Source: Forbes | Matt Hunkler | August 8, 2016
Doug Speight knows that one man’s pain is another man’s profit, especially when it comes to the $900 billion dollar commercial equipment leasing industry.
Over 80% of companies in the United States lease equipment in one form or another. But when it comes to approving companies’ leasing applications, banks are notoriously, painfully slow.
It can take up to three weeks for a bank to approve or deny a company’s leasing application, and during the application process, companies are uninformed right up until the point when the banker either approves or denies their application.
The cumbersome nature of this process means companies can’t afford to go through it multiple times, and thus aren’t able to compare offers from a variety of financial institutions. They almost always accept the first leasing offer they receive, and as a result, typically overpay between 16-20%.
Disrupting The Leasing Process
Now Speight, CEO and co-founder of Cathedral Leasing, plans to reinvent the old, tired, broken process of equipment leasing. Cathedral Leasing is trying to do for equipment leasing what LendingTree has done for borrowing.
The company has developed a platform that allows them to take a single equipment leasing application and determine the creditworthiness of the applicant much faster than a bank. Once they’ve evaluated creditworthiness, they layer additional metrics on top, such as market penetration, industry competition, social media statistics, and a variety of other metrics typically evaluated by banks. All these metrics are then combined into a package which is matched against the underwriting criteria of numerous banks. The result is 12-15 offers from a single leasing application, all within 3 days.
Applicants can log into the platform at any time to see the status of their application, allowing them to stay closely involved. It’s a simple, efficient, transparent process for equipment leasing.
Their initial revenue comes through a subscription to their SaaS product. Equipment distributors pay a monthly fee to use the Cathedral Leasing platform, and in return, they benefit from a much higher close rate on their leasing applications.
Cathedral also takes a 3% brokerage fee from banks for every successful deal.
Currently, Cathedral Leasing is focusing specifically on agricultural, transportation, and construction equipment. Why? Because it’s big ticket equipment, and these equipment distributors lose up to ⅓ of their deals because they cannot put financing in place quickly enough.
The Future For Cathedral Leasing
The company is currently raising $750,000 in seed money, which will allow them to get to 5,000 users. They will be moving their platform into beta in the 3rd quarter of 2016, and are building their digital and direct marketing strategies. They’ve had 5 banks test and sign off on their scoring method, and have brought on 40 banks across the country as leasing partners. They just signed a technological partnership with IBM, as well as pilot projects with Access Ventures, Village Capital, and PayPal.
The question is whether Cathedral Leasing can beat out the competition. A $900 billion dollar industry is going to attract a swarm of competitors, and Cathedral Leasing will have to work to strategically set themselves apart. Therein lies the challenge of disrupting an industry. Even if you’re the first on the scene, it’s difficult to remain the top dog. Uber has to fight Lyft and AirBnB has to duke it out with HomeAway.
Will Speight and Cathedral Leasing be able to carve out a space for themselves? That remains to be seen.