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.