Nearly two-thirds (62%) of U.S. middle market executives said the availability of vendor financing was important when deciding to acquire capital goods, according to Ron Arrington, Global President of CIT Vendor Finance, a leading provider of business solutions to small and middle market companies that acquire equipment and value-added services. This is one of the key findings detailed in “Vendor Financing Across the Supply Chain,” the latest CIT executive vodcast featured in the award-wining CIT Executive Insights Series.
The video is the first of a two-part series that takes a closer look at CIT’s recent study “U.S. Capital Goods and Equipment Financing Outlook: A Focus on Essential Acquisitions”.
Financing Helps Manufacturers, Resellers and Customers
Financing options are important to the acquisition of capital goods across the supply chain. “It helps the manufacturer or the reseller of the product as they go to market,” said Arrington. “With vendor financing present at the point of sale, there’s a financing alternative to help customers finance or lease that product. It also helps the end-user or the customer acquiring the equipment. Having a financing or leasing opportunity at the point of sale makes it easier for them to purchase the equipment, and other services that are available can provide added benefits, including asset management and variable billing.”
Vendor Financing Options Could Make or Break A Deal
When it comes to the acquisition of capital goods, middle market executives say they want options. “Our study indicated that half of respondents said they had disqualified certain manufacturers from the sales process because they did not have a vendor financing option tied to it,” commented Arrington.
Leasing Benefits Manufacturers and Customers
The lease versus buy decision has several components. “Using leasing, particularly vendor financing programs, helps manufacturers sell products,” said Arrington. “It could also help customers, allowing them to preserve capital while gaining the use of essential equipment to drive productivity and efficiencies in their own businesses, all while paying for the equipment over time.”
In addition to preserving capital, leasing also brings other benefits, such as predictable payments, flexible pay structures, reduced upfront costs, potential tax savings, the ability to remain current with technology through easy upgrades, and streamlined invoicing for equipment and services.
Adding Value Beyond the Sale
The good news is that more than three-quarters (78%) of middle market executives say they plan to make one capital good acquisition of significant value in the next 6 to 18 months. Having vendor financing options in place at the time of sale could aid those transactions. Arrington commented: “Vendor Financing benefits all parties across the supply chain. It provides value-added services with leasing, whether it’s tracking your assets or disposition of the equipment at end-of-lease. Manufacturers and customers are looking for good value outside of just the leasing part of the equation.”
About the Report
The insights and commentary found in this report are derived from both a survey instrument and personal interviews. The survey was completed by 279 executives from middle market companies with annual revenues between $10 million and $1 billion. Industries represented include industrial/manufacturing (19%); communications (16%); technology (15%); office equipment (15%); logistics and trucking (12%); energy, mining and construction (12%); and healthcare (11%).
CIT Vendor Finance is a leader in developing business solutions for small businesses and middle market companies for the acquisition of equipment and value-added services. It creates tailored equipment financing and leasing programs for manufacturers, distributors and product resellers across industries that are designed to help them increase sales. Through these programs, it provides equipment financing and value-added services, from invoicing to asset disposition, to meet its customers’ needs.