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Tips from a finance company’s perspective
It’s been a tough couple of years for the financing industry. Homeowners, once considered the safest borrowers, were defaulting on loans as foreclosures increased. This factor alone has caused finance companies to rethink credit models and underwriting guidelines.
Along with higher foreclosure rates, there has been an increase in general loan defaults. Several providers of financing to the water treatment industry have exited the business or scaled back their exposure. Using FICO scores, the standard measurement in the credit industry, an “A” score may have been between 640 and 650 a few years ago. An “A” score today is 700 or more.
One thing has not changed, however: Finance companies want your business, and they compete every day for the privilege to serve you as a customer.
There is a general perception that consumer financing can be difficult to obtain. In reality, it is easy to obtain for credit-worthy customers. The primary difference between the past and today is that not every customer is able to qualify for financing.
Ensuring Credit Success
What can you do as sellers of high-quality water treatment devices? The following is a list of suggestions, from the finance company perspective, which should help you obtain financing for more customers:
While these suggestions will not ensure that every customer receives financing, they will help you anticipate who is more likely to be approved, and dictate which customers should command more of your time and resources. Additionally, they will assist in your long-term relationship with finance sources.
A Finance Company’s View
Finance companies want your business. They want to work with you to increase your sales and profits. This relationship cannot be one-sided, though. Finance companies expect you to work with them to ensure that financing arrangements are profitable. When consumer defaults exceed both discounts taken and interest charged, it is an unprofitable arrangement from the finance company’s perspective. The best partnerships are forged when both parties understand their roles in maintaining a healthy and beneficial working relationship. By prescreening customers at the time of sale and providing exceptional customer service after the sale, you become a better business partner. Finance companies can pay you more when your customers are fulfilling their obligation to repay them.