ESSENTIAL ELEMENTS OF LONG-TERM FINANCE RELATIONSHIPS
Andrew Palmer, 27 September 2016
There are 5 Essential elements of long-term finance relationships. We ran this blog post last year, but we feel it is always good to keep this information top of mind.
Honesty, trust, common interests and shared goals are just some of the elements required for building and maintaining successful personal relationships.
These aspects also underpin strong financial relationships although they are sometimes difficult to find, especially if you don’t know exactly what you are looking for!
The 5 essential elements of long-term finance relationships:
1. Focus must be on a long-term relationship
At all stages of a finance relationship all parties must be focused on a long-term future together. If either party (funder or vendor) looks for short term gain the relationship will suffer and end up breaking down. All decisions around equipment ownership, handling of inertia, servicing of equipment, and rates must focus on the long term.
Financiers must have very good IT and back-end systems. This technology helps provide visibility 24/7 for vendors to help monitor and control their client base at all times.
3. Formalise your relationship
While no one likes to rely on contracts, they are a must in any finance relationship. It is critical that all parties understand their obligations. Contracts with a vendor finance partner must cover:
- Inertia Share
- Specific End of Term Purchase Options
- Dispute Resolutions
- Rental overs – if any are involved, how these will be collected and used
- How any service will be handled if collected by a funder
- No invisible surprises
4. Flexibility and range of product
The option to have a variety of vendor finance products to help you sell your equipment is very important. All relationships should have access to a Rental Facility, Lease Facility, CHP/Chattel Mortgage and some kind of Copy Cost/Gross Rental and Service Facility. One facility does not fit all situations. Customers have different needs and objectives when financing equipment. Your vendor equipment finance partner must be able to supply this flexibility if the vendor wants to maximise every sale opportunity.
Trust is a vendor finance relationship’s most important factor, yet hardest to quantify. This relationship is critical to your business and you need to make sure that your finance partner is a trusted partner. How will you know your new partner is trust worthy?
- bring to you a Relationship Contract outlining all of the above critical points
- have been in the industry for a long time
- already have long-term vendor relationships
- be more than happy to supply references
Finding the right vendor finance partner is critical, hopefully, the outline above helps you find that long term partner a little easier. If your current funder does not fit the above, then find one that does.
What are your key factors for a developing a long-term equipment vendor finance relationship?
General Manager, S.E. Rentals
S.E. Rentals are the finance as a service specialists that will help you grow your business by providing finance solutions in an 'all things technology' future. We provide you with the flexibility, scalability and agility to help you achieve your Managed Service objectives, and our unique in-house software platform, Finance Oxygen, automates the process for you