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.
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.
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.