This as it turns out, is an important question for the industry to consider. The new models are not only highly beneficial to vendors but to equipment finance companies as well. These “virtual” solutions represent the proverbial win-win situations that define the most successful customer relationships. With these solutions and programs in place, the vendor gets a turnkey, exceptionally cost-effective means of offering a robust customer financing program. The finance company, on the other hand, strengthens both its portfolio and bottom line, adding good assets and credits while benefiting from a predictable and sustainable source of volume.

There are many other benefits as well. Partnering with a vendor in virtual or CaaS solution breeds close familiarity with the company’s products and its sales channels. The finance company develops deep expertise in the vendor’s products and services, as well as expanding the comfort level with the people who are maintaining them. As these relationships strengthen and grow, the finance company’s underwriting capabilities broaden and deepen as well. These factors all ultimately come together to mitigate risk, arguably the most valuable benefit of all.

Additionally, substantial opportunities through expanded product and sales process knowledge can lead to very productive joint marketing programs. Partnering with vendors that enjoy established, well-recognized brands serve to enhance by association the finance company’s brand as well.

For the equipment finance industry, taking advantage of these opportunities requires a heavy dose of forward thinking coupled with a willingness to embrace automation, flexibility and transparency. Today, with the right processes, people, technology and — most importantly — mindset in place, finance companies can fill an important and growing need for customer financing by today’s educated vendors. What is needed is for these finance companies to employ unconventional, non-linear thinking and the organizational will to take action.

Based on our experience, there are some prerequisites for a finance company to participate profitably in the vendor program space. The ability to support and expand long-term relationships with key customers is an important facet of any financing program. One-and-done transactional financing has no place in the vendor space. Instead, a singular focus on relationship building is critical. Finally, a significant commitment to and investment in technology including partner, customer and system-to-system interfaces that enable the delivery of seamless services is at the heart of a state-of-the-art program offering. Together, these elements form the stable platform necessary to deploy a comprehensive solution.

When seeking opportunities, a key driver is to identify vendors who understand the value of a strong customer finance offering and who utilize outside experts to offload non-core business processes in order to concentrate on revenue production. Anecdotal experience in the marketplace indicates that the willingness to outsource is on the rise.

Second, many vendors are weary to put all of their financing eggs into one basket. It is now clear that a hybrid approach of multiple lenders, each focusing on a particular market segment or product line may, in fact, be a much more effective model for some manufacturers.

In the case of LEAF, our go-to-market solution is the “Captive in the Cloud," which includes five critical elements. We combine our capital with a comprehensive solutions-based approach to financing, sales and marketing expertise, advanced technology and a proven servicing platform. This gives us the ability to quickly deploy a customized captive solution to just about any organization that requires a seamless customer financing function.

These evolutions in vendor-sponsored customer financing should be viewed as a disruptive trend. Virtual captives and particularly Captive-as-a-Service both provide tremendous flexibility not only for customers, but also in how they are served.

The important thing to understand is how the market is changing. The new paradigm is about flexible integration and fluid partnerships, as opposed to rigid structures and sole ownership. A competitive finance company should be able to spot potential partnering opportunities and then be positioned to either take advantage of them or to ramp up in order to do so.