Vendor/Lender Equipment Financing Relationships – Private Label Programs

By | June 10, 2011

equipment financing relationships between vendors and lendersAwhile back, I mentioned 4 different types of equipment financing relationships between vendors and lenders. Let’s continue forward on that these and look at the second type of vendor/lender equipment financing agreement – Private Label Programs.

Private label programs are one step beyond the “equipment financing provided by X” referral programs I had written about earlier. With a private label program, a vendor’s financing will appear to be internal, to a degree (I say to a degree, because somewhere in the print the actual finance company’s name will likely be mentioned).

The advantage here is the financing, from the end user customer’s eyes, is seen as internal, as opposed to external. In terms of marketing, this helps in a convenience sense (people like the “everything under one roof / one stop shopping” mentality.) It also allows for a closer working relationship with the equipment financing company. And that closer relationship can lead to several interesting promotions/etc.

What type of promotions, you ask? Well, things such as “same as cash” “0% financing” and “skip your first payment” are possible. The vendor will usually subsidize these promotions via a discount on the invoice to the financing partner. But to the end user customer, it’s a financing deal, not a discount, which is very attractive in a marketing sense. These things become possible when a vendor and a financing company work closely together and become comfortable with each other.

One thing that I’ve read “out there” is that in this type of vendor/lender relationship, the vendor assumes some financial (credit) risk. That is NOT necessarily true – in a simple “non-recourse” private label program, the vendor is not responsible for repaying losses when a customer defaults on their payment obligations. In those non-recourse scenarios, the extent of a vendor’s risk is typically limited to the risk associated with entering into any contract as a named party – occasionally a deadbeat customer drags the vendor into collection court proceedings simply because the vendor is named on the lease or loan documents.

When a vendor assumes credit risk, that’s another type of vendor/lender relationship, called a “Vendor Recourse Program” – and those type programs are sometimes combined with private-label – but we’ll explore that one another day.

Ok, let’s end this with some Section 179 talk (big surprise, right?) But really, if you have read some of my past posts on Section 179, you’ll see it’s a great deal for 2011. But you know, we’re nearing the halfway point of the year… have you thought about the nice write offs you can take yet?


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