Equipment dealers must evaluate their vetting process for third-party financing partners to stop bad actors and prevent misinformation.
Dealers who do not have a process for sales personnel to vet financing partners put themselves at risk, said RJ Grimshaw, president and chief executive of UniFi Equipment Finance, during a panel at Equipment Finance Connect in Charlotte, N.C., on Tuesday.
“You’re putting your dealership and reputation damage [at risk] if they partner with someone and they had a security breach, or if they’re charging an interest rate or a structure where they’re misleading the customer,” he said.
Rather than leave the decision up to a salesperson, a defined financier vetting process should be part of every deal, Grimshaw said. “It’s more trying to educate that dealer around a defined process, and that’s what we do: share best practices on how to vet your partners — even if it’s not us.”
“Make sure that you’ve done your proper due diligence in picking your partner,” he said. “You should have more than one [partner] because we have all our own niches that we’re in.”
Navigating the risks in deal making
Proper vetting of lending partners is crucial for dealers to navigate the financial risks of making deals, according to Skip Owen, director of sales at Charlotte, N.C.-based Hills Machinery.
“From a cash management standpoint, funding in the elapsed time from when the deal closes to when we get our money, there’s enormous risk there if we’re dealing with a partner who hasn’t been properly vetted,” Owen said. “We need to know who we’re doing this with is real.”
Dealerships and lenders partnering on due diligence presents the best scenario for long-term success, Owen said.
“We try to talk to the [sales] team, as well, because sometimes they are so eager to make a deal they’re not looking at the longer term,” he said. “As a dealership, we feel like we have some underwriting responsibility. We want to have a clean portfolio with our lenders, to be thought of positively by the underwriter, and are happy to assist with the collection process early on — where we have the best relationship with the customer and hopefully help them through it.”
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