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Technology vendor financing: When core competencies outweigh price

By Shawn Arnone in Thought Leadership Posted March 26, 2019

technology vendor financing core competenciesEven in a market of seemingly unlimited choices, the old saying “you get what you pay for” still rings true.

In the current competitive climate of technology vendor financing, the low-priced choice doesn’t necessarily represent the best product or process.

More finance options for technology vendors

When it comes to equipment financing, the vendor side, specifically wholesale, is often considered more compelling because providers can quickly get a lot of high-quality assets on the books, and this is particularly true of the technology space. Additionally, these transactions are less process and resource intensive, which also feeds interest. As a result, options for technology vendor financing have grown, and rates have gotten lower.

The lowest price, rate and spread, however, only tell part of the story. The low-price player might not necessarily be the player that gets the deals done - and done well.

Considerations beyond price

In such an environment, it’s important to know when a few basis points aren’t going to make the important difference. Here are four factors to consider when choosing a technology vendor financing partner:

1Certainty of execution

It isn’t always possible to predict when a financing transaction might require special skillsets to get the job done, but when it does, a financing partner with detailed procedures and broad capabilities can make all the difference. It’s also important to consider the strength of a financing partner at every phase of a transaction. Does the lending partner execute on what they promised from the beginning? How are they at pre-closing? What about the closing/funding stage? Do they understand how to avoid compounding problems? How good are they at reviewing documents and minimizing the must-haves? Do they ensure that they don’t make their problems the customer’s problems? At each step of the process, skilled and professional employees play a significant role in a smooth transaction.

2Industry knowledge

It’s important for a financing partner to understand what their client is selling, why their customers are buying it, and how they can support that client’s customers. Shared industry knowledge and an understanding of what’s relevant in the marketplace help clients stay connected while expanding their field of view beyond the day to day. Such interactions might include explaining why pricing is going higher or lower, or what is happening in equipment finance or the client’s market. Knowing what’s important to the client can differentiate a financing partner from the next company that may have little more to offer than the lowest rate.

3Relationships matter

In any business sector, relationships matter and can elevate the quality of a transaction. Honest and open dialog cultivated over years can build a level of trust not found in most working relationships. Business transactions benefit when all parties work to understand where each person is coming from. A trusted partner will keep coming back and presenting new opportunities. The more consistent the relationship through up cycles and down cycles, the greater the trust – and that’s always good for business.

4Controls to protect everyone

With increasing fraud and scams, financing processes are inevitably becoming more cumbersome. But there are good reasons for strict controls. While the obvious one is the protection of the financing partner, another reason is the protection of the client. Unfortunately, when fraud enters the picture, everyone loses. For this reason, reliable financing entities are adding fraud protection into the process, and they are doing it as much for their clients as they are for themselves.

Selecting a financing partner

With so much change and competition in the vendor technology space, it’s important for clients to weigh pricing against the competencies and capabilities of any potential financing partner. Doing so will help them make clearer decisions, despite the pressures of low pricing, rising fraud and cumbersome processes.

The bottom line: By taking a holistic approach when selecting a financing partner, technology vendors can ensure better A-Z execution, more secure transactions, and improved outcomes for their clients. Taken together, these competencies are as important as price, especially when facing a rapidly evolving marketplace.

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Learn About Technology Vendor Financing

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