As a service provider, you face unique challenges when it comes to helping your clients finance their technology investments. The option of financing can improve your value proposition and make it easier for your clients to get the equipment they need without straining their budgets. But this process also comes with its own set of challenges, including addressing common objections that clients might have about financing.
You can create a smooth transition and build a stronger client relationship by understanding what these objections are and having effective responses ready. Here are some of the most frequent objections you might encounter and strategies to address them:
To Your Customer
I Have Decided to Pay in Cash
When a client decides to pay cash for their equipment, it’s important to help them understand the broader financial implications of that. Here are a few points you can discuss to give an effective response.
Cash Reserve Management
- Discussion Point: “Will paying cash for this equipment give you enough of a cash reserve for future purchases?”
- Example: Imagine there is a situation where an important piece of equipment fails unexpectedly. Having cash reserves allows your client to address an emergency like that without disrupting their operations.
Return on Investment
- Discussion Point: “If you finance, you can conserve cash and get a quicker return on investment.”
- Example: With financing, your client can start using the new equipment immediately to generate revenue and offset their financing costs.
Opportunity Cost
- Discussion Point: “What is the opportunity cost?”
- Example: For example, investing in marketing or R&D could yield higher returns than the interest saved by paying cash for equipment.
The Rate is Too High
Expressing concerns about financing rates is reasonable, so it’s essential that you provide an explanation for those rates that both addresses their worries and also highlights the value of financing.
Comparing Rates and Terms
- Discussion Point: Probe to learn what rate their other lenders provide and if that loan comes with penalties or covenants.
- Example: While another lender might offer a lower rate, their loan could come with stringent penalties for early repayment or restrict covenants that limit their financial flexibility. These hidden costs can sometimes make a seemingly lower rate more expensive in the long run. Understanding the full picture of what other financing options entail can help your client make a more informed decision.
I Have Decided Not to Buy Any Equipment at All
Maintenance Costs of Older Equipment
- Discussion Point: “Is the cost of an older machine feasible given it may require more maintenance?”
- Example: For example, using outdated equipment might save your client money upfront, but the cumulative maintenance costs and potential downtime can outweigh the benefits.
Efficiency and Features
- Discussion Point: “Are the older machines as efficient and do they have all the features needed?”
- Example: For example, newer hardwares and softwares might have features that have improved connectivity and better integration with other technology, which can streamline your clients’ operations and give them a better return on investment.
To Your Sales Team
All My Clients Pay in Cash
- Discussion Point: Most of your clients are using some form of finance (line of credit, bank loan, or other secured loan.)
While it may seem that all your clients prefer to pay in cash, it’s worth noting that many of them are likely using some form of financing.
It’s important to approach this topic carefully to avoid appearing intrusive. Instead of assuming your clients’ financial situations, consider discussing the benefits of offering financing as an additional option. That way, you’re providing valuable information without making assumptions.
Our Clients Bring Their Own Financing
- Discussion Point: Do you know where that financing comes from? Many capital expenditures rely on external financing so they are likely using a line of credit or loan.
By understanding the terms and conditions of their existing financing, you can offer them an alternative solution that might be more beneficial to their situation. Lines of credit often come with specific terms that could impact their cash flow and financial flexibility. Offering financing as an option could be an added value.
Whether it’s managing cash reserves, understanding financing rates, or comparing the costs and benefits of new versus old equipment, being prepared with effective responses can create a better transition for your clients while also building a stronger relationship with them.
The GreatAmerica technology equipment financing page provides information on financing options tailored to meet the specific needs of service providers and their clients.
