Cash flow drives small businesses. For the last 40 years, the $1.6 Trillion Commercial Equipment Purchase Market has enabled small businesses to generate the cash flow to drive their businesses to drive our economy. Caterpillar, John Deere, eBay and Amazon are great examples of Fortune 500 companies who quietly participate in the commercial equipment buying and selling ecosystem.
However, a huge problem has been going on in this market that no one has been able to come up with a solution for until now. Today, this article will examine what the major problem is and how one company is changing the industry with disruptive technology and fresh thought leadership.
Why Currency Was Built
Currency was built because the CEO was obsessed with helping small businesses grow through financing. In the beginning he didn't have a mindset to target in on equipment financing, just small business financing in general.
While at Stanford Business School, he had a very simple aha moment: "All businesses need equipment to grow." For example, truck drivers need trucks, restaurants need kitchen equipment, dentists need x-ray machines, chiropractors need chiropractic tables, financial advisors need phones and computers, contractors need construction equipment, and on and on. The conclusion was simple: Financing equipment empowers small businesses to grow.
Then, after doing even more research he came across the large and antiquated $1.1 Trillion market of equipment financing and Currency was born. From the CEO's perspective, the market was ready for disruption because many of the current people who founded the industry back in the 70s were still in it and they were preparing for retirement. They wanted and needed some younger and innovative people to take over for them.
The Problem: It's Painful for Buyers, Sellers and Banks to Connect
This industry has a huge connection problem. Today, it's very painful for equipment buyers, sellers, and banks to connect. It's not like financing a car (choose a car on a lot and then financing just seamlessly happens in the background).
For example, if you look at eBay, people bid on equipment and win. However, when it's time for them to pay for their $15,000 pizza oven, they have no clue how they are going to pay for the product.
It gets even more complicated when you try to connect with the company doing the shipping, delivery, assembling, and installing of the asset. Then, if you try and get your banker to coordinate with the seller, shipping company and installer, you're setting yourself up for a rough and painful process. This would be the same as trying to get a mortgage for a custom built house while it was on a moving truck as it's driving down the freeway with "oversized signs" taped to the back.
Not surprisingly, sellers don't always offer financing because they don't want to deal with it, they don't know how to deal with it, or they just don't have the time, the buyers are forced to either pay cash, or leave the digital "show room" to go and find financing somewhere else. This leads to fewer sales for the seller. This helps explain why ~$500bn of all equipment purchases each year are NOT financed. It's too painful.
Someone had to come up with a solution to this problem.
Currency was created to make equipment financing as easy as 1-click checkout on Amazon.
Why Equipment Financing
The equipment financing industry is a 1.6 trillion-dollar industry. However, before you can even think of tapping into this industry you have to have lots of portfolio data, key banking relationships, scale, and momentum.
Think about it, other industries such as mortgage, credit card, and auto, have already made their way from offline to online to mobile. However, the equipment financing industry hasn't, which already hints that there is a reason for this dilemma. In this niche, everything is done manually, which is not only time consuming, but it shows that it is meant to be disrupted.
Why is this?
When Currency was in its infancy the average age of the people in the equipment financing industry was 50 and above (baby boomers). This means that they were not focused on technology or the latest tools to make their jobs easier and they can see retirement right around the corner in a few years. They had even less motivation to take risks on technology just coming off the heels of the recession and seeing their close friends "down-sized" when things got dicey.
Major Players in Equipment Financing
There are three major players in the equipment financing industry. You have the equipment buyers, the equipment sellers, and the banks. Currency was able to analyze what each player wanted and found a way to tie them all together...making the cycle work seamlessly and keeping everyone happy.
What Each Player Wants
•Buyers - Instant competitive options for financing.
•Sellers- The highest approval rate so they can sell more products.
•Banks- Cost efficient access to deal flow.
Amazon Example
Remember when physical books were in? As time progressed buyers wanted to have books instantly and to be able to access them on the go from their devices. Sellers wanted to sell more books. Therefore, Amazon stepped in and took away the need for physical books and turned them digital. Buyers were able to get their books instantly, sellers were able to make more sales, and Amazon was able to make a profit off of an untapped market.
Overall, this is exactly what Currency is doing with the equipment financing niche.
Other Solutions
You may wonder what companies did before Currency came into the game. Well, the answer is they didn't have a ton of solutions. You may remember when PayPal Credit and eBay were good together. However, the reality is that they weren't, which is why it's not a huge surprise that the two split. Sellers were getting hit with fees from PayPal and eBay, which was costing them money or they had to charge buyers more to keep their revenue in the green. Then, of course sellers were disputing items with PayPal, which was delaying the payment process for sellers altogether, even if they were paid at all.
Currency has literally been a game changer in this untapped niche.
Equipment financing is a really complex business model and majority of entrepreneurs don't have the time, relationships, data or resources to sit down and put in the work that it takes to get it off the ground.
Closing Thoughts - The Future of Currency
Currency is the solution of equipment financing and in the coming years you can only expect them to shake up the industry even more to make it more simple, efficient, and transparent. Since their conception in 2012, they have already strengthened the equipment financing industry more than anyone would have ever predicted.