Vendor financing gives businesses a way to offer financing to customers as part of the purchasing process.
Traditionally, vendor financing can mean that the seller itself extends credit to the buyer. In equipment sales, however, vendors can also partner with a third-party financing company that handles the financing while the vendor remains focused on selling equipment.
For equipment manufacturers, dealers, distributors and resellers, this can make financing easier to introduce at the point of sale without requiring the vendor to become a lender or carry customer receivables.
Key Takeaway: A third-party vendor financing program allows an equipment seller to offer customers access to financing while a financing partner handles the credit review, documentation and financing transaction.
What Is Vendor Financing?
Vendor financing is a financing arrangement that helps a customer purchase products, equipment or services from a seller.
Vendor financing generally takes one of two forms:
- Direct vendor financing: The seller extends credit or payment terms directly to the customer.
- Third-party vendor financing: The seller partners with a financing company that provides financing to eligible customers purchasing the vendor’s equipment.
Centra Funding supports the third-party vendor financing model.
The vendor sells the equipment. The financing company handles the financing process. Once the transaction is completed and funding requirements are satisfied, the equipment vendor is paid according to the financing arrangement.
This structure allows vendors to provide financing options without underwriting credit, collecting customer payments or managing a financing portfolio themselves.
How Does Vendor Financing Work?
A vendor financing program can be integrated directly into the equipment sales process.
Although each transaction is different, the process generally works like this:
1. The Customer Selects Equipment
The customer chooses the equipment, machinery or other business assets they want to purchase.
2. The Vendor Introduces Financing
The seller lets the customer know that financing is available rather than requiring the customer to arrange financing independently.
Financing may be offered through a sales representative, website, proposal, payment calculator or customized financing link.
3. The Customer Applies
The customer completes a financing application with the vendor’s financing partner.
4. The Financing Request Is Reviewed
The financing provider evaluates the transaction and applicant based on its underwriting requirements.
Factors may include credit history, time in business, equipment type, transaction amount and the overall borrower profile.
5. Documents Are Completed
If financing is approved and the customer decides to proceed, the required financing documents are completed.
6. The Vendor Gets Paid
After the transaction is completed and applicable funding requirements are satisfied, the financing provider sends payment to the equipment vendor.
The vendor does not have to wait for the customer to make payments over the life of the financing agreement.
Why Do Equipment Vendors Offer Financing?
Equipment purchases can represent a significant investment for a business.
A customer may need the equipment but hesitate to use a large amount of available cash to purchase it outright.
Financing gives that customer another way to acquire the equipment.
For vendors, financing can also become a useful part of the sales process.
Rather than discussing only the total purchase price, the salesperson can introduce another purchasing option that may better fit the customer’s cash flow and business needs.
Benefits of Vendor Financing for Equipment Sellers
Reduce Upfront Cost Barriers
A large purchase price can delay an equipment decision even when the customer needs the equipment.
Financing allows the customer to evaluate the purchase without necessarily paying the entire amount upfront.
Keep Sales Opportunities Moving
If a customer has to leave the sales process and independently search for financing, the transaction can lose momentum.
An established vendor financing program keeps the financing option connected to the equipment purchase.
Help Customers Preserve Cash
Businesses need cash for payroll, inventory, hiring, marketing, expansion and operating expenses.
Financing equipment can allow customers to preserve more of their working capital for those other priorities.
Support Larger Equipment Purchases
Financing may allow a customer to evaluate the equipment solution that best fits the business rather than limiting the purchase solely to available cash.
That could mean purchasing multiple units, adding accessories or completing a larger equipment package.
Give Sales Teams Another Tool
Financing gives sales representatives another option when a customer hesitates because of upfront cost.
Instead of ending the conversation at price, the salesperson can introduce financing as another way to complete the purchase.
Get Paid Without Carrying the Receivable
With third-party vendor financing, the seller does not have to finance the customer directly.
The financing company manages the financing agreement while the vendor receives payment according to the funded transaction.
Vendor Financing vs. Offering Payment Terms Yourself
The distinction is important.
If you extend credit directly to customers, your business may be responsible for:
- Establishing credit requirements
- Managing payment terms
- Carrying customer receivables
- Monitoring payments
- Handling collections
- Waiting for payment over time
With a third-party financing partner, the finance company handles the financing transaction.
That allows the vendor to continue focusing on selling equipment and serving customers.
When Should You Offer Financing to Customers?
Financing does not have to be introduced only after a customer objects to price.
In many cases, it makes more sense to present financing as a normal purchasing option early in the sales process.
Vendors can promote financing through:
- Equipment quotes
- Proposals
- Product pages
- Sales emails
- Website landing pages
- Financing calculators
- Trade show materials
- Sales presentations
- Customized financing links
Making financing visible early gives customers more time to consider how they want to structure the equipment purchase.
What Should a Vendor Financing Program Include?
Not all vendor programs provide the same level of support.
When evaluating a financing partner, look beyond whether the company can simply finance an equipment transaction.
Simple Applications
Customers should be able to access a clear and straightforward financing application.
Responsive Credit Decisions
The financing process should help support the pace of the equipment sale rather than creating unnecessary delays.
Flexible Financing Options
Your customers may have different transaction sizes, equipment needs and business profiles.
A financing partner should be able to evaluate a range of transaction types.
Financing for Newer Businesses
Some vendors regularly work with startups, new locations or recently established businesses.
Access to programs that consider newer businesses can help support those customers.
Digital Financing Tools
Online applications, electronic documentation and payment tools can make financing easier for sales teams and customers to use.
Customized Financing Links
A customized or co-branded financing link gives vendors a simple way to connect customers directly with the financing process.
Marketing Support
Website content, sales materials and financing resources can help vendors make financing more visible throughout the customer journey.
Dedicated Vendor Support
Your sales team should know who to contact when a customer has questions or a transaction needs attention.
What Types of Equipment Sellers Can Offer Financing?
Vendor financing can be used across a wide range of commercial equipment industries.
- Construction and heavy equipment
- Restaurant and foodservice equipment
- Manufacturing machinery
- Automotive equipment
- Medical and veterinary equipment
- Printing and fabrication equipment
- Commercial vehicles and trailers
- Material handling equipment
- Technology and office equipment
- Agricultural equipment
- Franchise equipment
- Specialty commercial equipment
Vendor financing can work for companies selling individual pieces of equipment as well as larger equipment packages.
How to Choose a Vendor Financing Partner
The financing experience becomes part of your customer’s overall experience with your company.
Before choosing a financing provider, ask questions such as:
- What transaction sizes can you support?
- What types of equipment can be financed?
- Can you work with established and newer businesses?
- How does the application process work?
- How quickly are financing requests reviewed?
- Are electronic documents available?
- Can our company receive a customized application link?
- Do you provide tools for our sales team?
- Is marketing support available?
- Will we have a dedicated point of contact?
- How does the vendor get paid after a transaction is completed?
The right financing partner should make financing easier for both your customers and your sales team.
Vendor Financing With Centra Funding
Centra Funding works with equipment manufacturers, dealers, distributors and resellers to help integrate financing into the customer purchasing process.
Our vendor financing programs can provide tools designed to make financing easier to offer and easier for customers to access.
Customized Application Links
Give your sales team a direct financing link that can be shared with customers.
Online Financing Resources
Make financing easier to access through a digital customer experience.
Flexible Financing Programs
Support a range of equipment transactions and business financing needs.
New Business Financing Options
Provide another potential financing path for qualified newer businesses.
Electronic Documentation
Help simplify the transaction process with digital documents.
Private Label Programs
Create a financing experience that works alongside your company’s brand.
Marketing Support
Promote financing through website content, sales tools and customer-facing resources.
Dedicated Vendor Support
Work with a financing team familiar with equipment transactions and vendor relationships.
Frequently Asked Questions About Vendor Financing
What is vendor financing?
Vendor financing is an arrangement that helps customers finance products or equipment purchased from a seller. It may involve the vendor extending credit directly or working with a third-party financing provider.
How does third-party vendor financing work?
The vendor introduces financing during the sales process, and the customer applies with the financing provider. The finance company reviews the request and handles the financing transaction. Once the transaction is completed and funding requirements are met, the vendor is paid.
Does the equipment vendor lend the money?
Not necessarily. In a third-party vendor financing program, the financing company provides the financing while the equipment seller remains focused on the sale.
Why should equipment sellers offer financing?
Financing can help address upfront cost concerns, preserve sales momentum, give customers more purchasing flexibility and create a more complete sales experience.
How does the vendor get paid?
Once an approved financing transaction is completed and funding requirements are satisfied, the financing provider sends payment to the equipment supplier according to the transaction terms.
Can vendors offer financing without managing customer payments?
Yes. With a third-party financing provider, the equipment vendor generally does not have to carry the customer receivable or manage ongoing financing payments.
Can startups use vendor financing?
Some financing programs may consider newer businesses. Approval and available terms depend on the applicant, transaction, equipment and underwriting requirements.
What types of equipment can be financed?
Many types of commercial equipment may be eligible, including construction equipment, restaurant equipment, manufacturing machinery, automotive equipment, commercial vehicles, medical equipment and other business assets.
Offer Financing to Your Customers
Make financing part of the way you sell.
Centra Funding works with equipment sellers to provide financing options and vendor tools designed to help customers purchase the equipment they need.
