Northteq has released its latest white paper "Start Lean. Scale Fast. 5 Lessons Every Equipment Finance Lender Should Know," which reveals that equipment finance lenders' challenge is building a company that can move fast enough to compete and be smart enough to scale without burning through resources on the wrong priorities.
The paper notes that the equipment finance industry expanded to an estimated $1.34 trillion in 2023. Equipment and software investment reached $2.3 trillion that same year. Additionally, first-time startup founders have an estimated success rate of only about 18%, which reinforces the value of fast feedback loops over long planning cycles.
Northteq has laid out five lessons for equipment finance lenders:
- Lesson 1 - speed to market validates strategy
- Lesson 2 - build for scale and automate by default
- Lesson 3 - avoid overengineering and focus on ROI
- Lesson 4 - Use best practices and stop reinventing the wheel
- Lesson 5 - build a culture of continuous automation
"You need to be able to receive an app, enter the app, make a decision on it, record that decision, prepare docs, fund it and book it. There’s a lot in between there, a lot of automation that can be built and should be built, but at the end of the day, that basic footprint is what most companies still have," said Kapitus Equipment Finance Risk Leader Dan Thompson.
Ethan Keeler, co-founder of Sage Creek Capital added, "For us at Sage, that was our competitive advantage - automation. At a bank, you’re treating a $50,000 transaction the same way as a million-dollar transaction a lot of the time. For us, focusing on smaller scale deals that were consistent in structure, building automation around that was very easy to implement.”
The white paper goes on to note that 82% of end-users that acquired equipment or software in 2023 used some form of
financing, meaning the market for well-run, scalable lenders is enormous. The top reason end-users financed equipment was cash flow optimization, cited by 62% of respondents.
The full report can be found here.