Vendor Financing Programs: Why There’s No Better Time Than Now
Vendor financing is an important marketing and sales tool available to equipment manufacturers, dealers, and distributors. Even when the economy was doing well, a significant number of equipment buyers were opting for purchases financed by the equipment vendor.
Now that the economy has been in an economic slowdown and cash liquidity is a major area of concern for most companies, equipment & software financing is in greater demand. This is especially true for small and medium-sized organizations that need the equipment or software now, but don’t have enough in cash reserves to fund the entire purchase upfront.
From a vendor’s perspective, the ability to finance a purchase is an important one, especially if their competitors can and they can’t.
Why?
Because businesses that are unable to make a purchase outright would have no choice but to go elsewhere to a vendor who can work with their current financial situation.
The issue is that for many small or medium-sized vendors, they simply don’t have the financial resources to compete with large manufacturers/vendors with captive financing capabilities and successful vendor financing programs of their own.
Vendor Financing Programs Are a Win-Win
For equipment buyers, a vendor financing program gives them the flexibility to make installment payments (typically on a monthly basis), so they don’t deplete their working capital. Often times, there’s also the option of leasing, if need be, against an outright purchase of the equipment.
For the vendor, equipment financing enables a long-term relationship building exercise with the customer, leading to an increase in customer loyalty, repeat purchases, cross-selling, and technology enhancements as and when required. This translates into more business and additional revenue.
Selecting the Right Vendor Finance Partner
While the need for vendor financing can’t be underestimated, the real challenge for many vendors lies in their ability to set up an equipment or software financing program on their own. Most small and medium-sized vendors simply don’t have the requisite finance – or infrastructure – to manage and run a financing program on their own. They also lack the knowledge and experience. As such, finding a suitable finance partner is paramount to success.
A good finance partner will have access to capital, as well as the requisite expertise to successfully manage an equipment and software financing program. In addition, the selected partner should have a proven track record of vendor financing in the specific industry in which the vendor is operating, as industry-specific knowledge and experience is critical to the successful implementation of such vendor financing programs. The financing partner should also have a large capital base to be able to provide long-term solutions and stability to relationships both with the vendors and their end customers.
Once a vendor has selected a financing partner, the end-goal should be to build a long-term and sustainable relationship with a single financing partner instead of exploring multiple different options.
Get Assistance with Setting Up a Vendor Finance Program
To have a more detailed discussion on this subject and understand all the benefits of setting up a vendor financing program for your customers, contact us today at 800-755-0585.