Different types of Vendor–Lender relationships

By | March 27, 2011

different financing relationships vendor lenderI talk a lot about the various types of equipment financing here in this blog. From traditional equipment financing and equipment leasing to using Section 179 with financing to make the bottom line better, I cover a lot of topics.

But, and this is to be expected, those topics are usually from the “buyer’s” perspective. However, every so often, I like to remind people of “the vendor side” of equipment financing. I’ve posted previously about using equipment financing as a marketing tool and the like, and over the next few weeks, I’d like to return to this “other side” and discuss equipment financing from the equipment seller’s point of view.

Let’s begin by introducing the four common types of Vendor/Lender relationships (heh – I like saying “vendor/lender”… it sounds like something that should be part of an NFL snap count… “Vendor/Lender 47 Right hut HUT!!!”)

Anyway, here’s an introduction to the big four. Future posts will explain each in a little more detail.

  • Referral Programs – A referral program for equipment financing is typically the most common type of vendor/lender relationship. This type of customer finance program can be set up fairly quickly, and is essentially marketed as “equipment financing provided by XYZ Lender”.
  • Private Label Programs – This is the logical progression from a referral program. With a private label program, the equipment financing company (us) almost becomes the vendor’s financing department in the customer’s eyes because some or all of the written material is in the vendor name rather than ours. This allows for better branding, and also requires a closer working relationship between vendor/lender. Oftentimes, promotions like “same as cash”, “0% financing”, and “skip your first payment” can be worked out.
  • Vendor Recourse Programs – This is the next step, so to say… with Vendor Recourse Programs, the vendor wants to offer financing to a certain group of customers, sometimes without regard to credit history. In a nutshell, the vendor agrees to guarantee weaker credit transactions (there’s a lot more to talk about here – like I mentioned earlier, we’ll go over all of these in more detail in future posts.)
  • Captive Programs – This is essentially an extension/modification of Vendor Recourse programs, and are often used with unique circumstances where a vendor wants to get their equipment into their customer’s hands, sometimes regardless of losses suffered from defaulted finance transactions (indeed, many captive programs are a loss leader… to give an example, think of a company offering special financing to rapidly gain market share in a new vertical. Might be a good way for the parent company to gain a solid foothold, even if it’s financing subsidiary expects plenty of short term defaults.)


Anyway, that’s your big four of the vendor/lender relationships. Like I mentioned, we’ll go over each one in the future. Stay tuned.

Leave a Reply

Your email address will not be published. Required fields are marked *