Fear of Offering Financing is Costing You Money
Last year, at a trade show, I had the following conversation with friend of mine, who runs a small commercial furniture manufacturing company.
Me: You know Bill, you should really offer your customers financing. You’re missing sales because you don’t. Bill: Nah, I’m old school. My customers need to have cash or a check. That’s it. Once you offer them credit, that’s when the trouble starts. Me: But YOU, as in your company, would not handle the credit. In fact, you still get paid in full, right away, like always. Nothing at all changes from your side. Bill: Nah… I’m good. I’m not interested. I work in equipment finance, and Bill’s my friend, so this was only the hundredth or so time we had that same conversation. But today was different. It was different because I hung out with Bill at his booth for the afternoon. About a half hour after our conversation, a prospect asked Bill if he offered financing. Bill answered no (like he always does) and the prospect thanked him and left. I pleaded with Bill to let me answer the question if someone asked it again. Just give me TEN SECONDS. Bill sighed and agreed. I knew from my trade show experience the question would come up again, and later that afternoon it did. This time, the prospect talked to Bill, seemed a bit interested, and when he asked “do you offer financing”, I replied with “Absolutely – that’s my job here – go ahead Bill, and show him whatever he wants to see – we’ll take care of the money”. Bill had no choice but to follow along. And you know what happened? He made not only a sale, but a “show-making” sale - right then and there. Twenty minutes of conversation, a “show only” price from Bill, a dinner was agreed to, and before dessert was finished, the prospect was approved by my company, and Bill phoned the order in to his plant later that night. And he got paid in full on delivery and acceptance, as always. Suffice to say, Bill’s company now offers financing through mine. And he couldn’t be happier about it.
I’m happy this story happened, and I’ve told it often over the past year, because it illustrates several points very clearly. First, it outlines a very common misconception many companies have – that offering financing somehow puts them at risk, or otherwise complicates getting paid. And that’s simply not true. Second, even AFTER it’s explained, many of these same companies still resist. It’s like they don’t believe it, or simply won’t change their ways. Third, it’s only after they actually SEE IT IN ACTION (or repeatedly lose sales) do they see the light. Fourth – the trade show is a hotbed for this stuff. If you do trade shows, you’ve been asked – repeatedly – if you offer financing. And if you don’t, you’ve let really good prospects walk. Over nothing. It doesn’t have to be that way. There’s no reason – none whatsoever - to be even the least bit apprehensive regarding financing.
All offering financing does is give your customer another way to pay. That’s it. And why would you care one iota if your customer got money from their bank, mattress, rich Uncle Elmer, or an equipment financing company? It’s all the same to you. Which brings me to point #2…
Basically, you’re telling your customer “if you want it, here’s an easy way to pay”. That’s all it is. Offering financing is fundamentally no different than saying “here, go to this place – they’ll lend you the money
A full 80% of your customers, given a choice, would rather have a payment option on an equipment purchase. Financing equipment has become an effective business, tax, and accounting strategy.
There is no nice way to put it. If you do not offer financing, you will lose sales. Yes, some of your customers will go to the bank, get a loan, and still buy from you, but many others (like the first guy at that trade show) will simply move on to your competitors who do offer financing. Now that we’ve dispelled a few myths, let’s take a look at a few benefits that come with offering a payment option through an equipment financing company like mine:
No brainer here. Research shows that companies who offer a way to finance purchases see an average of a 19% increase in sales.
Maybe your customer doesn’t like the $24,000 price tag. But they can certainly embrace $479 a month. It completely eliminates any “we can’t afford it this quarter” rebuttal.
Ask your salespeople how effective saying “it’s only $xxx” a month” can be. Plus, asking the customer to fill out the quick 5-minute finance application right there with you is a major closing question.
As I stated earlier, your customers want a payment option. Many of them will still buy from you, of course, but by not offering it, you are forcing them to go to the bank or research financing options. And bank financing typically has many more restrictions than an equipment financing company will. By offering your customers an alternative (and easy) way to buy your goods, you become easier to work with, and a real problem solver. And again – nothing changes on your end. Nothing. You get paid like you always have (I cannot state that fact enough.) You’re not offering the credit, and you’re not taking the risk. And if the customer misses a payment, it doesn’t affect you one bit (you’ve already been paid.) Want an easy way to think of equipment financing? Think of it like accepting credit cards, except without the credit card company taking a cut from you, and without chargebacks. There, feel better about it now? I hope so. But on the off chance you’re not, you can book me to hang out at your booth at your next trade show, and I’ll prove how effective it is.