This story appears in the
April 2001 issue of
Entrepreneur.
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Q: I
recently purchased a large, multicolor printing press for my
business. During the price negotiations, the seller offered
financing for the equipment. The terms are really attractive. What
are the advantages of utilizing this type of financing, and what
should I be on the lookout for?
A:
Vendor financing is one of the oldest tricks in the book for
selling equipment. The vendor arranges financing with their own
funds or through a third party at lower rates and longer terms than
you might be able to arrange through your local bank. Other
attractive aspects of vendor financing are speedy approval and
equipment delivery and a lower down payment, which keeps working
capital free for other things. This can be a quick, painless way to
get that piece of equipment you need. Read the fine print, however,
to make sure the price you'll pay through the vendor's
program is the same as if you'd used a conventional loan for
the purchase. Often, the vendor's terms are made attractive to
hide a higher-than-normal purchase price. Consider showing your
banker the terms offered by the equipment seller. He may offer you
the same, if not better, terms, allowing you more negotiating
leverage with the vendor.
Doug Hood is co-founder of Rainmaker Capital Corp., a capital
acquisition consulting company in Cartersville, Georgia. Co-founder
Marilea S. Hood contributed to this article. Send questions or
anecdotes via e-mail to doughood@rainmakercapital.com.