[print version]
I seek advice, ideally via a short chat, from those who have experience with offering lease financing for products they sell. The company I work for sells next-generation cinema cameras at around a $40,000 price point. To expand the potential customer base, the company seeks to encourage lease financing and is exploring whether to take it on in-house and gain all the profits; outsource it under the guise of a company division and share the profits; or simply endorse one or two preferred vendors.
Troy Dunkel (troydunkel@gmail.com )
Response:
I work with a sizeable ($110 million) independent leasing company, headquartered in Nebraska, with operations nationwide. While taking on leasing in-house in order to "gain all the profits" may sound like a good idea, I assure you that it is an oversimplification. Quality leasing software, installed and operational, will cost well over $100,000. As a new player, your liquidity will be expensive. You will need to hire professionals who understand the legalities of leasing and collections. The list goes on and on. A captive may be a good model for you three to five years from now, but outsourcing will be the most cost-effective start-up for you.
AXIS Capital's model (www.axiscapitalinc.com ) is to partner with companies such as yours. We do not market to the end lessee, but partner with manufacturers and vendors, making it easier for your sales force to close more sales. Our sales force will work with yours to ensure that each group sufficiently understands one another’s product (i.e., how should your sales force "sell" leasing as a beneficial add-on service for customers?).
In short, we would be very interested in exploring a partnership with you. Please feel free to contact me at this e-mail, or call me at (308) 398-4140.
Brett Frevert (bfrevertcpa@yahoo.com )
Response:
I worked for Rockwell Goss 12 years ago and we sold printing equipment, where the contract value could be anywhere from $500k to $80 million. We had a captive finance company that would do the debt financing, but leasing was more of a specialty and was done outside the company.
I would suggest that you use an outside leasing company as your partner, and have a standard template that your sales force can easily execute for a lease. To do it yourself, you need to set up a leasing company within your company to borrow, collateralize, check credit, collect, bill, and follow up on non payment. So, unless you want to expand your company's core capabilities and become a mini bank or leasing company, I suggest you partner with a leasing company.
The question of operating versus capital lease comes up a lot. If you go the operating route, your company or the leasing company essentially has to retain ownership. So the operating alternative is another decision, and most of us manufacturers like a clean sale.
Tony DiGirolamo (Tony@SWEETSTREET.com )
Response:
We have had our own leasing company for 25 years. I'll be glad to discuss it with you.
Fred G Weaver (fweaver@sumner-group.com )
[print version]