Leasing — What is a Vendor Finance Program?
Business Advice, North Central, North Coast, North East, North West Tuesday, February 2nd, 2010In an effort to stimulate its sales, a retail equipment vendor can align itself with a leasing company and provide what is known as vendor finance or vendor leasing. To do this, the vendor must team with a leasing company so the vendor can offer low monthly payment options to their customers. Essentially, the leasing company becomes the vendor’s “in-house” finance company.
There are many different types of leases. Some leases are structured as finance-like installment contracts, which allow the lessee to depreciate the equipment over time, and some are structured as true leases whereby the lease payments can be treated as an operating expense and are 100% tax deductible.
Vendor Finance allows equipment vendors to offer customers another financing option besides cash-on-delivery or 30-day terms. On high-ticket items, this can be a major benefit since it may not be possible for some customers to meet such immediate payment terms. By extending the financing option through the outside financing company, the vendor provides a choice that allows customers to better maintain their own cash flow.
Vendor finance is also known as vendor leasing or lease asset servicing and helps build vendor-customer relationships while improving vendor sales volume. Customers can view the vendor as a one-stop shop where they can fulfill their orders and get financing, rather than having to seek financing beforehand from a bank or other lending institution.
The vendor provides a low monthly lease payment option along with their equipment quote. When their customer decides to purchase and they choose the leasing option, then vendor then supplies the customer with a lease application. The customer completes and faxes the signed application to the leasing company, which performs a quick credit check. If approved, the leasing company will then overnight a lease agreement to the customer for signing. The overnight package will include an overnight return envelope ensuring the lease documents are quickly signed and sent back to the correct address of the leasing company. After receiving the signed lease agreements from the customer, the leasing company issues a Purchase Order to the vendor. The equipment vendor then ships the equipment to the customer. After the customer receives and accepts the equipment, the leasing company pays the vendor for the total amount of the equipment, either by overnight check or by wire transfer.
A Vendor Leasing Program can give your business a competitive edge over competitors who are unable to offer anything similar to their customers. By using the financing option, customers can also opt for the top-of-the-line items, which they could not otherwise afford with COD or 30-day payment terms. In addition, you have the funds to build your inventory and offer a wider selection.
Jim Woods is the Senior Vice President of Mosaic International. www.mosiacleasing.com. He has family living in the Prince George area. Mosaic International Corporation is an equipment lessor headquartered in International Falls, Minnesota. Mosaic’s market focus includes commercial, municipal and federal leasing opportunities in the United Sates and Canada.
218.285.7421 ext.130
Short URL: http://northernbcbusiness.com/?p=824
Posted by oneadam
on 10:20 pm. Filed under Business Advice, North Central, North Coast, North East, North West.
You can follow any responses to this entry through the RSS 2.0.
You can leave a response or trackback to this entry
