A competitive financing program can be a powerful sales tool.
When a customer has strong credit, established operations and a transaction that fits the program, an attractive rate may help the vendor close the sale with confidence. It can make the equipment more affordable, support a faster decision and give the customer a financing option that genuinely fits the purchase.
The problem is not the low-rate program.
The problem is relying on one financing source, one narrow credit box or one advertised payment as though it will work for every customer who walks through the door.
The lowest advertised rate has no value to a customer who cannot qualify for it. If the vendor has no credible alternative, an otherwise viable equipment sale may be lost even though the customer has a legitimate business need and a reasonable path to repayment.
A strong vendor financing strategy should include both:
- A competitive option for well-qualified customers.
- A credible Plan B for customers or transactions that do not fit the primary source.
The lowest rate is only useful when the transaction fits
Vendor financing programs are designed around specific approval criteria. Those criteria may include credit history, time in business, cash flow, equipment type, transaction size, industry experience and other underwriting considerations.
A customer may be interested in the equipment and capable of using it productively, but still fall outside the requirements of the most favorable program.
That does not automatically mean the customer is unqualified for every financing option. It means the first program may not be the right fit for that particular transaction.
This distinction matters at the point of sale. If the vendor presents one financing source as the only realistic path, a decline can quickly become a lost sale. The customer may postpone the purchase, look for another vendor or conclude that the equipment is financially out of reach.
If the vendor has another experienced financing resource available, the decline can instead become a point for further evaluation.
That does not mean every transaction can be approved. It means the vendor has enough coverage to determine whether a legitimate alternative exists before giving up on the sale.
A second resource should bring experience, not just another submission portal
A second financing resource should provide more than another place to send the same application.
The value of an additional resource is not simply sending the same file to another phone number. It is getting an experienced commercial-finance professional to examine the transaction as a whole.
An application captures information, but it does not always capture the complete business story behind a purchase. A conversation with the customer and vendor may uncover relevant details concerning:
- The customer's business and operating history
- The equipment being acquired
- The intended use of the equipment
- The economic benefit the purchase may create
- The vendor's relationship with the customer
- The circumstances surrounding the previous financing decision
- Other facts that may deserve consideration
What does the vendor know about the customer and the equipment that may not be apparent from the application?
What does the customer know about the business opportunity that may never have been discussed during the original financing process?
What can an experienced Structuring Specialist learn from those conversations that may change how the transaction is understood or presented?
These are only a few starting points, not a complete structuring process. The point is that experience can help identify relevant questions and information that are not obvious from simply reviewing and resubmitting the same application.
Additional information does not guarantee an approval, eliminate underwriting requirements or make an uneconomic transaction workable. It may, however, help determine whether the original financing decision reflected the transaction as a whole or only the information captured in one process.
Be thoughtful about advertised rates and payments
A vendor's advertising can influence the financing conversation long before the customer applies.
Aggressively promoting the lowest possible rate or a specific monthly payment can sometimes work against the vendor. A customer sees the advertised payment and mentally adopts it as their payment. It becomes part of the customer's expectation for the equipment purchase.
If the customer's credit profile, time in business, cash flow or other underwriting factors do not qualify for that program, presenting the actual financing terms afterward can create disappointment or even offense.
The customer may feel that the financing changed. In reality, the customer simply did not qualify for the most favorable advertised program.
That distinction may be accurate, but it does not always make the sales conversation easier. The customer may believe the vendor promised a certain payment, even when the original advertisement included a qualification such as “OAC.” The resulting frustration can make the financing discussion harder and potentially jeopardize the equipment sale.
For that reason, vendors should consider whether advertising a specific rate or payment is actually helping the sale.
Depending on the equipment, customer base and financing programs available, broader language such as:
“Financing available”
or:
“Rates as low as ___ for qualified borrowers”
may set expectations more appropriately than advertising one specific payment followed only by “OAC.”
This is not a recommendation that every vendor use the same format. A manufacturer-sponsored promotion, a dealer incentive or a clearly defined customer program may justify more specific advertising. The appropriate approach depends on the vendor's market, equipment, financing relationships and advertising requirements.
The business question is whether the message prepares the customer for a financing conversation or creates an expectation that only a small portion of applicants can meet.
Financing should help the vendor close equipment sales. It should not create an expectation that makes a legitimate approval feel like a disappointment.
Maintain a strong primary option and a credible Plan B
A vendor does not need to abandon a financing source that performs well.
If the existing source provides competitive terms and works for the transaction, there is no reason to disrupt that relationship. A strong primary program may be exactly what the customer needs.
The issue is coverage.
What happens when the customer does not fit the primary program? What happens when the transaction involves a newer business, different equipment, unusual circumstances or a credit profile outside the source's preferred range?
A credible Plan B gives the vendor another informed point of evaluation. It can help preserve the opportunity to understand the transaction instead of treating the first decline as the final answer.
Simplified Capital works with different financing relationships and programs and can evaluate a broad range of business circumstances. The appropriate structure may depend on the customer, the equipment, the intended use, the transaction size, the repayment source and other factors.
That evaluation may result in a financing option. It may also result in a decision that the transaction should not be financed.
Not every transaction can or should be financed. Sometimes the right answer is still no. But before a vendor accepts a lost sale, the transaction deserves to be understood completely enough to know whether the problem is truly the customer, the transaction itself or simply that the original financing source was not the right fit.
Financing coverage can protect more than one sale
A vendor's financing strategy affects more than the immediate application.
When customers consistently encounter a narrow financing path, the vendor may lose opportunities that could otherwise support future business. A customer who cannot obtain financing for one equipment purchase may delay expansion, remain with older equipment or purchase from another supplier.
A second resource does not need to interfere with transactions that already work. It can be available when the primary source cannot accommodate the customer or the transaction as presented.
Over time, the value of that resource should be demonstrated through service, responsiveness, sound judgment and results. If it earns more of the vendor's business, that should be based on performance rather than a promise that every difficult transaction will be approved.
Simplified Capital approaches these situations as an experienced commercial-finance and structuring resource. The objective is to understand the business need, evaluate whether a legitimate financing path may exist and help the vendor make a better-informed decision.
Simplified Capital has been serving business owners since 2002.
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The commercial question for equipment vendors
Do you have enough financing coverage to avoid unnecessarily losing viable equipment sales when your primary financing source says no?
If your current financing source works for a transaction, continue using it. When it does not, an additional resource may be worth considering before the customer walks away.
Simplified Capital can speak with the vendor and customer, understand the equipment and business situation more completely and determine whether another legitimate financing approach deserves consideration. There is no guarantee that every transaction can be financed, and not every transaction should be.
The first step is simply to determine whether the opportunity deserves another informed look.
To discuss a vendor financing situation, contact Simplified Capital at (866) 810-1305, email info@simplifiedcapital.com, or visit www.simplifiedcapital.com. You can also review our available commercial financing solutions.