Its one thing to have a vendor equipment financing program in place for your customers.
Its quite another to utilize it in a way that isn’t going to get you the results you require.
Too often the seller or vendor does not provide their financing partners with enough information to complete financing in an expeditious fashion, potentially putting a sale at risk in the process and straining the vendor financing relationship.
Equipment financing, like any other type of financing needs to work backwards from the lender or leasing company.
What that means is that every lender or leasing company out there that provides equipment financing through vendor programs is going to have certain requirements with respect to funding criteria, lending documentation, and account administration.
When something is a requirement, it must be in place, otherwise the process or action cannot be completed.
This is where a lot of vendor programs fall down as the vendor or reseller holds on to the idea at times that the people they interact with at an equipment financing company can subjectively bend the rules, or look the other way if key information is missing and get the deal approved.
The main reason for this line of thinking is in the haste to complete the deal, the seller or sales agent either omits the collection of key items required by a financing source, or doesn’t want to disturb the customer with the “financing details” as there can be a view on the sales side that excessive information requests can kill the deal.
While that may very well be true, your vendor equipment financing program is going to work much better for you and your customer if your focus is on getting the required information than trying to work around not having it for whatever reason.
We can refer back to the old sales adage that you need to under promise and over deliver and than is directly applicable to vendor financing programs.
The goal on all sides is to complete business as quickly as possible.
The key to doing that is from both sides, seller and financier, to be highly invested in the financing process.
If there are process improvements that need to be changed, or customizations to fit the needs of the seller, then they should be discussed at the start of the relationship so that proper expectations can be established.
For instance many financing companies will be able to approve equipment financing requests based on the personal credit and net worth of the business owners.
But once the amount of financing reaches a certain point, business financials are going to be required to support the lending and funding request. And if the applicant only wants to provide a corporate guarantee, more information may be required from the outset.
Failing to follow what is typically a well described process will only lead to customer frustration when a financing commitment is not forth coming as promised.
And high expectations can also cause the financing company not to go out of their way and over deliver at any point even if they are capable of doing so due to the fact that the expectations will then only go higher and be harder to match.
Even if you know you’re working with an equipment financing company that is a good match for your customer financing requirements, it can still take time for the financing application, approval, and funding process to work smoothly and seamlessly every time.
In many cases, there are small issues that come up as well that can impact the process and need to be worked through by all parties involved with a level head.
Some vendors will experience early frustration when the process does not meet their expectations, and instead of seeing how things can be improved on both sides, they continually jump from vendor financing program to vendor financing program, incurring the same problems over and over again.
Not only is this disruptive to the business, but it can get to the point where it may be hard to find an equipment financing company that is prepared to work with you.
The key point is that the more both sides understand their role in the process and set their own expectations accordingly, the more successful the vendor equipment financing program is going to be over time.
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.