The past 18 months have had a major
impact on the vendor finance market, with a number of funders
withdrawing from sectors of the market, acceptance rates down,
service levels impacted, relationships frayed and a number of
vendors finding that the availability of funding has negatively
impacted their core product sales and margins.
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Communication and alignment between vendors
and funders have been tested. We have seen a polarisation between
relationships that have been well aligned and have strengthened,
and those that have not and have suffered as a result. The
stronger, successful vendor programmes will emerge next year with a
more open and collaborative relationship.
From the funder’s perspective, vendor
programmes need to be a partnership and not just a deal source.
From the vendor’s perspective they should not be viewed as simply a
deal closer and income stream. It will be interesting to see if the
current environment influences the way vendor programme agreements
are negotiated in 2010.
In the small ticket space, process integration
is critical – many vendors have relied too much on a single funding
partner to provide the IT system tools to transact flow business.
The last year has left vendors feeling exposed, and as a result
they have the desire to take more control over the front end of
finance sales. This will see some vendors moving towards a panel of
funders, developing or outsourcing front end tools and some taking
steps towards a captive type operation.
Bank-owned lessors are under increased
pressure to focus on the bank’s own customers with low acquisition
cost and established client relationships. This may have an impact
next year on the appetite of bank-owned lessors to participate in
the market.
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By GlobalDataOther challenges that funders have faced
include understanding the profitability of their own business,
where they make their money and where they should allocate capital
for future profitable growth. The current level of strategic review
and business refocusing may result in a number of the funders
withdrawing from markets or vendors.
As a consequence, there is an opportunity in
2010 for new entrants to come into the market, if they have capital
available and an appetite to grow. They will be going in with their
eyes open from a credit perspective, have the potential to make
good margins and not have the baggage of the past 18 months to
address.
The author is partner at the
leasing consultancy Invigors and a former marketing director at GE
Capital
