Dealers compete in part by giving customers what they want to the best of their abilities. When it comes to pricing and invoicing, that means rolling everything—equipment lease, service, consumables—into a single monthly or quarterly payment. That’s becoming more complicated as dealers continue to add new product lines and services outside of document imaging such as managed IT services or telecom equipment.
Mike Sarelson, Commonwealth
“We can put the machine, the service, and any other charges—for managed network services, for document management—on one invoice. If they want an invoice for every quarter for everything, that’s fine,” said Mike Sarelson, president and owner of Commonwealth Digital Office Solutions. “[Non-leased items] are all separate, but we’ve turned it into one invoice. It will be one statement with all the accompanying invoices. They’ll only write one check.”
What’s driving change in how office equipment deals are financed is the rise of managed solutions and services. “It’s the idea of a consumption-based model where the end user is more interested in utilization of the asset and not ownership,” noted Ralph Petta, president and CEO of the Equipment Leasing and Financing Association (ELFA). “They want convenience, flexibility. These end users are being very demanding and are very sophisticated in requesting from leasing and finance companies a unified bundled solution, which takes into account taxes, maintenance, insurance and supplies. They are looking for one payment, one flexible way of dealing with a dealer, providing all of the services, all of the hardware that are ancillary to using the equipment.”
Ralph Petta, ELFA
That puts pressure on finance companies, because it requires an understanding of the legal aspects of the transaction, the tax aspects, and the accounting—on balance sheet, off balance sheet. “Customers don’t want to deal with the leasing company for the asset, somebody else for maintenance, and somebody else for insurance. Just give me one payment and you guys handle it all. That’s what they are requesting, so leasing companies are trying to figure out how we make this work,” Petta added.
Petta cites what he calls the “hell or high water” principle in the leasing industry, where any problem with the equipment needs to be resolved between the lessee and the dealer or manufacturer. The customer must continue to pay the lease, regardless.
“In the pay-per-use consumption model, that isn’t the case,” he said. “The customer is saying, ‘I don’t want a hell or high water lease. I want a short-term lease. I want to be able to cancel the transaction whenever I want to.’ This is creating challenges for leasing and financing companies that are trying to look at their risk profile and figure out how to do this in a way that is profitable and gives the customer what they want. That’s a huge issue, particularly in the copier business where it’s cost per copy.”
Fred Carollo,
EverBank Commercial Finance
Lessors have recognized this change and are offering new services to accommodate the needs of the dealer channel and their customers. “Dealers have to find other areas and products to sell. When they start offering other items such as managed network services, software, IT offerings, signage, or production print, it does open up more doors for them,” said Fred Carollo, vice president of originations, office products at EverBank Commercial Finance. “They can find more end users that they don’t have today, and hopefully sell their whole product suite to them. The more they have to offer, the more stuff they can sell into their current base. So it makes a lot of sense.”
Dealers are looking for a unified approach finance that product for the end users in a neat and tidy fashion. It could be cost-per-seat structures or cost-per-copy structures. “We are very focused on it and we are working with a number of dealer to make sure that our product line complements what they are doing,” Carollo said. “The product offerings and demands from the market side of what they are looking for from the finance companies is going to affect our documentation requirements and our invoice output requirements.”
GreatAmerica Financial Services has developed a number of programs for adjacent products and services that dealers are now offering. “We are often the first to come out with programs to help pave the way,” said Jennie Fisher, senior vice president and general manager, Office Equipment Group at GreatAmerica. “We encourage dealers to understand the value of being able to bundle recurring revenue streams into a financing solution as being paramount to dealer growth and enterprise value.”
Jennie Fisher, Great America Fianancial Services
Examples she cited include the Hardware as a Rental (HaaR) financing program for managed IT services, VistaFi financing program for digital signage, a new label printer financing program in conjunction with Muratec, a standard financing program for production print, and an SBB financing program to support advanced MPS dealers
GreatAmerica sees good potential in SBB. “We feel a structure can be developed that aligns the end user’s desire to print less and have more predictable costs with the dealer’s desire to maintain revenue and profitability objectives,” Fisher said. “We are currently working with a few select dealers to fine-tune the approach, with the goal to offer a truly differentiating solution that is relatively easy to administer for both our dealers and GreatAmerica.”
