dealer equipment financing program
Dealer Financing Program Watch Outs
A Dealer financing program is where an equipment dealer or reseller has established a relationship with an equipment financing or equipment leasing company or companies, to provide equipment financing options to its customers.
If the dealer is owned, licensed, or franchised through a manufacturer, then they will likely promote any manufacturer financing programs available to them.
If a dealer does not have access to a manufacturer supplied financing program, the next best option is to introduce the customer to equipment financing companies that 1) finance the types of equipment the dealer is selling, 2) is prepared to finance the range of price points that can be offered, and 3) can provide financing that fits the dealer’s customer profile in terms of the average or most typical customer’s credit and financial profile.
Dealer programs that do not come from a manufacturer are either administered through a single equipment financing company or through an equipment financing broker.
For Your Dealer Financing Program, Here Are Some Things To Be Aware Of
First of all, does your dealer financing program fit the profile of at least 80% of your customers?
If not, that means that the customers are left trying to find their own equipment financing to close the deal which could very well land them at another dealer lot where better financing is available.
Second, is your dealer financing program responsive to your customer’s needs and your sales process?
For instance, if you require 24 hour turnaround with an equipment financing application to secure the sale in a competitive market, is the equipment financing company or companies you are working with even capable of doing that? Many times your financing partner has a generic administration desk that fields the application requests for all their customers. This can result in slow turnaround and customer frustration as the more agents working for the financing company, the less each on is going to know about your business and the equipment you sell.
Third, does your dealer financing program allow scalability of your business?
Basically all equipment financing companies have some sort of portfolio requirements that do not allow them to have more than a certain percentage of deals in any particular industry or customer segment. If they run out of room in their portfolio for your business requirements, you can be left scrambling to find an alternative while your customer is waiting for a financing solution to be offered.
If you have a dealer financing program in place, or want to get one in place, your next best step is to give us a call so we can quickly evaluate your business model and customer requirements and provide dealer financing program options for your consideration.
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.