Pennies From Heaven

Customer Support

By George M. Dawson

Question: Our company does computer networking and training, and develops and troubleshoots software. How could we get financing from our customers?

Answer: There's not much information on customer financing because it's unique. It's secret or "buried" financing--like source code.

What do you really need? Financing for your company, or financing of a particular customer's contract? A long-term loan/investment, or short-term financing of a deal?

As a rule, getting long-term financing from customers is like living with your mother-in-law--too much potential for conflict with no means of escape. Partnering and strategicalliance are nice words, but don't let others get too much into your stuff.

Where is the balance of power with your customers? If you provide very customized services and products, you may be able to justify upfront down payments or progress payments.

Vendors who aren't in control can still create powerful, shorter-term mutually beneficial relationships. First, know what you mean by "financing." Cash upfront or in progress? Sharing costs? Contributions of material or labor? Use of your customers' space or equipment?

Next, how creative can you be? Do you understand your customers' needs and motives? What can you barter for a change in customer behavior? Look for indirect financial and nonfinancial incentives for your customer. Will you provide free upgrades? Customized or priority helpline support? Protection against future price increases? Will you offer customers input on new product development? Extended maintenance or guarantee periods? This must be a win-win relationship.

Even though customer financing doesn't look like regular financing, get your attorney to review the agreement and put it in writing. I like using arbitration clauses in these agreements. If the deal goes bad, you'll lose a customer, so why add a lawsuit on top of it?

George M. Dawson ( is a small-business consultant and author of Borrowing to Build Your Business: Getting Your Banker to Say "Yes" (Upstart Publishing, $16.95, 800-235-8866). Send him your financing questions at

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This article was originally published in the February 1999 print edition of Entrepreneur with the headline: Pennies From Heaven.

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