Why some manufacturers are missing out

Involving yourself in equipment financing can boost sales and help customers finance smarter

Manufacturers I meet are typically very efficient, reliable, and knowledgeable when it comes to making things. It’s more uncommon to run across those who are great at sales, and more specifically, those using financing as a sales strategy. Changes in tax rates and bonus depreciation, as well as in leasing accounting standards, are creating new opportunities to do just that.

In fact, staying involved in the financing process is often overlooked as a differentiator to benefit you and your customers. The key to doing this effectively is understanding each customer’s current financial situation and their short- and long-term financial goals.

Stay present in the financing process

Let’s say you make tow trucks, and you have a potential buyer. The towing company goes to a dealer, who arranges the pricing of the sale, and goes to a bank to secure financing. As the dealer and the bank each maximize their take, they’re also working against your best interests. Staying in the loop creates a scenario in which the dealer and the lender are working with you.

But it’s not all about you. By playing an integral role in the financing process, you can actually create a better buying experience for that towing company, one that involves a financial package tailored to its unique needs.

Your customers likely want (and need) better financing options

If you ask customers whether they like negotiating separately the terms of purchase with the supplier and the financial terms with the lender, you’ll probably get a wide range of answers. There’s no consensus regarding the smartest way to finance, and that makes sense when you consider that each customer has a unique set of financial conditions.

You’re likely selling to small- and mid-sized businesses, many of them family owned, and their financial situations vary based on their specific short- and long-term goals. For example, if a company plans to sell within the next five years, its concerns are quite different from one growing as fast as possible. How they finance equipment purchases should reflect their particular financial situations.

When you understand your customer’s financial needs, you gain new information that can help you generate incremental sales, but you’re also helping that customer. Your competitors are likely not trying to find out how to match the lifetime acquisition cost for a purchase with a prospective customer’s financial needs.

A tailored financial package for an equipment purchase can make all the difference to help customers stay on track to meet their financial goals. So how can you, a manufacturer, help create that tailored package? By working with a dedicated lender who understands both you and your customers.

Support from a dedicated lender

Obviously, you’re not in the financing business, but you don’t need to be when you partner with a lending institution that specializes in equipment financing. Experts in this area can work with you to leverage financing programs that meet your customers’ unique needs and ultimately help grow your own business.

This service is highly specialized and by no means widespread among banks. On top of that, those that do offer this expertise are often large banks focusing on giants in manufacturing. Even if you’re not a giant, there are still lending partners out there who can help. Look for a bank that . . .

  • Is experienced with equipment financing.
  • Is interested in forging a long-term relationship with you.
  • Is willing to take residual risk, meaning they understand your equipment enough to be comfortable owning it over the course of its life and reselling it with you.
  • Is willing to expand the credit box, working with you to develop sophisticated credit models tailored to your customer demographic.

Don’t forget that sometimes you’re actually the customer. In other words, even if you’re not manufacturing “end-use” equipment, you can still benefit from customized equipment financing strategies when buying from your equipment suppliers.

Member FDIC

In October, First Business Bank will moderate a panel discussion on customer financing strategies at the Manufacturing First Expo & Conference in Green Bay. The 45-minute session will cover a broad range of strategies and tactics for improving sales, market share, and your business value.