Getting involved in the financing process

Don’t miss an opportunity to boost sales, help your customers

Posted on Sep 19, 2018 :: Insight From
Patrick Kuhn
Posted by , Insight on Manufacturing Staff Writer

As a manufacturer, you may indeed be great — efficient, reliable, knowledgeable — when it comes to making things. But what about when it comes to selling them? Have you considered how you could be financing your sales more effectively? Changes in tax rates and bonus depreciation, as well as in leasing accounting standards, are creating new opportunities for you to do just that.

In fact, staying involved in the financing process for your customers is an often-overlooked way for you to stand out from your competition. It also can bring about a series of positive results that not only benefit you, but your customers as well. The key to doing this effectively is understanding each customer’s current financial situation and their short- and long-term financial goals.

 

Stay present: Being absent from the financing process can hurt you. 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 then goes to a bank to secure financing. As the dealer and the bank each attempt to maximize their take, so to speak, they’re doing something else as well: They’re working against your best interests. That’s exactly why you should stay involved in the financing process. You want to create a scenario where the dealer and the lender work with you.

But it’s not all about you. By playing an integral role in the financing process, you 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 it’s a good idea to negotiate the terms of purchase with the supplier and then separately the financial terms with the lender, you’ll probably get a wide range of answers. In other words, there’s no consensus regarding the smartest way to finance. And that actually makes sense when you consider that each customer has a unique set of financial conditions under which it’s operating.

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

When you understand your customer’s financial needs, you’re arming yourself with new information that can help you generate incremental sales. But you’re also helping that customer. Think about it like this: 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.

Suffice it to say, a tailored financial package for an equipment purchase can make all the difference in helping a customer stay on track with financial goals. So how can you, a manufacturer, help create that tailored package? By working with a dedicated lender that understands both you and your customers.

 

Support from a dedicated lender is key. 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 to meet your customers’ unique needs and ultimately help grow your own business.

This is a highly specialized area of knowledge and is by no means widespread among banks. On top of that, those that do offer this expertise are often large banks that focus on the giants in manufacturing. But even if you’re not a giant, there are still lending partners out there that can help. You want to 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 that are tailored to your customer demographic

By the way, don’t forget that sometimes you’re 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.

Patrick Kuhn is vice president of equipment finance at First Business Bank (Member FDIC). He has more than 30 years of experience in financial services and helping manufacturers and distributors grow sales, market share, and cash flow with unique customer financing strategies. 

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.