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7 Smart Reasons For Manufacturers To Use Financing in Today’s Economy

Manufacturing is big business in Canada. Value added in the segment is projected at CDN $284 billion this year, with output projected at nearly $674 billion. Fueling that business is equipment and the financing that underscores it.

Manufacturers often look at equipment financing as somewhat of a routine necessity, even a commodity in some cases. Yet a deeper understanding of the ways they can use financing reveals that equipment finance is actually a path to increased sales, growth and long-term customer relationships.

A strong partner can provide floorplan financing, allowing inventory carry at the dealer level, versus at the manufacturer level. Manufacturers can also offer financing programs on behalf of their dealers, so they do not have to source financing for their customers. The ability to offer flexible programs to meet a customer’s needs can seal a deal quickly – meaning the dealer can stick to the business of selling equipment and moving inventory faster.

Here are seven key ways in which equipment manufacturers can benefit from smart, strategic use of equipment financing.

1. To facilitate the sales cycle. Strong financing programs can ease friction points and speed the sales process. An industry-knowledgeable, experienced finance partner can provide insight and expertise on how to work with different prospects. They’ll learn what each customer needs to make the deal work; they’ll help customers finance down payments or even provide 100% of the equipment financing. In short, they will work with manufacturers to find ways for customers to acquire equipment so that the manufacturer can sell more equipment faster.

2. To build out a dealer/distribution network. If a manufacturer is looking to build, expand or maintain a distribution network, financing can be a key component in several ways. When a manufacturer can help dealers acquire the equipment they need on terms that work for them, both the manufacturer and dealer will realize stronger customer relationships for both the short and long term. Offering financing options lets dealers know they come first.

3. To purchase in-demand raw materials, parts and equipment quickly. Manufacturers often must move quickly to purchase necessary materials. Supply shortages can persist or accelerate; large orders can come in; economies can shift. Leveraging existing assets and equipment can provide the working capital to buy what’s needed when it’s needed.

4. To purchase equipment in almost any industry. Yes, manufacturers use equipment financing to purchase the equipment they need to make their products. While construction and transportation industry manufacturers are common users, tailored equipment financing programs can finance vital needs for a wide swath of industries, from forestry (think: chippers) and safety (fire trucks) to material handling (forklifts) and electric vehicles.

5. To finance the purchase of used equipment. In today’s market, used equipment can be in as much demand as new equipment. Working with a provider that finances used equipment can be invaluable to a manufacturer’s business.

6. To improve cash flow on products shipped. Manufacturers are looking to move units quickly once they are produced. A good financing program can assure funding the minute those products ship, and allow customers to acquire equipment with convenient lease or loan structures.

7. To speed cross-border business. Doing business in both the United States as well as Canada? Market dynamics, local laws, regulations and credit requirements can get complicated. A finance partner that has true presence and capabilities in both countries – with physical offices and knowledgeable sales, credit and operations teams – can create custom programs that make cross-border finance simple.

Getting started

When you’ve made the decision to explore how best to utilize equipment financing in your company, it’s time to start looking for a finance partner. The choice goes far beyond interest rates.

• Choose a partner rather than a vendor. Partners seek a shared vision and shared success. Because they are looking for a long-term relationship, they will take time to learn about your business, your processes, your goals. With a consultative approach, a partner will recommend programs that work for you and your clients in the current economy as well as in the future.

• Prioritize flexibility. Development of tailored programs is essential. Customized vendor programs can add significantly to a manufacturer’s growth plan. Maybe it’s a buy-back program if an asset doesn’t sell in a given time or a special program for used equipment. Instead of a one-size-fits-all approach, a good financing partner will develop a customized approach that facilitates the achievement of specific sales objectives.

• Seek speed. Some equipment finance providers, working amidst regulations and policies, can be slow to respond. Working with a partner that is non-regulated and flexible, and has the ability to quickly and efficiently develop customized programs, translates to better overall customer experience for manufacturers, dealers and buyers. And for dealers, getting quick-turn credit decisions and expedited funding can be challenging. An experienced, customer-centric partner that intimately knows your business can make things happen fast, often even providing same-day funding.

• Find a partner who shows respect for the dealer network. A good partner will get to know a manufacturer’s dealer network, and understand that the network is the manufacturer’s most important resource. They will provide exceptional service, be available when needed, and focus on the priorities manufacturers and dealers set.

• Opt for the one-stop shop. To make life easier, look for a finance partner that can handle all your needs, including wholesale and retail channels – and possibly even corporate finance needs as applicable. Your life will become easier and less stressful.

Equipment financing is a tool that manufacturers, distributors and dealers can leverage to help drive sales. When looking at it as more than just a box to fit into, it becomes a strategic business tool to use in achieving greater growth.

Paul Green

Paul Green is Sales Director, Diversified Industries and Aviation, at Mitsubishi HC Capital Canada. Previously, he served as director of Aviation Finance and director of Strategic Programs for the company.

Paul’s nearly three decades of experience in lending and banking include heading new-business development for construction, transportation, and food and agriculture industries at DLL in Toronto. He has also held the position of vice president at LiftCapital Corporation in Toronto, and chief risk officer at AerCap in Amsterdam.

Paul holds a Bachelor of Commerce degree from Memorial University of Newfoundland, and a Master of Business Administration degree from Dalhousie University.

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