A recent executive briefing session by the Invigors consultancy
brought some insights into how capital equipment manufacturers see
financing solutions. Invigors partner Richard Guilbert, presented
the results of the firm’s research studies on vendor attitudes,
including in-depth interviews last year with 15 UK and
multinational vendors. He noted that: “Only 13 per cent of our
respondents viewed the finance programme as an independent profit
centre, but at the same time well over half of them felt that it
had a positive impact on their key corporate performance
indicators. Only 12.5 per cent felt that the impact on sales growth
was ‘very significant’, though less than 20 per cent claimed to
measure that effect very well.”
Guilbert also stressed how much manufacturers’ expectations of
finance partners have moved on.
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“Ten years ago it was all about who could offer fast credit
turnaround, market leading cost of funds, multi-country capability,
reasonably up-to-date systems and market based residual values. Yet
now all of those things are base line expectations. Vendors are
looking for finance companies that can help them to increase sales
and enhance margins; improve attachment rates for ancillary
products like servicing, peripherals and insurance; develop
customer contact and knowledge; and support innovation,” he
said.
Vendor representatives in “quasi-captive” finance operations
brought their own perspectives to the briefing. John Kneller, MD of
Claas Financial Services in agricultural machinery, has an
exclusive joint venture (JV) with BNP Paribas for the five largest
European countries, with sales mostly going through large
independent dealerships. He stressed the importance of sales and
finance personnel working in harmony. “Pay levels should be such
that people can easily make career moves between the finance arm
and the manufacturer’s sales team”, he said. Yet Kneller doubted
whether a JV or captive model would suit every type of vendor,
since “it needs financial investment and may have to compete with
other calls on cash like R&D”.
Sandy Neville, director of European funding at IT supplier EMC,
stressed the importance of long term relationships. “We sell all
our paper to third party funders. These include three main partners
who have been with us almost since we started the finance programme
in 1994, plus around ten niche players in smaller markets. We could
have afforded to invest in a JV, but no single finance company
would have been up to the task of an exclusive relationship. Our
product profile has evolved through acquisitions, and now includes
services accounting for 17 per cent of revenues, with the rest
split evenly between systems and software sales. Long term partners
can anticipate change. During the Dot.com boom, we persuaded our
funders to put up $1bn of finance to ‘pre-cashflow’ customers. Yet
when that market collapsed in 2002 their losses were kept to the
minimum because of our re marketing capacity,” said Neville.
Meanwhile, Kevin Bovington, European business development
manager at Microsoft Finance, points to a sector of huge potential
growth.
“Our finance programme includes services, provided by both
Microsoft and our commercial partners, as well as software sales,”
he said. Bovington reported on plans to raise finance penetration
from less than two per cent of sales currently towards the 10–15
per cent range. “We presently have customer financing capabilities
in 15 countries worldwide, but over the next five years or so we
intend to raise that number to 50. We expect to end up with one
quality finance partner in each country or region,” Bovington
said.
