Category Archives for Vendor Financing
Vendor Finance Program
Vendor Finance Programs – Broker Versus Lender or Lessor
There are basically two types of vendor finance programs that can be set up to provide financing to your customers in order to complete a purchase they are trying to make from you.
A vendor finance program can be set up and run by an equipment financing broker or it can be set up and administered by an individual equipment lender or leasing company.
In both cases, you are connecting the customer directly to the vendor financing program administrator for your equipment line so that an application for financing can be processed and hopefully approved as quickly as possible.
Broker Vs Equipment Financing Company
In an equipment financing broker driven model, the broker collects the information from the customer with or without the vendor or dealer’s assistance, puts an application package together that will be submitted to a lender or leasing company best suited to fund the deal, and then manages the process back and forth between the customer and the finance company until it is complete.
With a vendor program run through an individual financing company, instead of a broker administering the process, the work is done by an agent or customer service representative that works for the finance company.
The main difference between the two types of programs is that the financing company led approach can only service and approve applications that meet the lender’s criteria. If you have a customer that applies for credit who does not fall within the credit requirements of that specific lender or leasing company, the customer will be declined and then left to figure out potential financing on their own which could lead them to a different dealer or leave them with no financing option at all. In either case, the deal becomes in jeopardy of being lost.
When the broker model is utilized, the broker may very well be able to send deals to the exact same financing company that internally administers their own vendor program, but in addition, can provide the customer with additional equipment financing choices that may better fit the customer’s credit and financial profile.
With the broker model, your customer is not limited to one financing choice, and at the time of application, the broker is in a position to route the deal to the most likely source of financing versus having an all or none approach with one financing source.
Other Vendor Finance Program Considerations
Even if you have a very homogeneous group of customers whose needs could all be serviced with one financing company, you need to make sure that the turnaround time of the finance company and their level of customer service is in keeping with what you internally provide for your customer. Many of the financing companies provide services through an agent desk where there can be considerable variation in service from one day to the next, one agent to another agent.
A broker can still work with one targeted financing company if that provides the best value for your customer, but as an individual broker, they can also potentially provide a higher level of service which can make all the difference between closing a deal or not.
Vendor Financing Mistakes
Vendor Financing Mistakes To Avoid
So you have a vendor financing program in place, or are thinking of getting on set up to be available to your customers.
In either case, here are some vendor financing mistakes that you should avoid at all costs so they do not create lost sales and reduced profits.
Poor Coverage Of Customer Credit Requirements
Often vendor programs are marketed very aggressively by leasing companies through their agents to get exclusive or semi exclusive access to the dealer or reseller’s customer financing business.
But many times these programs are a poor match for the financing requirements some or most of your customers that require financing. For instance, if the leasing company only provides equipment financing for “A” credit deals and most of your customers don’t have “A” credit, then its not going to be very effective and will actually irritate the customers as no one likes to get their credit declined which will also take some time to go through and at the conclusion of the process they still can’t complete the sale.
It is critical that a vendor financing program is set up to meet the credit requirements of most of your customers that will require financing or you would likely be better off without it.
Lack of Timely Vendor Financing Services
Even if the vendor financing program is well suited to your customer credit spectrum, it still can do more harm than good if the equipment financing companies you are working with do not provide exceptional customer service and fast turn around of applications.
Many times, vendor financing programs are administered through a central support desk where your deals may be circulated through the hands of a number of different agents. Without some degree of familiarity with your business and the assets you are selling, the process is likely going to be less responsive than it otherwise could be or should be.
To find out how to tell if the vendor financing program you have in place right now can be improved upon, or to get an assessment of what type of vendor financing program best meets the requirements of your business and your customers, give us a call and we will perform a complete assessment and provide recommendations for your consideration at no charge or obligation to you.
Vendor Equipment Financing
Vendor Equipment Financing Program
Watch Outs
If you’re in the business of selling equipment as a licensed dealer or reseller there is only one thing worse than not having a vendor equipment financing program in place, and that’s having one that doesn’t properly fit the needs of your business and your customers.
Let me explain.
For leasing companies, vendor programs are their life blood.
Getting regular deals sent to them by dealers and resellers is how they maintain a regular deal flow, pay the bills, and turn a profit.
Sure, most leasing companies will look at “one off deals” where a business will come to them on their own looking for financing, but for most of their business, the vendor programs are the gold.
The problem with this for the vendor is that not all lease companies and their intermediaries are going to be working with your business’s or customer’s best interest in mind.
Many times there is a poor match up between vendor and business owner which can cause a number of problems.
First of all, if you have a vendor program that only works through one leasing company, you are going to be at the mercy of their program, lending criteria, sudden changes in policy, etc.
As a result, they could be charging your customers higher rates than they could get else where in the market, provide less than stellar customer service, and not have any funding options other than for those with near perfect credit.
With respect to customer service, in many cases your customer is working through a generic leasing desk that may even be outsourced that is providing service to many other companies. The inconsistency 0f this service from one customer service rep to the next can potentially impact the time it takes to get a leasing decision made as well as getting one back in the customer’s favor.
If you have an affluent customer base with solid credit and some level of patience, this can still work pretty well, provided the day doesn’t come when the leasing company says that they can no longer take any more of your customer applications because they have filled up their portfolio quota for the type of equipment you’re selling and/or the industry you’re selling to.
The best vendor equipment financing program in our opinion need to 1) cover off as broad a spectrum of applicant credit profiles as you are likely to encounter; 2) provide dedicated customer service attention to you and your customers; 3) have the scalability to always have financing available to your customers no matter how fast you are growing your sales or what level of sales you are maintaining on an annual basis.
To find out more about how to properly set up a vendor equipment financing program for your business, give us a call and we’ll go over everything with you first hand.
Vendor Financing Programs Equal More Sales
Vendor Financing Programs And Their Link To Vendor Profitability
When it comes to vendor financing programs and how they relate to vendor profitability, it very simple.
The easier it is for a customer to secure the equipment financing they require to purchase equipment from you, the higher the probability that the sale will actually close.
Too many times sales are lost because either the customer can’t locate financing, or they go to another vendor or dealer who can connect them into the dealer’s very own vendor financing program.
At the same time, just having a vendor financing program for your customers is not always going to equate to more sales and profits.
Unfortunately, there are lots of customer financing programs out there that are poorly designed, poorly administered and poorly funded.
There are basically two types of vendor equipment financing programs you can consider:
- Financing Company Direct
- Broker Administered
Lets look at each of these individually.
The financing company direct model is good if you have 1) a highly uniform customer base where everyone’s credit and financial profiles are similar; 2) a fairly narrow range of transactional dollar amounts; and 3) ample time to complete the deal.
You see a financing company direct model only provides their own equipment financing programs. Each financing company tends to be fairly narrow in terms of the type of credit and financing profile they are prepared to consider in addition the amount they are prepared to fund for any given transaction. With this model, you are also working into an administration desk where they could be different people involved on every deal that comes in and some variability in turn around of an application as a result.
If you’re customers fit this type of model, it can provide great value to them.
The broker administered model is more capable of dealing with a broader range of customer types, financing requests, and turnaround time requirements. A well run vendor program through a broker will also tend to provide one main point of contact who is going to be primarily responsible for making sure all the right information is collected in the manner in which the financing company requires it to be.
This is extremely important as each deal that comes in may need to go to a different lender or leasing company, depending on the type of equipment, amount required, the financial profile of the customer.
The strength of this model is the high level of dedicated vendor and customer support as well as the access to a broad range of lending and funding parties that collectively can cover off the needs of your customers.
If you would like more information on vendor financing programs for your business, or would like to see if what you currently have can be improved upon, give us a call and we will make sure you get all your questions answered right away.
Customer Equipment Financing Programs
Do You Need A Customer Equipment Financing Program?
A customer equipment financing program, or vendor financing program as it can also be referred to, provides your customers with immediate assess to equipment financing and/or equipment leasing programs that are capable of providing financing for the type or types of equipment you sell as well as the type or types of financial and credit profiles of your typical customer.
Basically, your business and offering has been reviewed and qualified by one or more lenders who would be interested in receiving applications from your customers.
Without a customer equipment financing program in place, lenders or leasing companies are basically entertaining one off applications which will each have to go through the process of validating your credentials as a dealer or reseller, how long you’ve been in business and your track record with your customers, as well as your financial position.
You may wonder why any of your information is important to the process.
Because the equipment financing process is going to be relying on the equipment as the primary security, the lender or leasing company will want to know that the supplier of same provides quality equipment and service and will be around for the foreseeable future to service the customer and potentially the equipment.
This becomes even more important for any equipment items that are not pure commodities in the market place where the resale market is not well defined or yet developed.
In order to strengthen a customer financing program, the dealer or reseller may also provide potential lenders with a form or recourse where by they will re market or repurchase the assets financed in the event of default. This type of scenario is not typically a requirement of a customer equipment financing program, but it does reduce the risk of the lender and therefore increases their potential to grant a financing approval in favor of your customer.
The other thing to keep in mind is that each and every customer must qualify with respect to their own credit and financing resources. Just because a lender or leasing company is ok with the equipment being sold the seller still does not guarantee by any stretch that financing will be provided.
The reason for going through the process of getting a vendor financing program in place is to simplify the financing process as much as possible so 1) a positive lending or leasing decision is more likely, and 2) the process is completed as fast as possible so as to reduce the risk of the sale not closing due to delays in the processing of a equipment financing application.
If you would like to get a customer equipment financing program set up for you business, or want a review of the one you already have, we suggest that you give us a call so we can go over your business model and customer profile and provide relevant vendor financing options for your consideration.