Credit Pre-Approval prior to proposal.

The Escalade vs. the Sentra.

By:  Scott Murr

A 22 year old gentleman with a $25,000 a year job walks into a car dealership.  He has very little credit.  The car salesman takes the customer over to look at new 2012 Escalades and after getting in the car, taking it for a drive, the customer is sold, they love it and have to have the new truck!  The salesman gets the credit and goes back to the Finance Manager to process the deal.  Shockingly, the customer does not approve for the $75,000 luxury SUV.  The sales rep argues back and fourth with the Finance Manager for an hour, he gets his manager to step in and see what he can do.  They ask the customer if he can get a co-signor, put down $50,000, does he have equity in his house he can tap?  He fills out a personal financial statement, goes home and brings in the last 12 months of his bank statements.  The banks will not budge.  The customer did approve for $3,500.00. The salesman then has to go back to the customer and explain they were declined for the Escalade and he proceeds to show the customer what he is qualified for, a 2003 Nissan Sentra.

The customer leaves buying nothing.  He feels insulted because his credit was declined and he was not able to qualify for the car.  Then to add insult to injury, they offer him a car that is far less appealing than the one he was sold on.   The customer left and bought a $3500 Sentra from a competing dealer down the street.

For the dealership, hours of time and resources were wasted on a sale that was lost.  A sale that should never have been lost had they just asked a few questions upfront and proposed a solution the customer could qualify for, the 2003 Nissan Sentra.

Ironically, this happens thousands of times a month in the copier industry.  Sales representatives do not pre-qualify the customer prior to proposing a solution.  As a result, solutions are presented that subject the customer to days/ weeks of struggles trying to get a credit approval.  First its corporate name, address, and ph# only and credit does not qualify.  Next, its an actual  credit application with a bank and some trades.  The bank takes a week to respond with a rating and still is not enough.  Next a PG is required, the customer gets upset and refuses….perhaps at that time they say they have an approval already in place from a competitor so things need to get moving quickly.  The leasing company says without PG info, they will need a full set of financials which at that point the customer gets fed up and signs with the competition.

Most often, sales blames the leasing companies and their own companies for not getting the credit approved.  They sold the deal.  The customer was ready to sign, it was not their fault.  Just like the car salesman who sold the brand new Escalade and his finance manager could not get the credit approved.

In most all of these cases, while one dealer proposes a new expensive solution with no knowledge of their customer’s financial ability to pay for it, another dealer previews the customer’s credit and proposes a solution they do qualify for.  The customer in most cases will hold out for the more elaborate solution but once deal fatigue sets in, they will buy from the competitor who has them approved with a solution they are actually qualified for.

This does not mean run a credit app before calling on a customer, that will only harm your sales organization.  It does mean ask your customer questions about their credit at the same time you are asking questions about their ideal equipment solution.  How long have they been in business, what is their industry, have they moved locations, are they a branch or a single location, are they open to providing financials, has the business declared bankruptcy in the last 10 years, if under 3 years in business is a PG available?  Write down everything and carefully go over this information prior to submitting for a credit pre-approval.

Once you have an idea of your equipment configuration and funding you will need, submit your solution for pre-approal to just one leasing company.  If your credit is declined, find out what the problems exactly are with the credit.  Do these issues match up with what the customer told you?  Do you need to request a smaller credit amount and change your solution?  Call your leasing representatives and learn everything you can about the credit and see if they can suggest what would need to happen for it to be more appealing to them.  If it means you need to lower the amount of funding requested, adjust your proposal accordingly.  If there are fatal problems with the credit, consider an in-house rental with used equipment.  Once you have the credit approved, then you have a solution to propose to your customer and you need to make it clear that your solution is credit approved and ready to be installed.

You would be amazed by how many customers initially go with one provider only to find they can’t get approved and end up going with the one who actually has them credit approved (even with a less robust solution).  Credit approval may not be a customer’s biggest pain point when initially proposing a transaction, but once deal fatigue sets in, it moves up the customer’s list quickly.

Offsite (www.offsiteequipment.com)  provides a full suite of services for both independent dealers and national branches.  Our services include:

  • Outsourced administrative services on competitive lease end management.  Offsite can contact your clients to remind them to send in their Letter of Intent for their old equipment, follow up for return shipping instructions, and manage their return shipping logistics.
  • National network of warehouses available to pick up and store leased assets that cannot be returned early.
  • Lease return shipping and copier moves.
  • Outsourced lease administration, Offsite can process your deals for funding on a per transaction fee thus reducing dealers operating expenses.
  • Program Agreement negotiation, back office consultation, lease sales training.  Increase leased sales %, secure lower rates, increase credit approval percentage guaranteed.

Visit our website today at www.offsiteequipment.com .  At Offsite, we know logistics and we know copier leasing, our services are second to none.

Good selling!

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