Why offer financing?

As a Vendor, Distributor of Manufacturer here are five key reasons to consider offering financing to your customers.

1.  It’s a Growing Trend

A study by the Equipment Leasing & Finance Foundation shows that among manufacturers who offer financing for their equipment, approximately 30 percent of all equipment sales are financed by the manufacturer or its finance partner.  That rate is increasing each year as the financing division plays a more important role in the organization’s overall strategy. According to the same study, of all manufacturers who offer a financing option to their customers, 67 percent expect equipment financing will increase as a percentage of their manufacturer sales.  The growth of this trend is largely due to the benefits derived from offering financing and its business impact.


2. It Builds Customer Relationships
Building customer relationships and improving customer retention are key benefits of establishing a finance capability.  It allows you to build rapport and trust in addressing customers’ financial issues, as well as answering their questions about the equipment.  It also extends the relationship into future transactions since it provides opportunities to offer advice and assistance with end-of-lease/financing term decisions such as whether to purchase new or existing equipment.  In addition to developing follow-up selling opportunities, it helps build long-term relationships for repeat business.

3.  It Provides Incremental Income

Providing a financing option can provide benefits including facilitating equipment sales and generating additional revenue. In addition to an increase in interest income, additional revenue may be generated if the equipment can be sold for more than its remaining book value at the end of lease.

4. It Creates Value
Offering financing creates value for your customers by saving them money, getting them better terms and helping them stay current.  One way they save money is through the manufacturer's knowledge of the equipment and ability to resell pre-owned equipment.  This may enable the manufacturer to take additional risks on the residual value which lowers the customer's monthly payment.

Customers may get better terms when they purchase equipment that might be otherwise delayed because of lack of financing elsewhere, and the manufacturer is willing to provide better financing terms.  Additionally, value is created when a customer takes advantage of leasing/financing since it eliminates the risk of them owning equipment that is technologically obsolete.

5.  Industry Expertise is Available to Assist You
An important consideration about offering financing is that there is plenty of assistance that can help you determine and establish the captive financing option that’s appropriate for your business.   The non-profit Equipment Leasing and Finance Association has an online Manufacturer & Vendor Resource Center which contains strategic, legal, financial and operational topics manufacturers should consider when developing or enhancing their finance capability.  The website also contains searchable databases to find financing partners and service providers to assist you.

Increasing knowledge of captive financing among small and medium-sized manufacturers and vendors will prepare the way to greater growth opportunities for their businesses and the economy.