Vendor finance

Offer financing solutions to your customers to preserve their cash flow

Chetwode offers a range of vendor programmes. Offer your customers financing solutions for their new equipment and integrate maintenance, support and spare parts into a complete service package.

1. What is vendor finance ?

contrat financement ventes

Vendor finance offers suppliers and customers a solution to their financing needs.

This type of financing allows companies to develop in a straightforward and secure way. It is also known as “vendor leasing”, “vendor financing” or “vendor programme”.

Who are the parties involved?

First, there is the vendor. This is a supplier of leased equipment or a vendor. This may be the manufacturer itself, an importer, but also a reseller or dealer.
Then there is the company (the customer) looking for the right asset for its needs.
And finally, Chetwode takes care of the management of the file and structures the best solution for the financing and associated services.

How does vendor financing work?

The question of financing almost always arises when purchasing durable capital goods. The prospective buyer of capital goods may obtain financing from his bank or leasing company. But it is also possible that the vendor, in one way or another, plays a role in facilitating this financing in the form of leasing. 

Renting with an option to buy (or leasing in B2B) is the standard solution, as with photocopiers in some markets. Virtually all copiers are supplied on a rental basis, whereby the user pays for the use of these machines in instalments over a period of usually less than sixty months, plus all service, maintenance, repair and other costs.

But there are more comprehensive packages that some vendors can arrange with the help of Chetwode.

An operating lease without purchase option is a preferred option when the buyer does not wish to purchase the equipment at the end of the financing.

Subscription-based service contracts (also known as subscription offers) can offer great flexibility to customers who want to have the right to cancel.

Pay-per-use packages are also very useful for some customers who prefer to pay only for what they use. In the copier market, some vendors offer billing based on the number of copies.

2. What are the benefits of vendor finance for the vendor ?

What does this type of financing offer the vendor ?

Vendor finance makes it easier for the buyer to buy. Indeed, the smoothing of equipment costs offered by the vendor is a convincing incentive for the purchase of capital goods, with the vendor thereby gaining access to additional customers and increased sales volumes.

As such, cooperation with a financing company such as Chetwode is essential for a vendor,  allowing both parties to record the sale of the equipment as a achieved turnover. The end user will not have to pay the investment amount in one go, but can finance it in several instalments to the leasing company.

In addition, the vendor retains the important commercial contact with the buyer, the end-user, thus controlling the entire commercial process.

The vendor, with the help of Chetwode, can therefore intelligently manage the portfolio of machines placed on the marketand maintain a long-term relationship of trust with the end user. If necessary, the vendor plays a role in taking back ownership of the machine at the end of the lease, emphasising the need to keep a close eye on the second-hand market for its machines.

What other benefits are offered by vendor finance in addition to financing ?

Firstly, there is regular contact between the vendor and the lessee or user during the contract period, which helps to maintain and strengthen the commercial relationship.

In addition, the vendor knows when the rental contract expires and can therefore anticipate possible replacements of the equipment.

Finally, the vendor can respond to changing customer needs during the term of the contract, which results in true portfolio management of the equipment being marketed.

The vendor and the buyer enter into a long-term relationship over the duration of the financing contract. Unlike a sale without financing, the links between buyer and vendor are extended and allow the vendor to follow a commercial relationship more closelyand identify additional customer needs.

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3. What are the advantages of vendor finance for the buyer?

Why is this type of financing important for the buyer ?

The buyer, the potential end-user, wants to use a machine without having to use his cash flow all at once. Of course, he can obtain financing himself from a bank or leasing company. However, this becomes much easier if the vendor offers an integrated leasing package. The end-user has the advantage of payment in instalments, which means that working capital is not tied up. In addition, the end-user’s sources of finance are expanded.

It is also often an all-inclusive monthly payment, which means that the end user has a clear overview of the total costs of using the equipment and can more easily organise his cash flow planning.

How is equipment depreciation dealt with ? What is the impact on the buyer

With operational leasing (also called operating lease), the end user does not have to worry about the depreciation of the equipment. At the end of the lease period, the vendor takes back the equipment, and the parties can either extend the lease period or decide to buy new equipment.

4. What is a vendor programme ?

Why set up this type of programme for vendor ?

A vendor will consider setting up a Vendor Programme with a leasing company if it is dependent on end-user financing for a large proportion of its sales. If there is a high demand for leasing and financing offers, it will benefit from the establishment of an integrated Vendor Programme.

The parties agree on the acceptance of the end-user’s credit risk, through a process of analysis and acceptance criteria defined together in advance. Since it is almost always the same products (as in the case of photocopiers for example), the leasing company will provide clear guidelines in advance regarding the financing capacity of the lessee, the end user.

How does this make it easier for the seller ?

If the customer meets these acceptance criteria ,it is certain that the leasing company will agree to finance the transaction. It is useful for the vendor to take these criteria into account when searching for prospects in the market, and thus to carry out targeted sales activities

What are the risk-sharing arrangements between the vendor and the leasing company?

Agreements can be made between the leasing company and the vendor on what to do if an end user is suddenly unable to meet its financial obligations. For example, the vendor can issue a buy-back guarantee to the leasing company, whereby it undertakes to take back the equipment and play a role in its resale.

Alternatively, the trade-in may be at a certain value, which may be lower than the book value in the leasing company’s books.

In the latter case, the risk is therefore shared between the vendor and the leasing company.

What are the variants of vendor finance ?

Vendor finance comes in many forms, the main difference being the level of mutual commitment in the agreements between the seller and the leasing company.

La présentation du bailleur financement des ventes
Simple matchmaking
The vendor introduces the buyer to a leasing company. The latter discusses the terms of the lease with the end user. The vendor no longer has any role in the lease and is not involved with the lessor.
Chetwode financement des ventes

Renting directly from a lessor

The vendor offers the buyer (the end-user) a standard lease contract with a leasing company. Beforehand, agreements are made on the acceptance of credit or the sharing of risks between the vendor and the leasing company. The end user knows the situation from the start: the lease is offered by a leasing company, the vendor is only an intermediary in this relationship.
Joint-venture financement des ventes

The joint venture

All leases are pooled in a specially created company, which acts as a financing pool. In such a joint venture, the parties share the benefits and risks.
Location directe auprès du vendeur avec reprise du contrat. Financement des ventes
Direct hire from the vendor with takeover of the contract
The vendor offers the buyer, the end user, a lease contract in his name. He has previously made arrangements with a leasing company to take over this contract. In principle, the lessor takes over all the contracts concluded by the vendor with end-users who meet the predefined criteria. This structure has two variants. The first is with disclosure: the end user is informed of the takeover of the contract by a third party lessor. The end-user therefore knows that the ultimate financier is a leasing company, not the vendor. The second option is non-disclosure: the end user is not informed that the lease will ultimately be financed by a leasing company. The leasing company will only disclose its role when the end user fails to meet its financial obligations
Leasing direct du vendeur combiné à un financement de portefeuille

Vendor direct leasing combined with portfolio financing

The vendor offers a leasing contract to the buyer, the end user. All the leasing contracts together form a "borrowing base" for which overall financing is obtained by the vendor, either from a bank or from a leasing company. There is therefore no financing of the individual contracts, but the portfolio of contracts is financed. This variant is only applicable to large vendor, who are able to have a large number of contracts on their balance sheet. In this case, too, the vendor and the leasing company can conclude agreements on risk sharing.

5. Why choose Chetwode for your vendor finance ?

Who is Chetwode ?

Chetwode is the European specialist in industrial financing since 2003.

Chetwode enables companies to develop their growth through asset finance. Companies are increasingly demanding the Venor Finance programme to help them boost their growth.

Why choose us ?

  • A young and dynamic team
  • Over 30 years experience in structuring supplier programmes and increasing supplier sales
  • Strong financing capabilities, including in areas where other lenders do not go. We put the asset at the centre of the deal so we can structure deals that banks can’t. A bank looks at a client’s balance sheet, we look at the assets first. If the client doesn’t pay we take the asset back and make it available elsewhere. We only finance assets with a key role in the client’s business and with a quantifiable value.