- 6 out of 10 business owners secure their financing at the dealer that leads with payment
- Business owners are 4 times more likely to buy from a dealer that leads with a finance program over one that doesn’t.
- Nearly 7 of 10 business owners prefer to finance equipment with an equipment lender versus their bank.
- 6% of commercial equipment sales teams lead with a payment
- 69% of business owners value payment over purchase price
- 88% of business owners look to price/payment as more important that asset specification and brand
- Equipment dealers that lead with a payment program have less sales volatility in a slowing economy than those that lead with a purchase price
If you’re sweatin’ right now, we can help. Red Thread Financial helps dealers achieve more with competitive equipment finance offerings that can help a wider variety of your customers. We have Wall Street level resources with a Main Street level approach. Let’s talk and let’s go.
As a small business owner, you’ve probably been a little underwhelmed with how little some finance alternatives may know about your business. Sure, they can talk about blended interest rates, residual values or even operate a funny calculator that uses something called reverse polish notation. Yes—that’s really a thing. But what they can’t seem to do is “get” you. Because of this business owners try to figure things out on their own and stop seeking advice. Well…stop that. You’re looking in the wrong place.
One of the hardest things about being a small business owner is feeling the overwhelming requirement of being the Jack-of-all-trades. The thing is, Jack was a master of none. And most mid-sized business owners will tell you they grew beyond small business status by realizing they can’t know it all–and were willing to seek advice from experts. This is never more true than in matters of finance.
Once you face the need for real advice, spend your time finding the right experts rather than spending your time trying to figure it out on your own. And sure, this may involve lots of time up front, talking to finance partners about their real experience in your type of business. It will be obvious, quickly, how much they really know about the challenges you face.
Once found, this partner can open doors for you that were previously unimagined. They can guide you through quilt production calculators to determine ROI or talk about screen printing equipment life cycles. They can talk to you about tax benefits your accountant may even have to look up. They can position you for success with financing whether newer to the business or a seasoned pro.
At Red Thread Financial, financing equipment for creative businesses is what we do. It’s in our name. Help smaller creative businesses dream big is how we work. It’s in our blood. We know your business…how can we help you?
When evaluating an equipment purchase, business owners will review a minimum of 3 different options–on average–before making a purchase decision. New/used, brand, features, benefits and of course price play a major role in each decision. And after heavily negotiating these factors with each purchase, business owners usually take the first finance option without looking at options. In fact…
A recent survey of small business owners indicated that 68% only seek one option for financing commercial equipment. And they choose that option 92% of the time.
Why would you spend so much time and energy finding the right asset and so little time ensuring you have the right financing? The structure, term, payment and other components of the financing could drastically impact ROI and how affordable the purchase can be. But the cumbersome reality of the finance process can feel so painful, most business owners simply settle for fast…over best.
Choice inspires competition and ensures the delivery of value. And it’s what most small business owners lack when it comes to financing their commercial equipment. Could there be a smarter approach to financing your equipment?
A different kind of finance solution. And a smarter one.
Imagine how different things could be if a single business relationship could ensure you are getting the best deal possible with your equipment financing. One equipment financier with access to a wide variety of programs, most not available to your bank or dealer. These experts are uniquely on your side of the finance process, fighting for your best interest and only receive compensation when finding the best solutions for your needs. They work to know you, your company and how you buy and use equipment. They can pre-approve you in most credit situations and help you buy confidently. And their unique flexibility gives you more options as traditional lenders ebb and flow in economic conditions.
At Red Thread Financial, our history and smarter approach to equipment finance bring more options to your business for smarter choices. As you look to evaluate the impact your next equipment purchase has on your business, give us call.
Often, we get so busy finding the next deal and pushing it over the finish line that it can be easy to lose focus of the real value equipment brings to small businesses. Sure, in any company cash flow is not just a thing, it’s a life-blood kind of thing. So the amount of the payment certainly plays more than a small role.
That said, a connection back to the value the equipment offers a small business just might be the key ingredient to overcome the “rate is too high” objection. Almost every time a small business is looking to acquire a new asset it’s an opportunity story.
The total cost reduction or revenue opportunity for acquiring needed equipment often dwarfs the impact of an interest rate. And many times, smaller businesses find themselves in a position where they are not really choosing between 5% financing versus a more expensive option. Too often they are comparing a rate they got years ago in their personal life to the rates they are offered in the business today, despite their company or their personal situation not being the prettiest of financial pictures.
If you spend more time on the positive benefits of having the newer equipment, you can show them that the opportunity cost of not moving on it at a higher rate now, is far less expensive than waiting on a lower rate at some point in the future that might not happen anyway. Many times it’s hard for a small business owner to improve their financial picture unless they have the equipment to win new business or reduce expenses that will help them turn things around.
You can also demonstrate that by getting the newer assets earning revenue or reducing costs now, they’ll be strengthening their credit circumstance so that when the next opportunity comes to acquire equipment and improve the business, they’ll be better positioned for financing success. And you’ll be there, as their strategic advisor, guiding them and building loyalty while doing another deal.
At Red Thread Financial, we help dealers achieve more. So leave the financial conversation to us. We can help you move beyond the “rate shopper” and grow your business. Let’s talk.
THE COLLOQUIAL DEFINITION OF INSANITY:
DOING THE SAME THING OVER AND OVER AGAIN AND EXPECTING DIFFERENT RESULTS.
Yeah, but what do they know about commercial equipment sales? Well, nothing. But considering the author of the quote was Albert Einstein and he basically was the smartest dude ever—I wouldn’t count him out when applying this to the behavior of commercial equipment sales teams. Here’s what we mean:
- Only 9% of commercial equipment sales teams lead with a payment despite the fact that customers are 48% more likely to choose a less preferred brand if a payment is offered up front.
- 76% of sales people said they feel “pushy” when talking about a payment despite the fact that salespeople that offer payments up front are 600% more likely to hit their annual quota.
- 82% of sales people will only bring up payment if the customer does, despite 73% of commercial equipment customers saying they are more likely to keep shopping until someone brings it up to them.
This data comes from annual research on the buying and selling behaviors with commercial equipment and guess what, the gap is WIDENING. That means the disconnect between what sales teams do and what customers want is increasing for the 3rd straight year. But beyond the stats, our favorite part of the research is the most common explanation that was given for the gap by commercial equipment sales teams:
“IT’S JUST WHAT WE HAVE ALWAYS DONE.”
How dumb does ‘ole Albert look now? Most commercial equipment sales teams are afraid of trying new things. The data shows that finance options drive more sales conversations than any other activity, their customers clearly want more finance options and those options would be a big differentiator among the competition—but—they are doing what they have always done. And hey, that’s comfortable. But how can you do anything truly great by doing only what is comfortable? Was your first big job comfortable? The first date, wedding, child, big sale (maybe that was the first date)…were any of those things in the category of “what you have always done”? Of course not.
To grow our businesses we have to try new things. Even fail. Absolutely fail. But not trying new things or attempting to look at matters in a new light will have sun revolving around the earth again. And maybe’s that’s the biggest failure of all. At Red Thread Financial, we can help you overcome the fear and close the gap between what you have done and what you need to be doing while giving you the confidence of delivering a better solution along the way. We help dealers achieve more. Let’s talk.
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.