Navigating Business in a Time of Crisis: The 2020 Vendor Finance Roundtable
by Jim Kelly, Chris Lemone and Justin Tabone May/June 2020
Jim Kelly, Chris Lemone and Justin Tabone sat down with Monitor for this year’s roundtable, where they discussed how COVID-19 has affected their team and vendor relationships, as well as the changes and predictions they have for the future of the industry in a post-pandemic world.
Jim Kelly, Head of Wells Fargo Vendor Financial Services, Wells Fargo Equipment Finance
Chris Lemone, Senior Vice President of Sales, Amur Equipment Finance
Justin Tabone, Senior Vice President, Originations, TIAA Bank
How has COVID-19 impacted your team and your vendor partners? Can you share any challenges or success stories that you have encountered in the wake of the pandemic?
Jim Kelly: These unprecedented times have challenged our team, our customers and the industry. Our team’s resilience, flexibility and experience has never been more valuable. We have faced tough external market forces in the past and how we respond to the current challenge is no different.
We have transitioned the majority of our team to work from home, and virtual meetings are now commonplace. In the absence of face-to-face meetings, we have acknowledged and embraced the importance of more frequent communication, both internally and with our customers. Our leadership team has daily calls to discuss any COVID-19-related issues.
We are in regular communication with many of our OEMs and dealers. Our customers appreciate our transparency, flexibility and partnership during these challenging times.
Chris Lemone: Like other organizations across the globe, working from home has made it more challenging to connect with our vendor partners. Internally, we were an early adopter of video conferencing company wide, which has been a very helpful tool for virtual interactions; however, we recognize these tools can’t replace the importance of face-to-face conversations. We work hard to make sure we sit down with our partners regularly, not being able to do so has been tough, and we’ve definitely had to get creative on ensuring we reach out and stay in touch with them frequently.
But, as with any challenge, opportunities present themselves if you look deep enough. We’ve taken this opportunity to review our processes end-to-end to further streamline and improve the user experience. It seems like it’s been noticed — utilization of our digital offerings, including our online quote tools and our online application process, has surged.
We’ve also used this time to identify and work with vendors that have not traditionally used financing programs, helping them uncover new marketing opportunities to maintain and expand their business.
Justin Tabone: Like many of our vendor partners, TIAA Bank Commercial Finance is operating under our tested business continuity processes to keep associates and clients safe. We are fully operational in a quick pivot to a work-from-home format, and it’s been all hands-on deck as many of our teams, including Originations, are assisting with activities other than sales. We’ve been working closely with our Partner Services team to respond to our customers’ payment relief requests during this time.
Our efficient technology solutions have allowed us to effectively manage the volume of COVID-19 payment relief requests from our customers. In addition to an overall slowdown in purchasing, many of our vendor partners are seeing their customers either putting new orders on hold or cancelling existing orders. We continue to look for ways to provide our vendor partners within our Healthcare business effective structures to finance equipment used for COVID-19 diagnoses. Our six-month payment deferral program is an example of this. Our parent company, TIAA, has a history rooted in meeting the needs of nonprofit organizations, many of which are in the healthcare industry, so it is extremely important that we’re here to support providers and manufacturers addressing the pandemic.
Other lines of business at TIAA Bank are benefiting from our digital platforms. Standing up new programs and modifying others to be completely digital has been much easier thanks to the agility of our team’s experience with these platforms.
Our associates are really taking to heart the “all hands on deck” mentality. At work, they’re pitching in with new projects or shifts in business to help clients. At home, they’re making a difference in their communities. Brandon Bach, one of our healthcare platform sale reps, also serves as volunteer fire chief for Upper Saddle River, NJ. In his capacity there, he’s helping kids celebrate their birthdays while in quarantine with socially distanced visits from the big red fire trucks. Chief Brandon is also participating in the “Leaders are Readers” program, a virtual story time through his local library.
How do you believe creating and maintaining vendor relationships will change in a post coronavirus world?
Kelly: The foundation we’ve built in regard to relationship creation and maintenance will not change in a post-coronavirus world. We will continue the critical elements that have sustained us for decades — adding value for our customers and helping them increase top line growth, margins and operational efficiencies.
Helping customers sustain growth will always be a top priority. However, now more than ever, we have to embrace and acknowledge that business models will inevitably evolve. We anticipate post-coronavirus changes to the way customers acquire equipment and how dealers market and sell to those customers. We must be prepared for these changes and can support through deeper integration and alignment with our OEM and dealer priorities.
Customers still demand advanced technology solutions and our progress and commitment to create a best-in-class experience is unwavering. We are building systems that provide a fully integrated customer experience from credit application to funding and throughout the life of the financing agreement. As we continue introducing these technology enhancements to the marketplace, we see increases in customer satisfaction and loyalty.
Lemone: One thing that this experience will not change is the importance of human relationships. That has always been, and will always be, a need. But, undoubtedly, this experience will have an impact. Vendors’ business priorities for the short- and medium-term will have been affected, so our success will depend on our ability to provide the needed tools that will help our partners achieve their post-coronavirus objectives. The focus will be on remaining close to our partners and providing them with the tools they need to be successful in the new environment.
Tabone: Vendors will require targeted finance offerings to [provide] customers just rebounding from the pandemic access to new equipment and technology. Additionally, there will be further emphasis on fee-per-service or usage-based solutions as budget-conscious customers may only want to pay for what they use. There is potential for an increased focus on technology as companies with employees working remotely will want instant access to their portfolio data and the ability to transact from proposal to purchase order through digital tools. Finance partners will have to become even greater subject matter experts on the markets they serve to ensure they are providing vendor partners with the right financing solutions to navigate through these challenging times, while also managing their own portfolio performance.
While some things will change, our focus will remain on helping vendor partners strengthen their relationships with customers by providing financing for their equipment and technology needs.
What is your outlook for the vendor finance market for the year ahead? What are the greatest opportunities, challenges and concerns that you anticipate?
Kelly: The first quarter was a challenge. Since we serve nearly every industry across the economy, we are seeing impacts across our entire portfolio. I anticipate Q2 will show the biggest drop in year-over-year production for the vendor finance market. Some economists suggest that GDP will pick up in Q3 and Q4; however, uncertainty and volatility will likely remain and we are preparing for that.
The biggest challenge for the vendor finance market will be delinquency and losses. We are taking a careful approach on some of the industry segments that are under pressure, such as energy and transportation, and modifying our projections. Our industry expertise is even more critical now as we lend our experience and capital to help sustain our customers’ operations.
Another internal challenge will be bringing team members back into the office in a safe and strategic way. We are tracking how other industries are addressing this and thinking about policies and guidelines to keep our team members safe.
Our greatest opportunities are developing expanded product offerings in the healthcare and IT sectors. These sectors will only continue to grow in the post-coronavirus world.
Lemone: The competitive landscape will undoubtedly change in the coming year, with some equipment finance providers exiting and others transitioning to adjusted business models. But there is opportunity in this dislocation for those that are dedicated to our industry.
At AmurEF, we have been focused for some time on building a durable organization that is equipped to withstand a downshift in the economy while still serving our partners, customers, employees and communities in which we work.
Our core values of agility and adaptability are precisely what this time calls for. By staying true to these values as a company, as employees and as partners to those we serve, we are confident in our ability to find the opportunities in this altered landscape and capitalize on them.
Tabone: I anticipate a tough year for the vendor finance market, especially in Q2. Reduced capital investment and a deteriorating operating environment are likely outcomes of this pandemic. As is the case during most times of economic uncertainty, companies are rapidly drawing down credit lines and trying to raise cash to finance operations through what will likely be a deep contraction/severe recession. New equipment orders in most industries are slowing and existing orders are either being placed on hold or cancelled. Uncertainty will likely lead to more conservative underwriting. Most equipment verticals will likely contract. Service industries that rely on human contact, like travel, hospitality and entertainment, will be the most severely impacted. The oil industry has been impacted. However, equipment verticals that are closely linked to serving the public health crisis may fare better.
This is a good time to revisit the markets that you serve and ensure that you have a deep understanding of how they are responding to a new, COVID-19 impacted world. Having meaningful conversations with vendor partners to really know the challenges they’re facing will be critical to both maintaining and supporting these vendor partnerships through the crisis. The challenge will continue to be balancing the needs of existing customers who need payment relief, while also effectively addressing the ongoing business needs of our vendor partners. There are concerns with the length of the downturn and the impact it will have on our vendor partners’ sales. These are unprecedented times and therefore there is no road map in place regarding how to effectively manage through this. •