- Name: Vernon Darko
- Company: EquipXP
- Title: Group president
- Country: US
- Sector: Heavy equipment
GTR: Tell us about EquipXP and the company’s trade finance needs.
Darko: Houston-based EquipXP specialises in the sale, finance and transport of new and used heavy equipment to frontier markets: mainly Africa, but also Latin America and Asia. Our company vision is to be recognised as a pioneer that advances global trade.
In terms of trade finance, we have been involved in utilising export credit agency (ECA) programmes so that we can finance our buyers, who can then secure their capital equipment needs, mainly in the oil and gas, mining and construction sectors.
GTR: How have developments in the oil and gas sector impacted your business?
Darko: Service companies have struggled in terms of contracts being reduced or cancelled – so they’re very cautious in their procurement needs. For that reason, a lot of the procurement has slowed down. But it seems like the market is starting to pick up a little bit, based on the fact that rig counts are going up. We’re seeing an increase of enquiries, which usually leads to orders. Pricing has also gone up a little. So we’re seeing indications where the market is going to pick up – but I’m not so sure how fast this will happen.
GTR: Which markets are you most excited about and why?
Darko: I’m currently excited about the African market. Mainly because it’s a frontier market, and the majority of the capital equipment that we supply is not produced there. This, combined with the fact that a lot of African countries are increasingly moving into manufacturing, means there is room for us to provide this equipment for those purposes.
GTR: Why do you favour the frontier markets?
Darko: I believe the opportunities are much greater there. There are better returns – and there is less competition. Most people don’t like having to go through all the processes that are required. These transactions take time, so you have to be patient. For that reason, there’s not a lot of people competing for that marketplace.
But because of that, one of the challenges we face in these markets is access to financing. Most of the time our clients’ access to finance is very slim.
We need to find solutions in the trade finance space to be able to conclude transactions. But the ECAs and the financial institutions (FIs) that are eager to work in those regions usually reach capacity pretty quickly. So we’re always having to find new solutions – or new financial institutions – interested in
GTR: How receptive are new lenders to financing in frontier markets?
Darko: Some FIs are interested, but they’re always looking for some kind of way to secure or back the transaction, which is understandable. More and more institutions are showing interest in frontier markets – and I believe that the opportunities are there. It’s just a matter of presenting a good, bankable transaction.
GTR: Tell us about your decision to start offering finance solutions to your clients.
Darko: This is something that we introduced as we went along. In the beginning we required customers to make payments in advance. But we realised that if wanted to increase transactions and enable clients to conclude on their deals then that was going to be a much tougher way to do business. We needed to find solutions for them and that’s why we got into trade finance.
One of the things we offer is suppliers’ credit. That has been a good way for us to get transactions moving forward. We offer this in different forms: in open account form, and also where it’s backed by instruments, such as letters of credit. We also provide medium-term debt loans for larger purchases, as well as domestic financing options.
These solutions provide clients with the time to pay for all the equipment: it gives them a little bit of leeway to get the equipment there, get it installed and start making some revenue, before having to begin making these payments.
GTR: How essential to your business is your ability to offer financing?
Darko: It’s very essential because now the majority of our transactions are finance driven, as opposed to just equipment driven.
It’s given us a competitive advantage, most definitely. Most suppliers that we know of will prefer to have payment upfront.
GTR: What else sets EquipXP apart from the rest?
Darko: The fact that we visit our clients on a regular basis. Most people wait and the clients come to them, but we do a lot of travelling to allow us to be able to be closer to our customers and form relationships.
GTR: Do you think you’ll branch out into more financing solutions?
Darko: We are always looking for solutions to better enhance our clients.