GreatAmerica Financial Services: Shelving "Canned Programs"

Equipment Finance Advisor: Vendor financing’s roots trace themselves to “exclusive programs” – a company typically partnered with one specific finance company. In some industries, this evolved into a “multiple funding partners” model over the years. Are equipment manufacturers, distributors, resellers etc., seeking exclusive relationships today, or do they typically utilize more than one financing source? Please explain what you are seeing in the market.

David Pohlman: At one time there was more exclusivity in many national programs with one, and in some cases, two funding sources affiliated with a particular program. With the onset of the financial crisis, some of those organizations experienced hiccups and challenges with their existing sources. In order to compensate, they opened their doors to more sources to maintain a consistent access to financing. The pendulum has swung a little far in the other direction with so many funding sources in the mix that the materiality to any individual financing company is just less and less. Things will eventually swing back, but what really drove it was the financial crisis. Manufacturers and vendors now feel it’s funding dependability they are after, since they are now driven by a need to regain consistency in their sales approach and get full spectrum, consistent funding. At any rate, it really did open some doors for us. There’s no doubt today that the level of exclusivity is pretty low compared to what it once was.

Equipment Finance Advisor: What are vendors seeking today from a vendor finance company – beyond good interest rates and superior customer service? What are the two most important features a vendor finance program must provide today to be successful?

Pohlman: Innovation and elements of differentiation are what come to mind -- and you could argue they are one in the same. More and more, if you’re a manufacturer and your product is fairly similar to others, you contemplate ways you can use financing to help differentiate yourself. Through innovation and flexibility on the financing side, a vendor can offer something that the marketplace or their distribution channel views as markedly better.

Another thing they are more mindful of today is the ethics and integrity of their partners, making sure their customers are treated the way they would treat them. They recognize that when they choose a financing partner, they are going to be associated with the experience that partner delivers.

Equipment Finance Advisor: Please tell how your “go to market” strategy has changed compared to say five years ago? Perhaps give us one example of what your business development team is doing today that they did not do in 2008.

Pohlman: We have fewer what I call “canned programs” these days and now use a more consultative sales approach. We go in with a blank pad, asking questions, listening, learning and ultimately creating something that is based on that organization’s specific needs. It could be made up of things we do every day, but it often becomes a customized solution that is truly unique and serves their needs. This approach serves us better and ensures that our salespeople become more skilled at their jobs as well. Once you put a program like that in place, you can look at yourself in the mirror and understand why that organization is going to do business with you instead of one of your competitors.

Equipment Finance Advisor: Tell us how IT developments such as cloud computing are impacting your business – do cloud computing and SaaS for example present new opportunities for vendor finance companies, or create hurdles for the financing of equipment? Please explain.

Pohlman: It’s a little bit of both. Certainly on the downside, there are probably fewer things that you traditionally think of as on-premise software solutions. With software, when it’s truly a SaaS model, there are financing companies that will sometimes attempt to monetize the stream of payments and so forth. If, however, there’s a disruption around that service, you’re probably not going to find a court that will force anyone to honor that arrangement. You have to be cautious in this world and clearly understand the spectrum of risk involved to be successful. On the hardware side, opportunities certainly exist. You have to be comfortable with hardware at a data center as opposed to a traditional on-premise location.

It’s also very impactful when a software company is forced to move from the traditional selling of licenses to a monthly subscription (SaaS) approach. SaaS doesn’t give them the big upfront sale, but in the very long term it probably removes some lumpiness from their financial picture. Eventually, once they have absorbed the near term financial challenge, their recurring revenue model becomes pretty consistent. Getting to this point is tough so we’ve developed some unique concepts that help mitigate the pain associated with this transition.

Equipment Finance Advisor: What do you consider to be the biggest challenges to succeed in the vendor finance market today?

Pohlman: The pace of change is rapid as things evolve and new innovations come out in the tech space. Today, in a short timeframe, you have to be able to identify the risk points, identify how to mitigate those risks, and see if an opportunity exists in the end. Those with the ability and depth of knowledge to properly discern these elements are going to find an opportunity-rich environment. Those who struggle in that area are probably going to find this space extremely challenging.

Equipment Finance Advisor: Manufacturers and resellers have had a hard time stimulating sales in this uneasy economic and tax environment – especially for expansion (not replacement) equipment. Do manufacturers that were not open to offering financing in the past, now recognize that vendor financing may provide a means to stimulate sales?

Pohlman: I think more vendors and manufacturers are open to offering financing solutions than they once were. I sometimes hear people say, “Well, all of our customers pay cash.” But what about the ones who didn’t buy? I think in reality all of their customers who bought paid cash because that was the only option they were presented. More manufacturers and vendors are clearer today about the benefit of integrating a finance option into their sales process. Many have come to realize these are just options and that you will never offend a customer by giving them an alternate way to buy. In any economy, it just seems foolish not to present all buying options to a customer.

Equipment Finance Advisor: Do you anticipate hiring more business development professionals in 2014?

Pohlman: We’ve continued to add business development professionals each and every year of our 20-year existence. Going forward, we’ll continue to grow and add at a pace that is manageable and where we can do it and do it well.