Partnering with Financial Institutions Pays Off
These days more industrial machinery and equipment (IM&E) manufacturers and vendors are offering financing to support the sale of their products. By partnering with financial institutions, vendors can increase sales, reduce risk and improve customer relationships while having access to expert financial advice and strategies that can help their businesses grow.
A recent study by the Equipment Leasing and Finance Foundation found that about 30 percent of all equipment sales are being financed by manufacturers or their finance partners. This number is likely to increase each year as financial partnerships play an increasingly important role in manufacturers and vendors’ overall business strategy, according to the study.
It helps to have an experienced financial partner that understands the complexities of the IM&E industry and the various markets and players involved, especially when doing business in other countries where knowledge of the local culture or lack of it can make or break a deal.
Benefits of Offering Equipment Financing
Following are six very good reasons for partnering with a financial institution to offer equipment financing to your prospective and existing customers.
1. It Increases Sales
Through partnerships with financial institutions, IM&E manufacturers and vendors can close more deals and increase their sales by making it easier and safer for their customers to purchase equipment.
2. Get Paid Sooner
Financial partnerships with direct lenders can expedite the loan process and guarantee you will get your money faster and without having to collect it directly from the customer.
3. It Helps Build Customer Relationships
Improved customer relations (and, therefore, customer retention) is one of the greatest benefits of offering equipment financing to customers. It enables manufacturers and vendors to build rapport, answer customers’ questions about equipment and address their financial issues. These relationships turn into opportunities for increased customer loyalty and future sales.
4. It Reduces Risk
A manufacturer or vendor financing program can reduce risk and improve the odds of getting paid for the equipment sold. Through an effective program, the collection risk is transferred from the vendor to the financing company. Financial institutions such as the Export-Import Bank of the United States (EXIM) have a Master Guarantee Agreement that covers defaults on behalf of the customers and pays vendors.
5. It Creates Value for Customers
Offering financing creates value for customers by saving them money, getting them better terms and helping them stay current. Customers may also get better terms when they buy equipment that otherwise could be delayed because of lack of financing elsewhere. Operating leases offer tax advantages by excluding assets from the balance sheet and allowing the full rent to be registered as an operating expense.
6. It Puts Financial Expertise at Your Fingertips
A partner financial institution offers the kind of flexible, strategic, integrated, legal and operational advice and support that equipment companies need to develop adequate financing programs for their customers. The partnership paves the way for further opportunities for growth.
How to Choose a Finance Partner
IM&E manufacturers and vendors often get approached by equipment leasing and finance companies wanting to become their partners. How do you select which company will be better for you and your customers?
Here are five questions to consider when choosing a finance partner:
- Integrity: Will your customers be treated fairly and honestly by the financing company?
- Flexibility: Does the company offer equipment financing programs that cover multiple situations?
- Easiness: Does the company make it easy for your customers to apply for financing?
- Communication: Is the company willing and able to communicate with both you and your clients?
- Education: Does the potential finance partner truly understand your business? Will the company help you and your customers work through the numbers and explain what decisions make good business sense? Can they help you and your customers manage realistic expectations, based on the financial situation of each party?
The challenge of accessing capital to acquire equipment can be effectively addressed by establishing captive finance capabilities through strategic partnerships with qualified, flexible and customer-oriented financial institutions.