Clinch the deal with a finance package.

• Author: McMackin, George E.
• Position: Management Strategy

Losing your equipment customers because they have financing problems? Offering them your own special finance program just may help speed up sales -- and even attract more business.

A commercial equipment manufacturer on the verge of closing an important deal faced a difficult dilemma: Unless it could offer its customer a financing contract, it risked losing the business to a rival. Because the manufacturer's customers were small to middle-market companies, equipment costs were expensive for them, and they often had less solid credit profiles. These factors delayed credit decisions, which meant lost sales. So the manufacturer could either assume all the credit risk to make the sale, or it could avoid the credit risk but chance losing the business.

If your company manufactures or distributes commercial equipment, this is probably a familiar tale. Here are some other situations that might ring a bell:

* The customer needs your equipment now, but only if it can get financing.

* A prospect is "shopping" your proposal. If you could offer financing, you could get the deal off the market and close the sale.

* Your pricing is competitive -- but a competitor offers extended terms that address the market's cash flow realities.

* A customer wants to upgrade its equipment, but hasn't paid off the existing equipment financing.

If these types of situations are often a problem, consider providing customer financing through a "vendor finance" program. Finance packages can be powerful sales tools. They give you a competitive advantage by helping to shorten the sales cycle, capture more business and retain customers. But a successful finance package requires a program that meets your needs and those of your customers.

First, decide whether to establish an in-house financing program or work with a third party. The viability of an in-house program depends on your internal resources. For some companies, it's feasible to establish a lending program in-house. Generally, the larger the manufacturer, the more likely it is to have the infrastructure necessary to support the program.

To successfully manage an in-house financing program, you need a credit department to analyze transactions; legal and documentation capabilities to prepare contracts and filings for regulatory agencies; collections to establish policies for and implement work-outs; accounting to handle billings and generate tax and year-end reports; and customer service to respond to myriad customer...