Key Takeaways from Monitor Live+ “Ask the C-Suite What’s Next for Equipment Finance”
MAY 21, 2020 - 7:00 am
On May 20, Monitor hosted the first of its new series, Live+ Asking the C Suite: What’s Next for Equipment Finance? The one-hour, virtual event was aimed to help answer questions facing the industry as we continue to navigate the new and changing environments in business.
Vince Belcastro, Group Head at Syndications in Element Fleet Management served as the moderator of the conference. Panelists included David Normandin, CEO of Wintrust, Specialty Finance Division, Tom Depping, EVP and Ascentium Group Manager at Regions Bank, Miles Herman, the President and COO of LEAF Commercial Capital.
Responding to the drastic and sudden financial shock caused by COVID-19.
Fortunately, for many of the panelists, the adjustment in terms of technology was a smooth one, due to technologies like electronic document signing, and portals for interface. However, they discovered other aspects of their companies that needed to be adjusted. Across the board, communication during a crisis was stressed. This includes both internally and externally and even in areas such as social media. Understanding what the customers’ needs are, but also being able to predict what the outcome is for higher risk businesses can be difficult in the current situation. A customer-first approach recognizes that what is happening to the businesses was not a fault of the customer and is little the customer can do to change what is happening.
Noticeable differences are apparent between the first month and second months of the pandemic.
When COVID-19 truly began to show itself as a threat back in March, uncertainty was prevalent globally, especially in terms of the economic effects. As we move into May it has become obvious that more long-term adjustments need to be instilled, because recovery is not something that is going to happen overnight and may take anywhere from months to years.
Dealing with deferrals and defaults.
Lenders have had to change the way they handle approvals from customers and a lot of that is done by the technologies they have, but also by monitoring the information and conditions daily. Evaluating how the pandemic is affecting the businesses ability to survive is a valid question. However, just because a company is high risk does not necessarily mean it is declining. Making these decisions are critical in determining how to move forward.
The stay-at-home orders impacted obvious industries with a few surprises.
The healthcare industry has struggled during this time. While it may seem contrary, since we are in a health crisis, revenue comes from elective surgeries and doctors’ appointments that are no longer happening because they do not fall under “essential”. Franchise organizations, social services organizations, retail and the transportation industry, such as bus and trucking companies, are among the others that are struggling during this time. The supply side is facing many challenges in trying to get parts and supplies, many of which are imported.
The financial impact will be long and may change the future of business as we know it.
The panelists believe that 2020 is going to be a long year, but they are in it for the long haul. They are hopeful that recovery will come in 2021, but what that will look like can be added to the list of unknowns. Factors such as a potential second wave, election results and furloughs are all things for leaders to consider. Ultimately, the way business has been prior to COVID-19 may be altered so much that it is part of history in the post-pandemic world.
Addressing rate compression shows what is changing.
Rate compression is mostly an issue for the larger vendor programs. Banks are focused on how they are going to be paid, and when the market gets tough, that means becoming credit focused. However, they are not seeing a credit issue, but a natural shift in the market, with spreads increasing in certain spaces. While the demand for equipment, lease and loans may be lower, the supply side of capital seems to be larger. Competition among businesses is present and for the leasing companies their main focus is on delivering the exact product the customer is looking for to them.
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