Daniel Proctor, chief technology officer at Henry Howard Vendor Finance, explains how technology is revolutionising the lease and hire purchase market
Technology is now the main driving force for change in the vendor finance market. The growth of online finance solutions means companies can access funding faster and more easily than ever before but there is still a long way to go.
Traditionally completing a lease or hire purchase agreement could take several working days as paperwork was sent to and fro to get the necessary approvals.
Now, thanks to advances in technology and the ability to work from mobile devices anywhere at any time, this process can be completed in less than an hour.
‘Fintech’ – financial technology – is the new buzz word in the industry as a growing number of tech-based financial vehicles emerge, ready to disrupt the industry by cutting costs and streamlining their services.
While alternative lenders such as HH Vendor Finance are leading the way, embracing new technology as a way to improve their customers’ experience and make access to funding more efficient, traditional clearing banks are struggling to modernise.
These global corporations are hampered by complex outdated technology systems and multi platforms in multi locations which offer little or no benefit to their customers – the SME business owners and entrepreneurs.
Offering a range of new financing options; peer-to-peer lending, crowdfunding, angel investment, invoice and asset finance and more, the new-style lenders, unlike their more established counterparts, are unhampered by strict regulators, old IT systems and existing business ties.
Agility, speed and efficiency are fast becoming the key to client attraction, acquisition and retention. Lenders will only succeed if they can keep pace with commercial needs alongside technological advances.
Mobile internet access overtook desktop browsing in 2014 and remote working has been on the rise ever since the emergence of mobile devices. About 4.2 million people now work remotely, an increase of 1.3 million since 2008, and this look set to rise much further.
Online and cloud-based working has meant the assessment, approvals and administration associated with finance provision can be made more efficient.
Access to lease or hire purchase agreements can now be done through user-friendly online portals and apps which cut paperwork and offer faster access to money, facilitating more stable cash flow for business owners.
It is likely that in the next few years online, automated applications and user-friendly online tools will become the norm. These apps may allow funds to be accessed on a dip-in-dip-out basis without the need for long term contracts.
Now with wearable tech on the rise it may not be long before we can access business funds through finger print technology.
With instant access to information, multimedia communication and real-time news, customers are becoming less patient. Time consuming application forms, approval processes and credit checks are starting to look outdated when it comes to business finance.
This is where new alternative lenders have an advantage as they can more easily adapt their systems, and indeed entire business model, to suit customer demand.
How the current apps can work
Many of the existing portals or apps are designed around customers’ unique rate cards and set up with credit rules specific to typical customers and equipment.
Once a customer enters the details of the lease or hire purchase required, an online automated underwriting decision is provided.
The customer can turn the credit acceptance into a finalised lease document by either uploading details of equipment they require or choosing from their products already listed the app.
Lease documents can then be sent directly to them, for a digital signature and automated purchase order wherever they are at the time.
Such streamlined online systems can complete agreements in less than an hour, revolutionising the traditionally lengthy leasing process that can take several days before the necessary paperwork is completed.
Where it is used effectively, technology offers a quick and easy way for businesses to apply for the financial support they need and ensures that sales teams time is spent generating revenue rather than administering lease paperwork.
When well-designed, apps can also be used to highlight new sales opportunities and provide full audit trails and tools to help its users stay FCA compliant both now and in the future.
Vendor finance on the rise
The UK economy grew 0.5% in the third quarter of the year, according to the Office for National Statistics, meaning it was 2.3% higher than the same period in 2014. As the economic recovery gathers pace, order books across the UK are growing and business confidence is improving.
The leasing and hire purchase industry financed 28.2% of all UK investment in machinery, equipment and purchased software in the 12 months to June 2015, a five year high, according to the Finance & Leasing Association.
Even now the economy is growing, few companies have the ready capital to pay for major investment in full so vendor finance is vital vehicle by which they can fund investment. Even more so since lending through the traditional high street banks has become more difficult for SMEs following the economic downturn.
Greater scrutiny and risk analysis has meant a generation of UK start-ups during and after the recession have been forced to look beyond the banks for funding. This lead to the emergence of the more creative forms of funding, now labelled as "alternative finance".
With technology widening and diversifying the market and making the options available much easier to search and research, SMEs can now benefit from choosing financing options which best suit their needs. Whether vendor finance or funding in another form, businesses should be able to access what they need using online tools with more ease than ever before. <