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.
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:
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.