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.
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.