If “cash is king” and a customer has the cash to buy a new piece of equipment, why would they opt for financing it? Why would needing a loan be better than getting paid cash upfront? It can actually be very good business sense for the customer to finance a large fixed asset like a new truck or machinery instead of using their available cash. Here’s why a customer who pays with financing for large equipment purchases is just as good as one who pays in cash.
1. Working with a financing company means you get an additional salesperson who wants to close the deal.
The customer is likely seeking financing to help leverage their cash flow. However, you don’t know much about the customer’s operations simply from making the sale. The financing company not only finds out more about the customer’s operations as a condition of having to determine if they should lend to them, but they also want to close the sale.
The financing company makes money off of the interest and any other fees charged, and they want to close the deal as much as you do. Since your sales team only needs to focus on the information that will help make a sale or sell additional products, the financing company will find out more things about the customer that they are unlikely to tell you. This could include plans for expansion or how their cash flows work in a typical year, which can inform your sales strategy based on when the customer is most likely to need new equipment and supplies.
2. It ensures that you are paid in full much faster.
When a financing company bears the risk of receiving payments rather than sellers offering payment plans, it ensures that you are paid in full much sooner if the customer doesn’t have enough cash upfront. The financing company issues you full payment for the equipment that was sold and takes care of cash collection from there.
3. The customer has a smaller monthly payment, which enables them to buy more expensive models than they could upfront.
If a customer has to constrain all of their cash on one piece of equipment, they could end up buying a cheaper model that may not suit their needs. Because financing enables them to free up their cash flow with a smaller and more manageable monthly payment, the customer can invest in more expensive and higher-end equipment and servicing plans. The customer’s buying power drastically increases with financing and gives them more options to purchase a larger, more upgraded model immediately and consider additional purchases for the near future.
Since the upfront investment is much smaller than making the entire purchase in cash, financing equipment provides you with more opportunities to sell supplies and other goods to the customer that don’t require financing.
Cash may be king, but cash flow is the life of every business. Helping your customer’s maintain steady cash flow through financing is a short term way to close a sale and a long term way of keeping them a sustainable customer. If you’re looking to test what having a fast and simple finance (and sales) partner is like with American Capital Group, apply for the Referral Program.