Designing a Vendor Finance Program that Works for Your Business

in Finance

Vendor finance offers supply businesses the opportunity to expand their business offering and attract new customers and clients. By presenting financing options to you clients, you’re providing flexibility and a tailored workable solution that will make your business a supplier of choice.

Of course, not all financing programs will work with your business and not all finance options will work for your customer base. By understanding the types of equipment finance that are available and selecting a strategic finance partner, you can develop a vendor finance program that will work for your business whether providing information technology solutions or distributing medical aesthetics equipment such as microdermabrasion equipment or laser hair removal machines.

Examples of equipment financing options

When most businesses think of commercial financing, they think of various types of loans and lending programs. However, there are a few other types of financing available to businesses that are specifically looking to acquire new equipment:

• Hire purchase – in a hire purchase agreement, the lender retains ownership of the asset while the borrower makes payments for a specified term. At the end of the term and one finalised payment, the borrower will take ownership of the equipment and can do with it as they wish.
• Equipment leasing – in a leasing agreement, the borrower is simply renting the asset for a fixed term. There is no implied ownership of the equipment at the end of the lease, and if a borrower is interested in purchasing the asset, a separate arrangement will have to be made.

Deciding on a finance offering for your business

Depending on your own operations and the industry vertical you operate in, there are a number of ways that you can make financing available to your customers.

• Vendor finance – traditional vendor finance relationships involve the supplier retaining direct ownership of the asset and offering a payment scheme to its clients to lease the equipment or pay to own it in the future. Many large manufacturers and equipment providers may choose to utilise a finance provider that offers personalised and customised vendor finance programs that they then offer as their own finance product.
• Finance partners - for some suppliers, taking on the ownership of the assets you supply is not viable, especially if you’re a smaller operation such as an independent distributor. In these instances, you can partner with a finance provider who will offer financing terms to your client base. The finance provider will then become the lenders and your role will be more as facilitator and broker. Many finance providers will offer supply businesses an incentive scheme to partner with them.

By offering financing, your business can add more value to your services and build longer term relationships with your customers – you can go from supplier to a total solutions provider.

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Lilly Anne has 287 articles online

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Designing a Vendor Finance Program that Works for Your Business

This article was published on 2011/10/26