Equipment Finance Keeps Pace With Logistics’ Drive Toward Flexibility

Consumers’ shopping behavior shift, driven largely by the pandemic, created a flurry of change along the supply chain, and logistics companies are hustling to adjust.

Whether it’s the need for extra warehouse capacity or more material handling tools, logistics equipment is in demand, but cash flow challenges can make it difficult for players in the logistics space to invest in the machinery they need to meet the pressures of an eCommerce boom.

What’s more, according to First American Equipment Finance Senior Vice President Daniel Wallenhorst, these businesses are also faced with the need to adjust their capacity and services based on dramatic dips and surges in the needs of their clients. As a result, equipment finance to support the leasing and procurement of machinery must be just as flexible, as Wallenhorst told PYMNTS in an interview.

Logistics Flexibility

Supply chain pressures are at unprecedented levels across a variety of industries. Lumber shortages in the construction space, the rise of online shopping and direct-to-consumer (D2C) business models, and even the dramatic squeezes in personal protective equipment (PPE) availability at the height of the pandemic continue to offer lessons for the logistics sector on the importance of flexibility.

Consumer spending shifts have created changes to how logistics firms operate and, as a result, the products they need to get the job done. According Wallenhorst, this ecosystem creates the need for logistics firms to reevaluate their existing client contract and match the assets they have and need — including machinery and equipment — to their clients’ needs.

“It’s definitely an ebb and flow of being able to find flexible client contracts that the logistics providers are servicing,” he said. “Finding flexible solutions to manage assets in and out of your business has been even more important with the change in the marketplace.”

Agility is another critical requirement for logistics firms, which can struggle to react quickly to market shifts. Being able to grab machinery and other assets quickly when they become available is key to enabling that flexibility.

Equipment Finance Goes Niche

When the opportunity arises, having the capital to invest in machinery leases or purchases is essential. This need has placed pressures on the equipment financing industry, which is now tasked with itself becoming an agile market that can ebb and flow with logistics firms’ demands.

“When there’s an opportunity to buy, executing on it quickly is extremely important,” said Wallenhorst. “Finding a partner where you maybe have a master contract in place that you can access funds directly off of, and getting comfortable with a partner that understands the growth that’s happening within your business, is really important.”

It’s an opportunity for the equipment finance space to explore a niche approach to the market, as Wallenhorst said First American has done with the logistics space. Developing those relationships and understanding the nuances of the market can mitigate risk and accelerate underwriting and funds disbursements to help firms grab machinery and equipment when it’s available and needed.

With more opportunistic purchases occurring among logistics firms, there is also a space for equipment finance to embrace some of the same trends that consumers driving industry shifts have embraced. That includes an eCommerce-like experiencing when sourcing and obtaining equipment finance as more firms not only seek a user-friendly experience, but one that can fast-track all aspects of what has historically been a manual, sluggish, paper-based process.

Although Wallenhorst said he has seen signs of the eCommerce model gaining traction in the way logistics firms source and procure machinery and equipment, the trend is in its infancy. But application programming interfaces (APIs) are setting the stage for equipment finance to position its digital-first, accelerated services directly in the portals through which logistics firms access the assets they need to finance.

When coupled with other digital-first advancements in the corporate finance sector, equipment financing can keep pace with the logistics solution providers that must act fast to respond to continued fluctuations in the economy.

“That drive that happened from necessity, it has a lot of technologies and advancements that are here to stay,” said Wallenhorst. “Just like eCommerce, I think we’re going to see the same thing now happen in the financial services industry.”