In past articles, I have detailed that the sale is never complete until the financing is in place. Toward that end, I have discussed different approaches to offering finance programs and this article will delve further into how dealers and manufacturers should consider how to choose a financial services model to support their sales efforts. There are five basic models available which include referral, outsourcing, virtual joint venture, joint venture, and true captive. Determining which model to implement requires careful consideration of the company's short and long term business goals, their desired control over the program and their tolerance for risk. The various models range in complexity and degree of risk, and for now, we will focus on the lower risk models which are referral and outsourcing.

A referral program is usually informal and does not typically involve a written agreement between the parties. Basically, the equipment vendor chooses a finance company to work with and when a customer expresses an interest in a financing option, the vendor provides him with a name and phone number of the finance company.

Generally, the vendor has no further involvement with the financing component other than to provide an invoice to the finance company for the equipment. Since this program is the least committal on the part of the vendor, they are less likely be considered for other value added services that can be provided by the finance company.

Outsourcing can take many forms, but usually involves a written agreement with one or more third parties. Unlike the referral model, vendors who opt for outsourcing programs actively market financial services and include it in their marketing strategy. In this model, lease transactions are sent from the vendor to a third party that handles all of the details (credit processing, documentation and funding). Frequently, these programs operate under the vendor's name and have the look and feel of the vendor's company even though a third party is facilitating the transaction details and process. An outsourcing program can be private labeled or not depending on the vendor's program goals.

This type of program provides the finance company a greater level of commitment from the vendor, and thus the vendor will be considered for other value added services offered by the finance company including joint marketing literature, trade show and open house support, and sales training.

Building and supporting any financial services program is an ongoing process, and as with any working relationship, is only successful if it is a true partnership. That means that both sides have to commit to the relationship. Both sides must support each other, and most importantly, the vendor must make training an ongoing priority.

Across the board, vendors that offer financing programs agree that the financing program provides them with a competitive advantage. The next step is then to consider what type of program best suits their needs and find a reputable finance company to partner with.