“Thanks again for your help recently with our customer.
As you recall, the first time around you had to put in
some “overtime” to get him a financing program he was comfortable with. This time too, it is your perseverance
that made the difference. At the end of the year these hard cases add up to a significant amount of business for us
that we would not have secured with your funding. We are glad to be able to count on you for all of our customers financing requirements.”
- President, Packaging Equipment Vendor

Economists have been saying that the “Great Recession” technically ended over a year ago in spring / summer of 2009.  However, much of what is said about the US economy these days could be true or false, depending on your angle or perspective.  Regardless of what the facts say, America is just too big and too diverse to be described usefully by blanket statements.  The $14 trillion American economy is, in fact, a galaxy of smaller economies.  This notion is reinforced by simply looking at national unemployment figures which are still stubbornly high at roughly 10%.  However, when you look at the individual economic galaxies that comprise the overall American economy it is interesting to note that Michigan has nearly twice the unemployment of Texas, which has almost twice the unemployment of Nebraska.  Many business owners enthusiastically agree that the economic environment has improved significantly in recent months including Warren Buffet but there are a lot of angry doubters out there – both are probably right with the accuracy of their opinion being directly tied to their perspective or point of view.  

Several representatives from First Star Capital recently attended a trade show where a few equipment vendors that we have partnerships with were exhibiting.  The turnout was high and the general sentiment was quite optimistic.  This was encouraging and reinforced the fact that positive economic sentiment is becoming prevalent.  While attending this show and assisting our vendors with their customers financing requests, we had the opportunity to speak with other equipment vendors about implementing a customer finance program with First Star.  In general, this concept was well received and we are currently developing new programs for businesses that we met at the show. 

However, we were surprised by one response that we heard more than once because of how short sighted it seemed.  Some of the equipment suppliers and individual equipment sales people felt that their clients should only pay cash and that it wasn’t their responsibility to get involved in their clients’ financial affairs.  These same people proceeded to explain that no more than 10% of their proposals ever turn into orders.  If you put this conversion rate into baseball terms it is terribly low.  Any baseball player with a .100 batting average is positioning themselves for a career change whether they know it or not.  Shortly after one of these conversations I spoke with a reseller of IT equipment who was adamant that they needed a customer financing program sooner than later.  This lady explained that they recently lost a $125K sale to a long time customer because a newer competitor in their area was able to offer an attractive leasing program through one of their partners which made the purchase more affordable by providing a monthly payment.  She explained that their firm has never offered leasing or financing but that after this experience she spoke with several of their existing clients as well as their own internal sales force and determined that they could increase their conversion / closing ratio by 20% - 30% immediately with an effective leasing option.  She wasn’t all that surprised when I informed her that 55% of all capital equipment acquisitions are obtained through some form of debt financing.  Whether the customer arranges a bank loan themselves, uses an existing line of credit, or the equipment supplier offers an equipment lease / term loan through a funding partner, is secondary to the fact that business equipment is acquired with some form of financing more often than not.

First Star continues to invest heavily in infrastructure for the benefit of our vendor partners.  We routinely hear that our vendors are increasing their average order size, shortening their sales cycles, and closing more sales by converting a larger percentage of their quotes / proposals to orders / invoices.  They are experiencing the First Star advantage – a competitive advantage.

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About Vendor Financing 101

Vendor Financing 101 is a strategic tool box for top performing equipment vendors nationally.  Businesses that sell equipment experience an immediate jump in sales when they implement an effective equipment financing or equipment leasing program.  Business owners and sales people constantly report sizeable increases in their sales volume after implementing an equipment finance program for their customers.  The vendor finance group is the fastest growing division within First Star Capital. Read More »

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May 2010

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