| LeasingWorld | Feature |
| Vendor finance and the web based marketplace |
Chris Boobyer examines the vendor finance market and argues that lessors and vendors need more options than a one-to-one relationship can offer |
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The application of a web and global relationship based finance
market place is happening now. In the same way that Pony
Express riders must have wondered what all those wooden
poles stretching across the horizon were for, the traditional
vendor finance relationship is about to witness the same sort
of paradigm change. Why? Because an innovator has posed the
following questions: why would anyone be satisfied with only
a bi-lateral relationship in this increasingly competitive world;
why should customers be restricted to just one or two sources
of finance; why is the vendor-finance market so inefficient? Consider the following two scenarios and choose which makes most sense for each party involved: 1. A vendor’s customer is skilfully guided through the whole sales process to the point of signature on an order but pauses with pen in hand and says “I am okay to proceed but just need to sort out the finance” and then heads off through the emergency exit marked “I don’t want to sign this/have changed my mind/want to get a comparison”. 2. Same scenario up to the pause, whereupon the salesperson’s closing answer smoothly flows “Not a problem, we arrange all of that for you at market leading rates through our close friends at XX Finance in a matter of minutes”. The second scenario does sound more promising! “Speed, ease of access and available credit – for all my customers!”. That is the plaintive cry and primary objective of every vendor looking for a Funder to help close sales and increase market share. For the Funder there is the promise of a rich seam of transactions with credit worthy customers without having to deploy an army of sales and credit staff. This is how it should work in theory. In practise the vendor – funder relationship is a tried and tested ritual brought to fruition over many years of courtship, denial and false hopes, brief periods of enchantment, disappointments, attempts at reconciliation and then disintegration of the “relationship” over something fundamental, eminently predictable and avoidable. The pace of all sales-led markets is rapidly changing. Those who hesitate have probably lost the deal; those who do not have the finance answer to a closing objection are going to lose plenty! But why are salespersons so reluctant to introduce finance to customers who already use it perfectly well in other parts of their business or who would be a perfect fit for funders’ underwriting criteria – and are, paradoxically, so forward in raising it with customers who are clearly not creditworthy or are simply insolvent ?! |
Buying on finance, deferred payment plan, using someone
else’s money rather than your own – whatever reason is given
by the salesperson, spreading the cost over the useful life of the
asset and changing an eye watering capital cost into an
affordable monthly payment is child’s play – surely ?
Apparently not – hence the cynical view of the need for a
vendor – funder relationship to enable blame for the lost or
unconverted sale to be put on someone else’s shoulder. “They
wouldn’t agree the finance; the rate was too high; they wanted
too many conditions; the document was too long; it was
raining ….” – sound familiar? A funder, hopes raised, is often unprepared for the initial trickle of poor quality customers apparently expecting blue chip finance terms. The same funder is equally unprepared for the extreme pressure from the vendor sales team anxious to test the new funder “relationship” to breaking point within the first few minutes. Why should technology customers be satisfied with the offered in house solution or the preferred finance partner approach? On the other hand, how can a funder meet all the demands from a broad cross section of a vendor’s customer base? How can a portfolio be managed if every credit rejection is met with chants of “Cherry picking; better service from your predecessor, etc.” and yet another issue for the joint management committee. I admit that some (but only a small sum!) of the above may have been exaggerated to illustrate the point that there is an inbuilt and unavoidable flaw in the traditional vendor finance relationship. No one vendor – and certainly no one funder – can reasonably expect or deliver a one stop finance shop for every customer. Generally, logic and experience dictates that less than 60 percent of any vendor’s customers will be acceptable to any one Funder. It is this inherent market flaw that prompted the development of Smartfundit.com, a web-based technology finance marketplace where vendors, technology buyers and funders interact online to extend the reach of each party in the relationship. The smallest buyer gets exactly the same access to available finance as the largest. The smallest vendor has the same access as its largest competitors. Funders can be at the point of sale for every potential transaction yet still receive only transactions which are likely to fit its credit criteria. CHRIS BOOBYER IS CHAIRMAN OF SMARTFUNDIT.COM AND PARTNER AND HEAD OF THE MERGERS AND ACQUISITION PRACTICE OF INVIGORS LLP, THE UK LEASING AND ASSET FINANCE CONSULTANCY. |
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