The basic premise of these programs is to provide readily available capital to individuals or businesses that want to purchase hard or tangible goods. The financing is pre-qualified by the funding source for the intended purpose and the only thing to figure out when granting financing is if the applicant is credit worthy or not. For requests under $50,000, most loan and lease financing is approved on credit scores and credit history making for a virtually instant approval or decline. For larger amounts, support information can be required to further support the credit decision.
Equipment financing programs are basically divided into consumer or B to C programs, and business or B to B programs.
The consumer related programs tend to be either driven in house by the manufacturer or distribution network, or through large financing companies that specialize in consumer lending.
On the business financing side, there are typically a wider variety of available programs being offered to the business public than in the case of the consumer, even though the overall dollars tend to be lower on the business financing side.
An effective equipment funding program can be a challenging thing to get into place due to its need to not only fit into the sales process of the vendor, but also be able to qualify most of the customers that will be looking for financing. When the customer population is very homogenous, the challenge of getting a vendor financing program is not nearly as challenging as when your customer mix is very broad based from a credit and financial viability point of view.
Put another way, when the average customers have very similar credit profiles, then its not too hard to match up a funding program that can generate a high level of approvals. But when there is a wide range of potential customer credit to consider, its basically impossible to find any one program that will provide a high approval rate.
In diverse credit situations, the equipment financing program may have to utilize several different credit sources to effectively serve the needs of the vendor’s or dealer’s customers. In these situations, the financing solutions tend to be administered by a broker or other form of financial intermediary that has both the skill to quickly assess credit and the access of different source of capital that can accommodate the majority of customer requests that are likely to be forthcoming.
Credit aside, a successful equipment finance program will also have to seamlessly fit into the sales process as well. When this is not the case, the financing process will likely end up losing the business sales which will result in lost profits. In the end, all equipment funding programs require a certain amount of customization to fit into the sales process of the dealer or vendor. Virtually no to sales processes are exactly alike, largely because of the differences in the personalities that administer them as well as the unique selling features inherent with different types of equipment and different types of customers.
The continued effort to customize and improve the sales to financing process is critical to maximizing sales and growing as a business where customer credit availability is important to completing the sales process. The path to the best results typically comes from working with an experienced fiance professional that has effectively set up and managed equipment financing programs that were able to provide a higher percentage of not only approvals and sales closures as well.
If you’d like to find out more about equipment financing for your business customers, either with respect to setting up a new program, or improving upon what you already have in place then I suggest that you give us as call for a free initial assessment of your situation and a discussion of options available to you to consider.
Vendor equipment leasing programs are designed to provide your customers with financing options as quickly as possible, regardless of their time in business and credit profile.
That being said, the more challenging a customer’s financial and credit profiles, the longer its likely going to take to get their financing arranged. And when customers are in that position, they are also expecting the process to take a bit longer in most cases.
The key here is that equipment lease financing options are available for a high percentage of your customers.
The only way this is going to be possible is if you are working with a financial intermediary with multiple sources of credit versus working with one lender that only services one segment of overall credit market. For instance, there is no sense working with one “A” lender if 50% of your customers do not qualify for “A” funding. Unless your customers are extremely homogenous with respect to their financial and credit profiles, its very likely that a single financing source will cost you sales due to the inability of the funder to qualify a significant number of your customers for credit.
From a vendor point of view, equipment lease options for your customers tend to be preferred due to the speed of the process. For transaction amounts under $100,000, the financing assessment and approval process is typically completed in 24 to 48 hours with funding to follow soon after.
This is preferred as the customer can have everything they need to complete the sale in a short amount of time, reducing the risk that they will change their mind or purchase from a competitor.
From a customer point of view, leasing affords them with a number of different ways to structure a deal in order to take advantage of cash flow, taxation, and balance sheet considerations. In comparison, equipment loans do not have as much flexibility and tend to take longer to arrange.
Equipment leasing is also a more common form for equipment refinancing where funding is provided through a sale and lease back process. In this situation, a leasing company purchases the equipment from the business owner and provides them with a lease back that gives the business owner continued ongoing use of the equipment and the right to purchase the equipment back at the end of the lease term.
From a financing company point of view, leasing provides a greater form of security to them as the financing or leasing company actually owns the equipment versus a loan scenario where the borrower owns the equipment and the financing company has registered security against the equipment. An ownership position is preferable in situations of default as leasing companies have greater ability to reclaim their equipment and liquidate to get their money back.
So for all involved in customer equipment transaction requiring equipment financing, an equipment lease can be a preferred financial vehicle.
If you would like to better understand how a vendor equipment leasing program could be set up for your customers, or if you would like to assess if the current program you are working with could be improved upon, then I suggest that you give us a call at 905 690 9874 for a free assessment of your vendor equipment leasing options.
If you are in the business of selling equipment to other businesses, then the first question I would ask you is what percentage of your sales are for cash and what percentage does the customer require financing?
The more times customer financing that is required, the greater your sale is obviously at risk if they either can’t figure out financing on their own, or if the vendor program you’re working with is unable, or too slow to get your customer an acceptable equipment financing solution.
The good news is that there are many different sources of equipment financing available to a wide range of customer financial and credit profiles. The bad news is that this still does not guarantee that funding will be in place in the time required for you to close your sale or not lose your sale to a competitor.
For well established vendors and dealers, its very common to regularly have finance companies and equipment financing brokers call you up to see if they can arrange funding for your customer either in the form of an equipment loan or equipment lease. Its also very common that as an established vendor you already have a working relationship with a third party provider of equipment financing for your customer transactions.
What then becomes important is the success you’re having with your vendor program and how that’s translating into more sales being closed on a timely basis.
If you’re not already doing so, a periodic review of the your sales offers and closing is important to make sure you aren’t missing out on sales due to customers not being able to arrange financing. If this is the case, then you should seriously look at changing how you’re doing things and who you’re working with.
If your close rate is not where you want it to be, then here are a few things to consider when assessing how to improve it.
First, are your customers getting an offer for financing fast enough to close the sale without competitor interference. Especially in situations where you’re trying to steal a customer from a competitor, the sales window can be very small and if financing is required to close the deal before the competitor reacts, then you need to make sure you have a program in place that meets this sales requirement. Going one step further, an analysis of the sales process may identify certain steps/items that if a leasing company could cover off differently or faster, the overall process would complete much faster. This could relate to the way credit applications are collected, how lease documents get delivered, steps in the funding process, and so on.
Second, does your current vendor equipment leasing program properly represent your average customer profile related to credit needs? For instance, you could be working with a customer financing program that only looks at strong “A” credit. If 20% or more of your customers are not strong “A” credit, they are getting declined and trying to find funding somewhere else, which could lead them to the vendor financing program offered by your competitor.
If you have a very homogenous customer base with respect to their financial and credit profiles, then one mono line lending source with a specific credit focus can work just fine. But if your customer base is more diversified with respect to their individual ability to quality for credit, then you’re going to need to be working with someone that can provide a broader range of financing options.
A broader range of credit profiles also tends to lend to greater facilitation skills by your vendor financing partner. On a deal to deal basis, the financing challenge can be significant in a diverse customer group, so you need to be working with individuals that have the skill set and broad access to capital necessary to figure out a timely credit solution for most customers most of the time.
It all starts with analyzing your close rate and see if its where it should be.
If you’re not offering customer financing options today, the other thing to consider would be how much incremental sales volume could you generate if you were financing customer equipment sales. Sometimes just offering a financing option can be a spring board to a significant sales increase over time. If this is coupled with the right customer equipment financing program the results can be further magnified.
If you would like to set up a financing for your customer equipments sales, or evaluate your existing program, then I recommend that you give us a call for a free assessment of your customer equipment financing options.
When we talk about Vendor and dealer financing, we’re basically taking about the sale thing with respect to equipment leasing solutions for the end customer.
We could also add the term “equipment resellers” to the list as well or any other term that identifies an established business that sells equipment to their customers.
The key here is that we are talking about a business that sells or resells equipment, not an individual person that sells something privately. And in the segment of the market that we work in, we are also referring to sales transactions to other businesses. Vendor and Dealer financing programs relates to consumers is serviced by a totally different part of the market.
The equipment financing programs that we set up for a vendor, dealer, or equipment reseller provide their customers with direct access to a credit granting program that provides capital for the specific type or types of equipment being sold.
The financing or leasing program is not owned or funded by the vendor or dealer. They just direct their customer towards a financing program that typically already exists that the vendor or dealer have taken the time to get qualified for.
What we mean by qualifying is that most vendor or dealer programs are provided through equipment lease financing which means that the leasing company is going to be the purchaser of the asset and will provide the end customer exclusive use of the equipment through a lease agreement. Because the leasing company is going to be owning the asset, they want to make sure that 1) the assets being sold have an established resale market, and 2) that the vendor or dealer is a reputable business that stands behind their products and can provide after sale service if required.
So even though the ultimate credit decision to provide equipment financing is based on the customers financial and credit profile, the vendor, dealer, or reseller must also qualify with the lender in order for any potential sale they want to make be considered for funding by the finance company.
The term vendor financing is also used frequently in the real estate market but the application of the term there is totally different in that vendor financing from a property perspective tends to involve the seller agreeing to defer the receipt of the proceeds into the future and this arrangement is referred to a a vendor loan or vendor financing as the vendor is the actual lender indirectly providing funding to the deal.
Vendor and dealer financing from and equipment resale point of view strictly relates to the vendor or dealer providing their customers with access to a financing program that is capable of financing the equipment the customer wants to purchase.
This is what we specialize in and would welcome the opportunity to either set up a vendor finance program for your business or provide a free assessment or valuation of a vendor funding program you current have in place.
Give us a call today and find out how we can help your customers secure financing and help you close more sales.
While on the surface that would appear to be very obvious, it doesn’t mean its easy to accomplish.
Once you have gotten a customer to make a buying decision, agreed upon the price and terms of sale, the sales process is basically 90% complete, right? If the customer has cash available to complete the purchase, the process is completed right away and you earn your margin on the sale.
But what if the customer does not have sufficient cash to complete the equipment purchase, or what if they don’t want to use their available cash up to fund the acquisition? This case, which can be the most likely case in many industries, the customer is going to have to have financing in place to complete the sale.
So the next question is … are you comfortable assuming your customer can figure out their own financing, or do you want to provide some assistance? If the customer is left to figure out their financing on their own, it could all work out very well where funds are provided on a timely basis. But when there is any delay or difficulty in the financing process, your sale can be put at risk in the following two ways.
First, if the customer cannot figure out financing by themselves, then there will not be funds to complete the transaction and therefore no sale.
Second, if the financing process is taking some time to complete, it opens up the possibility that a competitor may get involved with the customer and grab the sale. The competitor can grab the sale by providing a better deal and/or providing a financing option for the customer that the customer could not find on their own.
So even though your deal is all set to close, there is no closing and profit if it doesn’t close.
That’s why its so important to provide your customer will a pre-qualified and highly relevant financing solution at the point of closing. It will also be important that any financing option you introduce you client or customer to works seamlessly with your sales process so it does not put the sale at risk either.
To clarify further, its not enough to just have a vendor equipment financing program in place. You’ve got to have one that’s going to help you close a high percentage of sales and that adds value to the closing and funding process versus placing it at greater risk not completing.
The best way to know for sure what type of vendor equipment financing program will work well for your business is to get a customer equipment financing assessment from one of our equipment financing specialists. The process can be completed over the phone and at the end of the financing assessment, we will provide you with specific vendor equipment financing programs to consider as well as an evaluation of any programs you currently have in place.
Once again, there is no cost to getting this assessment completed and you will be one step closer to making sure you are going everything possible to maximize the closing of all sales you’ve worked so hard to get lined up. Having a higher sales close ratio can be the difference between breakeven and profitability, or marginal profitability to exceptional returns.
Give us a call today and we’ll get all your questions answered right away.