Many firms wish to offer a financing for my customers but don’t have the necessary skills & capital to offer such a service. A properly run financing online purchases program can increase sales, eliminate customer objections, improve cash flow by 100%, and also allow your customers to work within their budget & approval cycles. Those reasons are clearly commanding for any firm considering the customer financing strategy. Most of the customers know that some of the world’s largest corporations offer very robust customer finance programs for their customer base. They provide such a program to ensure that they can reach determined customer penetration within their markets – they don’t want to lose a sale just because customer was unable to finance the product or service.
Industries who wish to start a customer finance program should explore numerous resources of an experienced third party. This, as stated previously ensure program will have technical, credit & financial backing which such a program provides. The major reasons that customers look at using the third party can be summarized as follows –
- No in house credit & leasing and documentation expertise
- Lack of funds for the large program
- Desire not to take the credit risk inherent with the long term financing
- They feel they aren’t large enough to consider such programs.
Leasing & equipment financing is highly specialized area – it also needs significant accounting skills with respect to the types of leasing that is provided. Firms considering such a program should ensure that they have ability to provide lease to own leases or capital leases, operating leases (customers use but don’t own the equipment), & also short term rentals if that is applicable to their goods or service. Such customer finance program needs a significant amount of capital – as such it makes sense to utilize resources of the third party with unlimited or close to unlimited capital. Some businesses may find that their borrowing power to support such the program doesn’t allow them to provide terms, competitive rates, & structures.
Some industries which consider customer finance & leasing programs don’t wish under any circumstances to take back product at the end of the lease. They want to sell more new products! That reason alone drives numerous firms to utilize the services of the experienced third party. There are numerous different third party ‘types’ that the company can partner with. It includes leasing banks, intermediaries, and other independent lease firms. The leasing intermediary, experienced in the industry, is quite often a great choice as they have vital expertise in a wide variety of industries, they have access to the unlimited funding through their funding sources, & they are not constrained by deal size or credit quality of the one individual deal. They also can assist customer in making sales calls to complete sales & financing scenarios.
A customer finance program, offering lease financing to your customers is the powerful sales & marketing tool, & within the reach of all industries who wish to enhance their revenue & profits by providing financing in their sales “toolkits”. Traditional financing for business includes various banks, government financial programs, and commercial lending organizations. All such organizations offer equipment leasing, asset financing, loan products, operating lines of credit, etc. But, due to the current global financial market conditions, it can be stimulating to qualify for this start-up financing (because the lending criteria has tightened as most of the traditional lending institutions want high level of security & low risk) and it can also be challenging to get cash-strapped lending institutions to disperse business start-up loans, asset financing, and operating funds promised.
For new business owners, this might mean working several jobs to raise cash or revising your plan to start your industry with less money, or fewer products or services. Let’s assume leasing furniture, laptops, sharing office space, & administration staff and ensure that you carefully consider your cash flow needs & do the cash flow projection for a period of at least two years. Cash flow management is the way of reducing start-ups financing needs; effectively manage your cash flow by managing receivables, inventory, payables, & short term debt (in other words, increase incoming cash and reduce outgoing cash). Some other non-traditional financing methods include –
- use of credit cards,
- second mortgages occurred on the entrepreneur’s home,
- equity loans, secured by personal assets,
- loans from key suppliers,
- partial pre-payments & progress payments from the large consumers,
- and loans from family, friends & associates.
For various small business owners, finding financing to their start-ups business or want to keep it operating is generally challenging experience. Before you borrow some money you need for start-ups, ensure that your business can support the level of debt & can repay on lender’s debt schedule. You need to have the strong business plan and be able to present the strong business case to your lenders.