Kevin's Corner

 

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What’s the Buzz about FinTech?

Financial Technology firm GreenSky LLC is said to be planning an Initial Public Offering that could value the Atlanta firm at $5 billion.  This is newsworthy since IPOs in this sector have been rare in recent years. You may ask:

    1. What is FinTech?
    2. Who does it serve?
    3. Has FinTech revolutionized the credit industry? 
    4. Why is this news relevant to the Leasing Industry? 

FinTech stands for Financial Technologies, as explained in this Forbes article. It simply is “technologies used and applied in the financial services sector”. In the case of GreenSky, The Atlanta Business Journal reported that “GreenSky’s technology analyzes consumer information  using  Social  Security number and credit bureau data to make credit decisions. The online loan platform also determines the credit limit and interest rates.” According to CEO, David Zalik . “The customer can apply, be approved, and be able to start spending money in less than 10 seconds,” 

Since GreenSky will focus solely on  home improvement loans, it may be more successful  than other FinTechs like  Kabbage and OnDeck Capital. These companies and most other FinTech providers offer business loans mainly to startups that don’t have an established credit history or a bank relationship. The funds are used by the business owner for various purposes.

The same Atlanta Journal article stated, “Despite the large amount of financing that private investors have poured into lending startups, IPOs have been rare in recent years due in part to concerns around rising defaults among their borrowers and increased competition. Those that have tapped the public markets have struggled. Shares in the online lenders LendingClub Corp. and On Deck Capital Inc. were recently down 86 percent and 77 percent, respectively, from their IPO prices when they debuted in December 2014.”

The Lease Finance Industry could be considered the original alternative to using a Bank Line of Credit and plays a large role in the economy, by enabling companies to grow and prosper. A lease is the preferred instrument of choice if a business plans to acquire capital equipment in that it has certain advantages: 

    1. A lease is only secured by the collateral that is being financed.  In the case of a default, only the equipment is repossessed.
    2. The equipment cost can frequently be  written off more quickly with a lease as opposed to a loan.
    3. Businesses avoid the risk of obsolete equipment since  a lease allows for upgrades at the end of the term.  
    4. FinTech rates are normally astronomically high and should be avoided by any and everyone.  

Since FinTech advertisements and news seem to be everywhere, we felt it was important to point out the differences and potential pitfalls if you need funds to acquire equipment. The real “Buzz” should be that FinTech is just one of many credit options that are available to business owners, but this tool has limited applications. However, an equipment lease is a reliable alternative for companies to acquire the equipment they need to stay competitive. 

Give us a “Buzz” if we can be of service,

Kevin F. Clune, CLFP
Clune & Company LLC