There is a fairly common misconception among manufacturers who sell equipment or software directly or through distributors to commercial end-user customers. It is a costly one that can result in fewer sales, smaller market share, less repeat business, and weaker brand recognition. The misconception is that they don’t need to offer a financing option to their customers, especially for small equipment. Many assume that financing will be handled by distributors and resellers. However, for any manufacturer there is a tremendous need and numerous benefits to providing extended terms to customers. Manufacturers need to carefully consider how their end users acquire their products. Offering financing is one way they can take greater control in the sales process.
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Since manufacturers don’t typically sell to end users and a large percentage of products are sold by resellers who sell multiple lines, each manufacturer is essentially trusting that resellers are going to put its product at the head of the line. Providing financing is a key way a manufacturer can differentiate how its product is sold among competing products. Consider subsidy financing that offers zero percent rates. Such incentives factor highly in the end user’s buying decision. Offering financing by partnering with an equipment finance company also provides manufacturers with another point of contact who can talk about their products with distributors and support financing programs and special promotions.
To fully leverage the potential of offering financing, manufacturers need to commit to embedding financing into their sales process rather than using it as a backup plan. Among the benefits of making financing part of the sales strategy are quicker sales closes, increased average transaction size and repeat/resell opportunities. For manufacturers who offer financing, approximately 30 percent of their equipment sales are financed.[1] That means roughly 30 percent of sales activity is generated by customers who need or prefer alternatives to outright equipment purchases, and potentially 30 percent of sales that manufacturers who don’t offer financing could be losing.
What to Look For In a Financing Partner
The key to setting up a financing program is to find an equipment finance provider whose goal is to commit the resources and exert the energy necessary to increase the manufacturer’s sales and improve service. What should manufacturers look for in a financing partner?
- Stability and transparency. Financials should be made available and carefully reviewed. The financing company should have a record of longevity and successful performance.
- How well capitalized. Determine if the financing partner has an independent source of capital. There are brokers and other lessors that do not have access to their own source of funds and get it elsewhere.
- Alignment to product, transaction size, and sales channel. Manufacturers will want their equipment financing partner to be experienced in their market and product segment. Ensure that the average product price point matches up with the expertise of the equipment finance provider. Align with a company based on their servicing of small, middle or large ticket equipment sales, and with proven experience in direct and distribution sales channels.
- Brand protection/support. The financing partnership at the manufacturer level is very sensitive. The manufacturer’s brand reputation is at stake and it depends on the equipment finance company to support its brand. It needs to ensure that the way the equipment finance company operates conveys the way the manufacturer wants to be represented in the marketplace. How do they treat customers? Can they represent the manufacturer’s brand?
- Program resources. Along with the previous qualifications, the resources an equipment finance partner is able to commit are critical to the success of the financing program and the manufacturer’s sales performance. Do they cover resellers across the country? Do they provide high level service? This is especially important for small ticket equipment because there are thousands of resellers and dealers so the equipment finance provider needs the capabilities to reach them. Will they train on the benefits of the program, from direct sales reps who sell, to distributors and resellers? Do they train the internal team (dealer or reseller base) so that the end user experience is seamless, and one the manufacturer intended it to be?
Value Added Benefits from Equipment Financing
In addition to establishing and operating the financing program, an experienced, full service equipment finance partner can provide support services. Manufacturers can find financing partners who will build and maintain Internet microsites for their resellers and dealers. These online repositories are available 24x7 and can be used to access up-to-date content and tools, including transaction quotes, current promotions, required documentation, and general leasing and financing information.
An understanding of the benefits and the straightforward steps to take make a compelling case for manufacturers to assert greater control in how their products end up in their customers’ hands. With the right equipment finance program in place, manufacturers have the opportunity to build their business through new channels and increase their strategic advantage in the marketplace.
[1] William G. Sutton, CAE, “Five Reasons To Offer Financing To Your Customers,” Equipment Leasing and Finance Association, accessed June 8, 2015, http://www.elfaonline.org/resources/MVRC/?fa=five
About the Author
Phillip A. Bruno is Chief Marketing Officer of Marlin Business Services Corp., a nationwide provider of commercial lending solutions for small and mid-size businesses. Marlin’s equipment financing and loan products are offered directly to businesses, and through third party vendor programs, which include manufacturers, distributors, independent dealers and brokers. For more information about Marlin, visit www.marlincorp.com or call toll free at (888) 479-9111.
© 2015 Marlin Business Services Corp. Reprinted with permission.
