Many industries are upgrading equipment to include GPS asset tracking technologies. IT equipment needs to be upgraded seemingly every hour and a half. The commercial truck industry is requiring everyone to upgrade to more emissions friendly engines. Whether part of a regulatory move, efficiency gains or the requirement to keep up with the competition, the word “upgrade” is a big impact on business owner’s lives. And a bigger impact on their cash position.
A little planning helps
Most of the time, businesses understand the seemingly never ending need to reinvest in their commercial equipment. They just don’t plan for it. More than 8 of 10 small business owners only think about upgrade or replacement in the break/fix emergency. Waiting until these big events to look at upgrade or replacement can be a very costly endeavor. Did you know that businesses that plan for capital equipment acquisitions versus ones that wait until the wheels fall off have nearly 20% lower equipment acquisition costs?
Sinking cash into equipment is a sinking feeling
Another major reason why businesses feel the pain of upgrade in the cash drain. Big hits in cash flows for unplanned equipment needs hurt. So why do it that way? Virtually all classes of commercial equipment lose value. You wouldn’t knowingly invest $50,000 in a stock you know is going to be worth $25,000 in five years. But time after time business owners drop huge down payments on their commercial equipment or pay cash outright. Even if you produced 3x the revenue for equipment cost, what’s your return on that investment? There is no real merit to owning 100% of an asset worth half of what you paid for it in the near future and when the upgrade comes…it hurts.
Ease your pain
What if you just paid for what you use? A simple monthly payment budgeted for each month for the use of the equipment you’ll pretty much always need. And when the equipment is ready for replacement or upgrade, you just get the new model and keep the monthly payment stream going. Even mobile phone companies have caught on to this. With the introduction of no down payment monthly financing of your phone, nearly 40% of cell phone users are now on the monthly plan. Rather than it being a $200-$500 hit to personal cash flow every few years or when your phone goes swimming, customers just pay their $25 per month. And then every few years pick up the new model. Taking this approach to commercial equipment will ease your pain as well
At Red Thread Financial, we help businesses with a simple, painless and affordable way to handle the constant need for upgrade. In fact, our programs can keep you on the cutting edge of technology while taking the surprise out of the budget. If you’d like to reduce some pain in your upgrade cycle, let’s talk.
Sometimes as a small business owner, you need a $5400 trailer, a $9000 screen printing machine, or three laptops for $3100. To think that all smaller businesses have this cash on hand all the time is asking a bit much, so financing becomes a viable option. Unfortunately, the option most people choose isn’t very good for them.
When it comes to financing the small ticket commercial equipment purchase, many business owners find themselves using more “retail credit” solutions. Retail credit alternatives are either similar to or actually are credit cards. The approval process is very simple and approvals happen at the end of a computer screen. While the speed may feel like a positive experience, the devil seems to be in the details.
Like a credit card, the interest rates can skyrocket to 20% or more. While that may feel very high, most of these programs are essentially unsecured credit programs and anything unsecured carries a higher interest rate. Also, these lenders rarely have any real knowledge of the equipment and the businesses that actually use it. As such, the payment terms are a “one size fits all” solution. They may not understand that a certain type of trailer could easily be financed for 48 months rather than the 24 they are proposing. That lack of understanding just doubled your payment. Also important to consider is the impact to your credit. High balances of revolving credit like this can cause havoc to your personal credit score.
But don’t lose heart, there are alternatives out there. Seek lenders that understand the equipment and can offer financing for smaller ticket commercial equipment with more “friendly” payment terms that are more beneficial to your business in the short and long term. These lenders primarily work with smaller businesses and understand the cash crunches you face. They understand the importance of monthly cash flows. And they can help you with a fast, reliable process to acquire the equipment you need without resorting to the “credit card-like” options.
Financing a $9000 commercial asset is NOT a point of sale decision. At Red Thread Financial, we know that our finance programs can help smaller businesses more easily acquire desperately needed small ticket commercial equipment. Keep your credit cards in your wallet…and let’s talk.
Fortune 500 companies are missing earnings projections at a higher rate. Oil concerns are legitimate and the stock market is doing its roller coaster thing. Major classes of commercial equipment are already seeing new production fall off and some sales teams are secretly nervous. While the headlines always seem ominous, the reality is our economy ebbs and flows in cycles—typically moving from strong and fast to slow and weak and back again every 5-8 years. It has done this for more than a hundred years and in the current growth cycle–we are in year 7.
While that may feel a bit uncomfortable, there are some basic things you can do to prepare for a slowing economy and keep equipment sales humming along.
Money matters. Financing for your equipment is always an important consideration, but as the economy slows, access to financing for smaller businesses tightens. Focus on your finance partnerships and lean on those that can offer financing in a wide variety of credit situations to the smaller business. These companies are more likely to be able to adapt through the ups and downs than a lender that has primarily one lending platform.
Focus on affordability. While it is always a good practice to lead with payment, in slower economic times it’s absolutely critical. Use your solid finance relationships to create ongoing campaigns featuring affordable monthly payments.
Embrace the reality. Give a webinar for your customers on how to manage the issues your equipment solves in more “revenue challenged” environments. Invite your finance partner to jump in and give stories of how they’ve helped people get the revenue producing equipment they need in slower economies. You’d be surprised at how many smaller businesses want to plan better and purchase more in these situations—they just don’t know how.
If your customers were a little more prepared, they might be able to grow through a slowing economy with your equipment driving the revenue for them. Pretending it’s 80 degrees and sunny when it’s not…is kind of annoying. So hand them an umbrella or at least show them how to get one. At Red Thread, we help businesses with a simple, painless and affordable way to acquire equipment through the cycles. Let’s talk.
A company’s website is a great tool for advancing the sale. Information about products, solutions, testimonials, service area, etc., are critical in advancing the awareness of your company in the mindset of your target audience. While we all agree with that, many dealer websites are a little …let’s just say…behind the times. Beginning January 14th, a resource close to American Financial Partners surveyed 100 websites for dealers. And boy, did we find a few things.
41% had broken links on their website.
Only 4% had any type of article, opinion, insight to demonstrate their expertise and educate their audience.
74% did not discuss a finance offering on their website. The best way to sell anything is to make it easier to pay for, yet nearly 3 out of 4 had no program for affordability on their website.
Only 11% were designed to adapt to mobile devices. In light of Google’s new rules for ranking sites…a site that doesn’t play well with mobile is a bad deal.
Only 7% offered a finance program you could learn about in less than 3 clicks on their site. People have no attention span. If they have to work to find things…they won’t.
Heavy product focus, light service focus. Despite most of you making the majority of your money with service.
Of those that offered financing, only 3 actually explained the program. The rest just took you to an online application. Helping your customers understand the benefits of financing your equipment is the key to actually getting them to do it. So you might want to consider more than just an application.
Only 6% had an active* presence on social media. Social media is becoming an increasingly powerful tool to connect with your audience. Lack of presence is a competitive disadvantage.
As an equipment finance company that helps dealers increase sales, we found the finance implications of this review interesting. In the Sawbux Greenwich 2015 Survey of Customer Decision Making, 66% of prospects are “more likely” to choose the vendor with the best information on financing…even if it means they sell a slightly less desirable asset.
At Red Thread, we know that our finance program when prominently displayed on a website increases sales. If you would like to discuss how to leverage finance information on your site, contact us today. We can help.
*an active social media presence is defined as having at least 4 posts per month
If you make your equipment easier to pay for, more people will buy it. The previous sentence is not a famous quote. It’s not a parable or the end of some tale spun by some unrealistic self-help book. It’s a truth. A fact. It’s like saying the sky is blue or that kids like Easter candy. Leading with a payment is the undisputed key to ensure more equipment sales. But…
Only 9% of all commercial equipment sales teams lead with a payment.
NINE PERCENT? The research company that did this survey touched more than 2100 commercial equipment sales professionals from trucking to construction, restaurant equipment to IT. And when the results came back…they expanded the research to another 1500 sales pros because they simple couldn’t believe it. When they finished…still…nine percent.
Let’s leave the world of commercial equipment sales for a minute and take a look at what the car guys do. In 2015, Chevrolet needed a jump in sales in their struggling European market. They built an ad campaign for the European version of the Chevy Cruze that led with a monthly payment amount. 3 months later—24% increase in sales. Excited, Chevrolet moved to a 0% financing initiative in the next 3 months and 3 months later—sales dropped 11%. They moved back to the low payment campaign for the following quarter and guess what—21% sales increase. And here’s the kicker…the absolute payment amount was more expensive than their closest competition in Europe, those guys just didn’t lead with a payment.
What does this all mean? PEOPLE ARE NOT FINANCE EXPERTS. They don’t understand the real impact of interest rates, residual creation, secondary market implications, etc., but they do understand the amount of money that comes out of their bank every month. And here’s the hard pill to swallow: this biggest problem might be you. Nine percent is crazy. The most impactful way to demonstrate how easy it is to own your equipment is simply being underutilized.
When people are afraid of doing something, they make excuses. Facts get lost, things get emotional and we let fear and lack of knowledge drive behavior. So, let’s clear that up.
At Red Thread Financial, we help manufacturers, dealers and vendors lead with a payment. But we help you do more than that. Our programs deliver on the promise of affordability, ease of doing business and personal touch. If you’d like to start leading with payments, let’s talk.
For most business owners, equipment acquisition happens in the break/fix moment. Recent research points to more than 60% of all small business owners replacing equipment only when they absolutely have to. But with the price of this equipment being so significant and the enormity of downtime expenses, is this the right approach?
The downside of waiting until you have to.
Running an asset “until the wheels fall off” or close might be a very expensive strategy. Maintenance expense can be a monster, but downtime is the real killer. Most business equipment is a source of revenue and the ones that aren’t are counted on for operating efficiency. Hours or days of downtime in these circumstances cost big bucks, not just in lost productivity, but in rental and other real dollar costs.
Understanding your equipment
If running equipment as long as conceivable is not an option, what is the right time to replace equipment? The answer depends on the equipment and how you use it. To avoid some of the real pitfalls of aged equipment and its downtime, you have to first look at each class of equipment you need and how you use it. For technology, the cycle may be 2 years and for some construction equipment it may be 15 years. But we’ve seen trucking companies that replace Tractors every 24 months and replace laptops every 3 years. It all really depends on the unique nature of your business.
A better way?
A Life Cycle Management approach to acquire, finance, manage and dispose of your commercial equipment just might be an attractive alternative for you. Working with a combination of your equipment sales partners and a strategic finance partner, you can actually develop a program—customized for your company—that provides the best way to acquire equipment affordably while maximizing uptime and staying on the cutting edge of technology.
At Red Thread Financial, we help business owners acquire equipment with competitive finance programs and make things downright uncomplicated. We can help you avoid the expense and fire drill of the break/fix moment with an affordable approach to acquiring new equipment. If you would like learn more, contact us today.
In the spirit of the political crescendo filling the airwaves leading to a presidential election this year, I am reminded just how influential these guys can be. Or at least used to be. No matter what you think of the process you cannot deny the wisdom and leadership demonstrated over our country’s great history. And as inspirational “quote people”, no better place to look than our leaders. Take a minute and soak them in. I think these are a good representation that should shape the mentality of every business professional. Enjoy!
If your actions inspire others to dream more, learn more, do more and become more, you are a leader. — John Quincy Adams, sixth President of the U.S.
Always bear in mind that your own resolution to succeed is more important than any other one thing. — Abraham Lincoln, 16th President of the U.S.
In matters of style, swim with the current; in matters of principle, stand like a rock. — Thomas Jefferson
I walk slowly, but I never walk backward. — Abraham Lincoln
Conformity is the jailer of freedom and the enemy of growth. — John F. Kennedy
It is amazing what you can accomplish if you do not care who gets the credit. — Harry S. Truman
What counts is not necessarily the size of the dog in the fight- it’s the size of the fight in the dog. ― Dwight D. Eisenhower
A pessimist is one who makes difficulties of his opportunities and an optimist is one who makes opportunities of his difficulties.” – Harry S. Truman, U.S. president from 1945 to 1953.
Any man worth his salt will stick up for what he believes right, but it takes a slightly better man to acknowledge instantly and without reservation that he is in error. – Andrew Jackson
Leadership and learning are indispensable from each other – John F. Kennedy.
In my many years I have come to a conclusion that one useless man is a shame, two is a law firm, and three or more is a congress. – John Adams
Red Thread Financial believes in leadership. And even a little motivation from time to time. If you’d ever like to learn more about competitive finance solutions that can drive real growth, let’s talk.
Sales gurus will tell you that the “high price” objection is bunk. That if you do your job of demonstrating the value in your solution, price objections melt away. Too a point they’re right…and wrong. In a world of highly competitive offerings, you can only demonstrate so much unique value in a price gap. Sometimes people have the need and simply don’t have the money. No matter how much they like you and see the value in your story, if you don’t have the dough…you don’t have the dough.
Welcome to the world of the break/fix sale. The good news is customers are forced to make a decision because no one is happy when their temperature is not regulated wonderfully. Sweet. The bad news is that overwhelming amounts of them are not prepared for the significant expense. Darn. So how do you sell the equipment they must have but can’t afford?
Finance it. When was the last time you dropped $48K in cash on new truck? For most of you…never. You can’t afford that and if you had to wait on that kind of savings to invest in your business, you wouldn’t have much of a business.
So why don’t more businesses lead with a simple payment? Because offering financing seems hard. Because offering financing requires too much time. Because you don’t want to get in the middle of your customer and their money. Wait, what? Of course you do. You want their money to come to you because you made a reasonably expensive purchase they were not prepared for—affordable.
Think of your car. Does it really matter if the sticker price is $48K or $50K as long as the monthly is where you need it to be? For most folks…no. But if you’re a cash payer, what if you didn’t have the extra $2K? Financing opens up a world of possibility for your break/fix driven business. And if you do it right, you’ll find a partner that is fast, treats customers like you do and does all the work.
The team at Red Thread Financial has been financing equipment for decades. We know that our program is built for the success in the break/fix moment. If you would like to discuss how to leverage a fast, reliable finance program that can increase your sales, contact us today.
Today, automated scoring systems can make credit decisions almost instantly. There are search algorithms in place to make one dealer’s equipment come up sooner than another competitor’s equipment in a Google search. Advertisers know what websites people visit so that even when they are smiling at the grandkids on Facebook, an equipment company ad pops up. And to think, 20 years ago the phone in my house had a cord.
Advances in technology are undoubtedly positive as they quickly inform decision making. The finance business powering commercial equipment sales has pushed limits to increase volumes of credit applications and make things faster and easier than ever before. A few stats on a single page application and lenders are able to evaluate an investment in your business–without knowing virtually anything about you. Is something missing?
While convenient, business is still about people. More than ever, business owners seek partners to learn about their unique needs and be solution providers. Speed and technology are important, but can it come at the expense of leaving people, their story and opportunities to really help business owners behind? In a complicated and long process of acquiring new equipment, why do business owners leave the finishing step of financing to impersonal, automated “fast food” application process?
In this critical step, why do the people behind the numbers become less important? In an overly “credit scored” world with a sea of information surrounding finance alternatives, there is a significant opportunity for business owners to establish partnerships that evaluate more than an application and develop real, long term competitive solutions to grow your business.
Technology in the finance business is clearly valuable, but we wonder how many business owners are left behind because numbers in the scoring model are the only decision criteria. And how many business owners settle for wrong options, because they simply don’t know there are smarter alternatives out there?
Could the benefits of the application only solution, combined with several lending options for your situation all quarterbacked by a finance expert dedicated to your goals and not a lender be a smarter approach? We think so. At Red Thread Financial, we do this every day. Dream big. Call us. And achieve a little more.
There are some really innovative small business working capital providers breaking through in the market today. While caution must be used to ensure proper use, they fill a void where banks are no longer meeting the need. With the ease of these solutions, we are hearing more often that these are somehow viable alternatives to more traditional equipment lending–especially in credit “challenged” circumstances.
Not so fast.
Working capital is for, well, working capital. It’s almost never a good idea to finance a fixed, depreciating capital asset you will have for more than a year with working capital debt. To explain, let’s start with a really nice definition from our friends at the SBA:
“Working capital is the difference between current assets and current liabilities. Current assets are the most liquid of your assets, meaning they are cash or can be quickly converted to cash. Current liabilities are any obligations due within one year. Working capital measures what is leftover once you subtract your current liabilities from your current assets, and can be a positive or negative amount. The working capital is available to pay your company’s current debts, and represents the cushion or margin of protection you can give your short-term creditors.
Positive Working capital is essential for your company to meet its continuous operational needs. The availability of working capital influences your company’s ability to meet its trade and short-term debt obligations, as well as to remain financially viable. If your current assets do not exceed your current liabilities, you run the risk of being unable to pay short term creditors in a timely fashion.
Businesses that are seasonal or cyclical often require more working capital to stay afloat during the off season. Although your company may make more than enough to pay all its obligations yearly, you must ensure you have enough working capital at any one time to meet your short term obligations.”
So, how many times did we highlight the phrase “short term” or “current debts” or “within a year”? Now how many businesses pay off all their equipment debt in a year? Using working capital debt, which is designed for short term capital need, to finance equipment, which is a long term capital need, can do 2 really harmful things to a small business:
- It chews up critical access to working capital debt to meet payroll, finance inventories, etc. because that big equipment exposure sitting in the working capital loan.
- Many small businesses DO NOT PAY DOWN the equipment debt as it depreciates in the working capital facility. So not only have they chewed up access to life-blood working capital, they are massively upside down on the equipment.
The process for these new working capital loans is simple, quick and can help you easily complete an equipment purchase. But please be cautious not to trade simple and short term for long term negative consequences. There are some great equipment financiers out there that can help you when the banks fall short and position you for long term success in all credit circumstances. At Red Thread we bring years of experience positioning customers for success with financing. Let’s talk.