Are you old school or new school? I’m not talking about whether you prefer the Commodore 64 or the Sony PlayStation 4. I’m talking about the philosophy and approach you employ to finance equipment deals.
Old school methods evolved from a lender perspective, with a hyper focus on doing deals and managing risk. New school methods come from a customer perspective, and include identifying underserved customer segments, creating a superior value proposition and borrower experience while establishing long-term relationships with profitable customers. New school financing companies often serve new product niches such as green technology, or create new, frictionless funding processes such as managed services for vendors. But there’s one segment ripe for new school financing that I want to talk about—one that’s become part of a national dialogue this election year: immigrants.
Immigrant-owned businesses are a large and growing segment of the industry with many equipment financing opportunities. Immigrants are two times more likely to start a new business than native born Americans, according to the Partnership for a New American Economy. In 2011, for example, 28%of the companies in the U.S. were founded by immigrants, and 40% of the Fortune 500 companies were founded by immigrants or their children—though immigrants made up just 13% of the population that year. Despite these contributions, entrepreneurs who do not speak fluent English often find the search for equipment financing daunting. A lingering, unfounded belief that entrepreneurs that speak English as a second language (ESL) or English as a foreign language (EFL) are high risk and not worthy of funding is still alive and well in the equipment finance industry.
Here is the story of one equipment finance company with a savvy, new school method for serving immigrant-run businesses. This kind of thinking will help the equipment financing industry move leaps and bounds into the future and give all small business owners a fair chance at success.
Case Study: Kings Meat Market
Hyo Jin Kim worked for most of his life as a meat department manager in Korean supermarkets across California. Confident in his skills and passionate about his craft, Kim decided to open a meat market of his own outside of Atlanta. Kim and his wife, Hye Jeong Cho, recruited their daughter as a translator, and found a lender willing to finance the refrigerators, freezers, slicers and work benches necessary to open up shop. When the lender required that Kim and Cho agree to the loan terms themselves in English, plans for the meat market came to a halt.
Upon hearing about Kim and Cho’s “old school experience” with the previous lender, we enlisted one of our trusted partners, Financial Pacific Leasing, to help close the deal and make their dream of opening a market a reality. Financial Pacific jumped at the opportunity to help the couple.
“In situations where our customer doesn’t speak English or is more comfortable speaking a different language, we utilize the services of a translator,” said Terey Jennings, executive vice president of Financial Pacific. “When we communicate with the translator, we can be assured they have a thorough understanding of the financing contract.
“We recognize each lender in the market abides by different policies. Our thought process was looking for a way to solve the problem,” Jennings said.
With the language barrier dismantled and equipment from vendor Atlanta Fixture in place, plans for the meat market’s grand opening began. And King’s Meat Market opened in Jonesboro, Ga., just a quick drive from Atlanta. Today, the business is thriving, with some of the best-selling items being chicken wings and drumsticks, spare ribs and T-bone steak. Kim and Cho equate the experience to the American Dream.
The success of King’s Meat Market would not have been possible without Financial Pacific’s new school approach to equipment finance, which focuses on creating a positive finance experience for the borrower while managing risk. Financial Pacific began by asking, “Does this loan or lease make sense for this business?” For Kings Meat Market, the answer was yes. Though a startup, the owner operator was highly experienced in ethnic meat retail, had run successful operations for other businesses, had good credit and presented a believable business plan. Financial Pacific made sure English proficiency didn’t stand in the way.
As one of the emerging champions for a new, more flexible borrower-driven financing experience, Financial Pacific also used automation to improve risk scoring, speed up and simplify the financing process and leverage new approaches like real-time translation services to help the borrower. Because of Financial Pacific and others like them, lenders, small business owners and local economies benefit in a big way.
There is no magic formula for equipment finance. Rather, the best advice for success in the industry is to understand entrepreneurs and their needs and find strategies to fulfill them. Focus on your customers over your product, and do not place them in the same box. Sometimes, it’s like trying to fit a square peg in a round hole.
Those involved in equipment finance have the privilege of playing an integral role in someone’s entrepreneurial journey. It is important not to lose sight of the personal aspects of this industry and to recognize the high stakes entrepreneurs face. Implementing a new school approach to financing ensures success for both equipment finance companies and the businesses they work with.
For more statistics on immigrant-owned businesses in the markets you serve, visit MapTheImpact.org.
Most of us enjoy the benefits of servitization (also known as managed services or managed solutions) every day. In fact, you may be holding a piece of equipment that includes bundled services in your palm as you read this article.... read more
When Uber co-founder Travis Kalanick went on a tirade against one of the company’s drivers, with a camera recording the event as it took place in the back seat of an Uber car, critics focused on the broken culture of... read more