Integrity is everything when spanning uncertainty in lending

20 minutes west of Avignon, in sun soaked, wine thirsty South of France, lies the magnificent Pont du Gard. Constructed by the Romans in the first century AD, the mighty aqueduct elegantly joins up the banks of the River Gardon.

As the world was opening up again after the pandemic, I was fortunate enough to visit. I was struck hard – not by the scale or style of this two millennial old structure but by how well it has aged. It’s robustness and enduring strength are testimony to the leap in structural integrity that came with Roman architecture.

Lending money is a tough gig. It’s not enough to be right most of the time – you must be right almost all of the time. Depending on how much spread it earned on pricing, and how much recovery is achieved on defaults, a lender will typically need ‘to be right’ (i.e. not extend credit to a borrower who will default) between 95% and 99.5% of the time, coincidentally two to three standard deviations of a normal distribution.

At equipal, we painstakingly and patiently developed our tech-enabled business so we can facilitate lending with integrity. This underscores everything at the company from tech to operations to BD. In part, because it’s the right thing to do and reflects who we are, but also because a build up in the lending arena is a longer term play (5-10 years vs say 2-3 years for SAAS software or pure tech business). Integrity of data, integrity of architecture, integrity of process… Others, usually VC dominated backed lenders, will shoot for maximum origination in the name of pursuing growth at all costs. Integrity inevitably falls by the wayside. Blow ups follow.

This took time – in developing equipal it was essential to research user flow, map out steps, understand how important each piece of data was.. Example: when extracting the weight of a commercial vehicle to our API, there are four or five different measures commonly available but only one drives the recovery cost on the unit. We make sure to have the right data. And we keep it clean and clear.

So while other shot for the sky in paper airplanes, dolled up with the right PR and an unrelenting advertising campaign, equipal instead built itself steadily and systematically with a solid base.

But integrity is about more than data. In fact we think about integrity on several levels:

1. Integrity in our actions and in our service – We do our utmost to find a solution for the Customer and we never promise, or even imply something we can’t deliver. Indicative prices are clearly labelled as that, firm pricing is firm.
   We don’t ram a product on users. We enable the user to determine if the product is right for them and we then utilise tech to make it as easy as possible for the user to use the product. Our reputation amongst Customers and Vendors is excellent and the good percentage of customers who return for two, three or four pieces of equipment remind me that we are looking after our market well.
2. Integrity in our decision making – We make smart, objective decisions, that are empowered by factual data in the black and white, not colourful emotion. This applies to credit decisioning but also to commercial and business development decisions. Reputation is everything. Repeat after me, reputation is everything.
3. Integrity in our communication – We make it easy for our funding partners with honesty and transparency in our reporting, our disclosures and our free flowing communication.

Ultimately integrity drives customer retention and deeper relationships with Vendors, Trusted Introducers, Customers. This naturally brings other business. Repeat after me, reputation is everything.

Below is a recent photo with a customer who has come to us four times for finance in the last six months. We consider ourselves immensely fortunate to support him on his journey.

But does integrity come at too high a cost?

Within hard-asset, prime SME asset finance, we have seen funders such as ABN Amro, PCF Bank and Hampshire Trust Bank all struggle. A big part of the problem is the cost of maintaining a hands-on approach. Customers want hands-on but they won’t pay for it. Risk demands hands-on but doesn’t consider the opportunity cost of time utilised. The compromises can kill integrity across a business, sometimes leading to demotivated staff or loss of customer goodwill or worst of all, triggering higher credit or fraud losses.

Others are currently chasing their tail as they struggle to contend with the provisions necessary to cover claims for hidden commission. And then there are broader regulatory headwinds which will curtail asset funders even more.

We firmly believe the solution to effective asset funding and sustainable business is not to be overly ‘hands on’ but to be ‘tech-on’. Integrity can be maintained with the good tech supervised by the right governance. People are expensive (not helped by recent budget!) – it’s time to automate, and where there is horse power rather than hype power, fully utilise AI tools.

It is our hope that platforms who keep a steely focus on integrity will continue to facilitate flow in this uncertain world.. just like the siphon pipes laid in those roman aqueducts carried the water to nourish the fields two thousand years ago.