Recognizing the complexity of execution and the demand for increased resources (capital and human), lessors often see greater risk and disruption in building an in-house servicing solution. Those recognizing the opportunity and long term stability of an outsourced partnership are growing in number, seeing value as reporting and collections become more sophisticated.
An in-house servicing platform is no longer seen as a requirement to grow an on-book equipment lease portfolio. Lessors are leaning more frequently toward third party outsourcing specialists in credit administration, documentation, on-boarding, collateral management, customer service, collections/workout, accounting, cash management and tax administration services. These specialists add value in the areas of cost savings, service levels and predictable costs for budgeting.
Managing cost has become a priority as lessors grapple with erratic monthly expenses associated with their internal portfolio servicing. Lessors managing their own portfolios bear the cost of a servicing system and an operations staff; an outsourced solution consolidates expenses down to a simple monthly servicing fee where you only pay for what you use.
A lot of businesses outsource the servicing component of their portfolio, especially after looking at the expense of staffing, infrastructure, and software. In-house servicing can also be a big distraction from the core mission of the business. Here are four areas to consider in making a decision:
Access to capital has created a fertile climate to grow an on-book portfolio while providing funding diversification. These unprecedented economic conditions have pushed organizations to rethink how they want to grow. In some cases, their funding sources either allow for servicing to be retained or require it. When required, funders are reassured by a qualified outsourced partnership that gives turnkey access to experienced employees and system solutions with proven lease processing practices.
Lessors who are teetering between a small portfolio managed on spreadsheets and exponential growth if they can seize upon available funding are prime candidates for outsourced servicing partnerships. On the flip side, if a business has a twenty-lease portfolio with limited growth plans, it could be a smart move to remain with an internal system. The question to ask is: ‘Will my system provide future continuity for new customers and have the capacity to keep pace with my current speed of growth.
A careful review of your staff situation should inform your decision to outsource. Is your staff ready to execute with minimal fail rates? Have you located a reliable recruitment base to fill positions at lower salaries? There has never been a better time to have qualified and well-trained people managing a portfolio and servicing customers. Outsourced servicing brings experienced skill sets to a portfolio in an indirect approach while still maintaining adequate metrics. Not only do lessors retain the benefit of immediate, qualified employees, they also skip the time and expense of hiring and training.
Just about all lessors enjoy strong relationships with their customers and wish to maintain this bond. As a result, some have ruled out the possibility of a contracted outsourcing partnership that touches their customers on a daily basis. This is a valid concern since all portfolio servicers are not cut from the same cloth. Look for frequent and customized reporting cycles to help maintain contact. Outsourcing can actually help finance companies retain customers by directing more attention to business development and providing more attentive service levels during the origination process.
Back office service levels improve as well. When electing to outsource portfolio management, a lessor doesn’t transfer the back-office responsibilities to a single desk but rather a team of trained servicing professionals, each with expertise in their own niche. Team members have support staff and colleagues to cover for them while they are out of the office or on a call. Instead of relying on two or three staff members to fulfill six or seven functions, the lessor has access to a team with a full complement of specialized functions.
