are no longer relying solely on traditional funding sources. They are seeking new alternatives for smart growth,” Teal said, noting that companies also appreciate not having to change their sales model or business operations. “They can continue to sell products and services as they always have while accessing immediate liquidity.”
As an example of its assignment financing programs, Mitsubishi HC Capital America has provided private-label financing to a medical automation equipment manufacturer for more than 15 years for its automation-as-a-service (AaaS) subscription contracts. Mitsubishi HC Capital America’s financing of the OEM’s contracts for its bundled AaaS solution of equipment, software, supplies and services has totaled more than $200 million, with funding ongoing. The financing was structured to monetize contract payment streams so the OEM has access to immediate cash value of its AaaS contracts.
This structure provides two major benefits to an OEM, explained Teal. First, the OEM receives funds it can use for other business purposes now vs. waiting months or years for payment. Second, Mitsubishi HC Capital America’s private-label financing eliminates the burden on the OEM of administering financing while providing a single point of contact for customers.
“Just like as-a-service offerings have revolutionized the way customers buy everything from software to robotics, so has our approach to financing,” Teal said. “In monetizing as-a-service contracts, we’ve developed a structure to reduce — or remove — upfront capital requirements while providing a cash infusion that, in many cases, eliminates the need for companies to seek outside funding for business investment.”
Monetizing as-a-service contracts is not a new concept, Teal said, but few lenders, including banks, offer this type of program.
“At Mitsubishi HC Capital America, it’s core to our spirit and philosophy to understand a company’s current and future business needs to design and offer solutions that enable them to maximize market share and cash flow,” Teal said. “This approach, combined with our core services, is clearly addressing what the market wants and needs.”
