Adding a Financing Arm to Your B2B Business “aka” In-House Customer Payment Plans

With majority of business processes automated – payment plans are more readily available than ever before. This includes business goods, services, and consumer goods – almost everything under the sun can be financed.  With that being said it is crucial for a business to offer payment plans for products and services to keep up with competition and most importantly grow sales and increase revenue.  Commonly, a customer that wants or requires a finance option is often not going to share that with whom they are purchasing from. Keep in mind, 100% of your customers that pay cash are already doing so. So suppliers offering a financing option have the chance to convert more existing prospects into buyers.  As a private lender in the B2B space, read more to discover why one of the biggest mistakes a supplier or wholesaler of equipment can make is not providing alternative payment solutions to customers.

Customers will go to Competitors

When a business is greatly in need of business equipment and does not have the funds for it, they will always opt for an affordable option or a supplier whom offers payment plans.

A simple example: a winery’s 7 year old sprayer has given its last spray. The winery simply cannot afford not to get another sprayer immediately. Bugs, fertilizer, amongst other factors contribute to a ruined crop in a very short amount of time. And with no flexible budget to purchase a top of the line brand new machine outright – the winery will seek a supplier who provides some sort of payment plan because they cannot take the hit of such a financial burden at once, so unexpectedly. Next, the winery finds a supplier who lets them make small monthly payments for 24 months. This particular supplier whom offers payment options reaps the benefits of both worlds, selling to those businesses who cannot pay in full and those who can!

Customers Will Buy Less, When They Could Buy More

A grape grower is shopping for a new ripper in order to replant a diseased section for upcoming seasons. The grower is a repeat customer of S.C. Agriculture Equipment & Services, and wants to buy the same model ripper previously purchased. They have the money and are ready to pay in full. However S.C.’s Equipment offers financing now for all equipment and takes the opportunity to tell the grape grower about their new line of premium rippers. The premium line has new technology for better more efficient soil results. These rippers start at $5,000 more than the growers past model. However with payment plan options the grower can now afford one of the premium rippers! They decide to finance in order to upgrade to the higher end ripper. S.C. Agriculture Equipment & Services increased profits on an already secured customer.

Making all equipment affordable by different means of payment arrangements makes room for upselling and in turn more profit!

Common Concerns

Most commonly a business supplier of equipment will not have the financial resources to provide products upfront without being properly reimbursed at the time of transaction. Or typically the business does not want to take the risk of providing payment plans, which can have complications including; customers defaulting on their payments which leads to having to chase down the customer to get the equipment back, or taking further legal action. Thank goodness for collections!

Commercial Lenders and Equipment Leasing

This is where 3rd party Commercial Lenders come into play. A Commercial Lender is a financial institution which provides Financing programs that help support and increase the sales of their Vendor partners. These plans are commonly known as Vendor Financing, In-house Financing, White Label Financing, etc. Here, the lender acts as the de-facto financial arm for the Vendor and provides financing to its customers.

This becomes a real win-win-win for all three parties involved in the transaction. The Vendor gets to make the sale, the Lender gets to gain a new customer, and the end-user gets the equipment they need at the monthly payment that fits their budget.

Customers will experience significant benefits when financing with an independent lender, including speed of approval, limited or no financial information required, and the ability to structure custom payments and terms. For companies that have less-than-perfect credit, an independent lender is often the best solution as the credit windows are often significantly larger. What does this mean for the equipment supplier? Fast transactions and happy customers!

The typical Vendor Financing Program utilizes an Equipment Lease. The entity supplying the funding (also known as a Lender) basically purchases the equipment from the supplier and rents the equipment back to the Lessee (customer) for a low monthly fee. The lease can include cost of equipment, tax, shipping, installation and training. At the end of the lease the Lessee has the option to purchase the equipment for as little as $1 or start a new lease for the latest and greatest equipment models. Leases range from 12-72 month terms and can include seasonal payment provisions to help match the cash flows of the business.

For a customer that wants to own the equipment, most Independent Lenders will provide an Equipment Finance Agreement (EFA) whereby the customer is the owner of the equipment at the onset and the Lender is a Secured Party.

Wait…What About Banks?

Keep in mind, most bank loans will come with a requirement for a significant down payment, often as high as 10-20% of the equipment cost. And, bank loans usually only cover the equipment itself and do not include the installation, shipping, tax, and other “soft costs.” Timing is another factor that can greatly slow the process down. Banks can take weeks to decide on a loan approval for customers. Most importantly, a Bank does not lock in the specific Vendor into the transaction the way and Independent can, meaning your customer can take that approval to your competitor. ILS does not recommend sending customers to banks to get financing for business purchases.

Finding a Financing Partner

With many commercial lenders providing vendor programs, it is important to do the homework and research a partner whom can make the process as simple, seamless and speedy as possible. Most importantly seek out a partner that protects your sale throughout the process and does not charge you anything to be a partner – at ILS we call this “a no strings attached partnership.”

At ILS we have found that Vendors who did not previously offer a financing option can increase their prospect conversion rate by over 10%. Remember, most prospects are already sold on your equipment solution but unless they are a cash buyer they may not have the resources. By controlling the financing, you further control your sales.

About the Author:

 Innovative Lease Services, Inc. (ILS) is a private lender specializing in Vendor Financing Programs specifically in the agriculture, winery, brewing, and distilling industries. For more information or to enroll in the Vendor Program please call: 800-438-1470 or visit www.ilslease.com/equipment-lease/offer-financing.