Their answers reveal one thing is clear –
vendor finance can help them to grow profits and revenues. On the
down side, however, vendor finance relies upon a successful
partnership with leasing companies. In reality, however, few
lessors have a natural desire to sustain such a supportive
‘marriage’.
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Notwithstanding this, the research also showed
there are new opportunities around at present, particularly for
those vendor lessors wishing to create the right package.
For instance, one vendor finance company
recently started leasing dental units with deal terms that provide,
in one integrated package, CRM, warranties and direct debits from
health insurance providers.
Interestingly, the manufacturer of this dental
equipment, supported by this finance, and despite the recession,
saw 15 percent growth in new business volumes at Q1 2009
year-on-year.
In this case, the lessor went out of its way
to understand the needs of the market, the manufacturer, the
product and the end-user so to develop and deliver a customised
product range for the vendor partner meeting most, if not all, of
the needs of the parties involved. This also included the provision
of a second life and recycling solution, too.
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By GlobalDataUnsurprisingly, not all banks continue to want
to lend in the vendor finance markets, while others have reduced
how much they lend to manufacturers’ customers. After all, the
business case needs to satisfy lessors as well as the vendors.
This has made room for new sources of finance.
Private equity companies, for instance, are increasingly looking at
the vendor finance market. Some of these, I have learned, are based
in the Middle East.
The key to success in a vendor finance
relationship is meeting the needs of all parties involved: the
lessor, the lessee and the manufacturer. If this is done correctly
then the lessee will be happy to pay an uplift. Unfortunately,
lessors traditionally have not been good at doing this. More often
than not they have adopted a standardised approach which ignores
the specific needs of end-users. For instance, it is not widely
recognised by lessors that many of their customers want pay-per-use
packages.
Vendor finance, it appears, is no longer just
about making profit, as maybe once it used to be. Now it is more
about forming a partnership that properly understands customer
needs.
The author is a leasing consultant and
formerly worked in vendor finance management at Dell Financial
Services.
Michael Vander
