Your client’s capital constraints may be stalling your sales growth
Your customers need the latest technology and equipment to grow their business, but the large capital outlays required can mean they miss out. If your sales team are telling you that sales are being lost due to clients’ inability to finance the equipment they need, there is a solution.
What if you could provide the finance they need to buy your equipment?
Our research with East & Partners on 646 Australian SMEs revealed that over 87% of companies said that using equipment finance helped them grow their business and on the other side of the coin, 30% reported missing an opportunity due to a lack of credit. Almost a quarter of these hadn’t even considered equipment finance as an option, and 16% weren’t sure how to access it.
For most clients, traditional banks are the first port of call, but inflexible lending practices and slow turnaround times (21 days on average) mean that many small businesses miss out. Yet at the same time, nearly 25% of businesses hadn’t even considered equipment finance, and 16% weren’t sure how to access it.
If you could present your clients with a finance options as part of your sales process, you would be giving your clients options, and your sales force the tools they need to convert sales.
The figures speak for themselves. Ninety percent of businesses which offer vendor finance options experienced sales growth, 75% said that they were able to close larger deals, and 63% said they closed deals faster. And nearly all of them were more confident about sales growth going forward - 80% forecast higher growth in the future, compared with businesses which did not include equipment finance as part of their offering.
Read more about our research with East & Partners in
The Equipment Manufacturer's Guide to Growing Your Business:
The businesses we interviewed – those who provide asset finance as part of their sales offering – reported that financed sales are typically more profitable than other sales. Up to 15% more profitable, according to BizBuySell.
In most cases, this is because there is less incentive to provide upfront discounts, because clients focus on the monthly payment amount rather than the total cost. And even more importantly, nearly 70% of vendors interviewed said that providing asset finance allowed them to better serve their clients, create stronger relationships, and improve customer retention.
Asset finance can improve your cash conversion cycle exponentially
One of the reasons that offering asset finance improves sales figures so dramatically is the excellent effect it has on your cash conversion cycle. As a small or medium sized business, cash flow management is likely to be your biggest headache, so you know that your cash conversion cycle (CCC) is one of the most important metrics to focus on.
The cash conversion cycle measures the length of time in days that it takes a company to convert its resources into cash flows. In other words, the time between a company spending cash and receiving cash or how long cash stays tied up in working capital.
It’s a great way to measure your efficiency in managing cash to generate more sales. The shorter the cycle, the less time capital is tied up in the business process, and the better for the company’s bottom line.
And an improved CCC means a better bottom line
When we interviewed small businesses about their cash conversion cycle, those which offered equipment finance reported not only that their sales had grown, and their sales cycle shortened, but that their cash conversion cycle had reduced by 59 days, from an average of 210 days to just 151 days.
The following example shows you why.
CCC – without asset finance
Take the example of a reseller of commercial lawn care equipment. If the reseller imports the equipment from abroad, they need to pay for it upfront, and then store it. Even if they receive 60-day trade credit from their supplier, they typically hold the stock for 30 days, and will not receive payment for what they do sell for up to 120 days after the purchase order.
CCC – with asset finance
With asset finance, your sales team can offer the finance package to the customer before the purchase order is made, and offer the customer 60 days to decide. Your asset finance provider also has 60 days to prepare, so can pay you immediately when the equipment is delivered – saving 60 days.
The provision of asset finance could be the difference between your potential clients buying from you, or from someone else. If you can solve their cash flow problems, not only are they more likely to buy from you, but they are more likely to buy more, buy more quickly, and buy from you in the future.
And even more importantly, the offer of finance is about more than just the cost of an item or the ability to pay for it. It’s about starting a conversation with your clients about the benefits to their business of your equipment and technology, and how you can work with them to achieve their business goals.
So many customers have budgets which are out of step with their needs, simply because they are driven by the amount of cash they have available at the time – if you can help them overcome that hurdle, by providing asset finance solutions which allow them to grow, both their and your business will be better off.
LEARN HOW TO OVERCOME YOUR CLIENTS' CAPITAL CONSTRAINTS AND BOOST YOUR SALES PERFORMANCE
Download our free whitepaper The Equipment Manufacturer's Guide to Growing Your Business to read more about our research on 646 Australian equipment vendors and buyers.