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.
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.
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.