Market disruption can make startups into overnight sensations. But the majority of startups will never become a market disruptor because nine out of ten of these companies fail before they can make any impact at all. But one startup is starting to trend in the equipment financing market.
The equipment financing market helps new companies to obtain the equipment they need. $1.1 trillion of this market is financed by independent lenders. This is an industry that coasts under the map, but it’s about to change because of market disruption.
The company in question is Currency Capital. Its CEO, Charles Anderson, believes this is the right time to disrupt the equipment finance market. So how is the equipment financing market going to change?
The Perfect Storm
For any market to be disrupted there has to be the perfect storm. Everything has to be in place to disrupt a market because the idea has to be there and the demand has to be there. Currency Capital CEO Charles Anderson believes that combination is now in place.
In the last few decades nothing has changed in this market. A company that needed a new cooker or a new printing machine went to a bank. The bank assessed the application and dispensed the loan money.
What changed was the 2008 financial crash. This was the first step in the perfect storm that has made this industry ready for disruption. The increasing conservatism of the banks has made it incredibly difficult for small businesses to gain any financing at all.
Companies like Currency Capital are making it easier to get financing. They’re making it faster and they’re making the requirements less stringent. This is going to encourage more companies to look away from the banks.
The Change in the Generations
What has to be mentioned is more Baby Boomers are retiring. As the millennial generation becomes the biggest part of the workforce it’s increasing the rate of handover when it comes to companies. More retiring Baby Boomers are handing over their companies to the next generation.
That’s significant because the next generation is not used to dealing with the clunky applications banks offer. They’re used to going online and checking their applications at the click of a button. The demand is there and they’re demanding a faster way to get a decision.
This is what Currency aims to do. They want to make it easier to apply for and gain financing online. Businesses will be able to apply for equipment financing online, with a number of lenders to choose from. It’s set to increase the speed of applications. The whole process will be more transparent and it will be more user-friendly.
Traditional lending institutions are not interested in changing a system that has worked for decades. But they might have to if more agile competitors start to eat into their market share.
Simplifying the Lending Process
The lending process has never been more complicated. Banks have all sorts of requirements, and they often differ between the banks. The way startups and small businesses are applying for funding is changing. They’re not going to walk into a bank and ask for funding. They’re going to do the entire process online.
They’ll still have to supply things like business plans, but they’ll be doing this from the comfort of their own offices. The millennial generation wants to do things differently and the industry is going to have to change. Market disruption is happening and there’s no getting away from it.
What’s Going to Happen in the Future?
The next ten years will be a critical time for the equipment purchasing industry. Finding out where the industry could go is important for CEOs like Charles Anderson. He believes the only way to find out whether a market is truly ready for disrupting is to attempt to predict the future.
The industry in ten years is going the same way as the mortgage industry has in the previous ten years. Early adopters of this new way of lending are going to have significant advantages over their competitors. The equipment financing industry is going to become more virtual. Lenders and borrowers working together may never meet.
Currency is one of the companies hoping to become a successful early adopter, and all signs point towards this being a success.
The current gap in this market is half a trillion dollars. Currency is a company that is hoping to plug most of that gap with its new way of doing things. With an industry that’s firmly ready to step into the 21st century, the current giants are going to have to change if they want to keep up.
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