Vendor Financing: What Every Manufacturer or Dealer Should Know


Every deal counts these days, no doubt about it. Providing vendor financing to help close the deal has many benefits.

Understanding Vendor Financing As A Dealer

As a vendor or manufacturer of the equipment, you likely understand the fundamentals of vendor financing. The basic definition is the lending of money by a vendor to a customer who uses the capital to purchase the vendor’s product. Here, the customer benefits from an easy finance solution without needing to secure a traditional bank loan or lease.

However, many vendors find it challenging when asked to provide equipment financing for their customers, especially those with lower credit scores. If the customer has a lower credit score, and the vendor cannot provide financing, it may leave many significant sales on the table, not to mention an unhappy customer. Therefore, the ability to provide creative vendor financing yields flexibility and options for your customers across the credit spectrum.

Creative vendor financing can be a good fit for a company that needs an out-of-the-box payment structure, unique lease or loan terms and conditions, flexibility in documentation, and more.

Often, flexible vendor financing terms are more appealing to the customer.

So, how does it work from the perspective of the dealer

Simple: The business that needs your equipment applies for a lease or loan. Then, the funds are used to buy the vendor’s products or services. Once a customer enters into a vendor financing arrangement, they may make an initial deposit or payment, and then, the balance of the lease or loan is paid over an agreed term with regular repayments.

What is An Equipment Vendor Financing Program

An equipment vendor financing program is a referral program in which an equipment manufacturer, dealer, or reseller enters into a partnership with a lender to provide financing to their customers. This can help ensure that the vendors’ customers receive financing options for the needed equipment with minimal headaches during the purchase process.

Vendor Financing: What Every Manufacturer or Dealer Should Know

In addition, a solid partner for vendor funding will develop a custom program to help you move more inventory and close deals more quickly.

Initiating A Financing Program With A Lender

While a well-designed vendor leasing program can help close sales and increase profits, a poorly designed one can have the opposite effect on the business. So, finding a trusted and experienced vendor financing partner is crucial.

Vendor Financing: What Every Manufacturer or Dealer Should Know

To get started, a lending partner will want to understand your customers’ credit profile range, average transaction size, and the number of transactions that occur each month. From there, the lender can begin to outline a program that meets your needs and further develops the specifics of a program to help you provide fast and flexible financing for your customers. Offering vendor financing to the full credit spectrum of your potential buyers is a great way to close more sales. So, engaging with a lender that serves all credit profiles, including those with less than perfect credit, is an important consideration.

Benefits of Offering Financing as a Dealer/Manufacturer

There are numerous benefits to offering vendor financing for your customers, from closing more deals, providing unique financing solutions for all credit types, enhancing loyalty, and reducing your balance sheet risk.

It is a missed opportunity to close more sales if you are not currently offering vendor financing. If you are offering vendor financing but with a program that draws the line at the B credit rating, that is a missed opportunity too. A creative story lender can provide solutions to customers that you may otherwise decline.

Learn more about the benefits of vendor financing with NFS Leasing here.