Many firms wish to offer a customer finance program but do not have the necessary skills and capital to offer such a service. A properly run customer finance program can increase sales, improve cash flow by 100%, eliminate customer objections, and also allow your customers to work within their budget and approval cycles. Those reasons are clearly powerful for any firm considering a customer financing strategy.
Most customers know that some of the world’s largest corporations such as IBM, GM, CATERPILLER, etc offer very robust customer finance programs for their customer base. They offer such a program to ensure that they can reach maximum customer penetration within their markets – they don’t want to lose a sale just because the customer was unable to finance a product or service.
Companies who wish to start a customer finance program should explore the resources of an experienced third party. This, as stated previously ensure the program will have the technical, credit and financial backing that such a program provides.
The major reasons that customers look at using a third party can be summarized as follows:
No in house credit and leasing and documentation expertise
Lack of funds for a large program
Desire not to take credit risk inherent with long term financing
They feel they are not large enough to consider such a program.
Leasing and equipment financing is a highly specialized area – it also requires significant accounting skills with respect to the types of leasing that is offered. Firms considering such a program should ensure that they have the ability to offer lease to own leases (capital leases) operating leases (customers use but don’t own the equipment) and also short term rentals if that is applicable to their product or service.
Such a customer finance program requires a significant amount of capital – as such it makes sense to utilize the resources of a third party with unlimited ( or close to unlimited!) capital. Some companies might find that their borrowing power to support such a program does not allow them to offer competitive rates, terms, and structures.
Some firms that consider customer finance and leasing programs do not wish under any circumstances to take back product at the end of the lease. They want to sell more new product!! That reason alone drives many firms to utilize the services of an experienced third party.
There are a number of different third party ‘types ‘that a company can partner with. These include leasing intermediaries, banks, and other independent lease firms. A leasing intermediary, experienced in the industry, is quite often a great choice as they have significant expertise in a variety of industries, they have access to unlimited funding through their funding sources, and they are not constrained by deal size or credit quality of any one individual deal. They also can assist the customer in making sales calls to complete sales and financing scenarios.
A customer finance program, offering lease financing to your customers is a powerful sales and marketing tool, and within the reach of all firms who wish to increase revenue and profits by offering financing in their sales ‘ toolkits’.