Offering B2B buyers financing options is nothing new for suppliers, especially those selling high-priced equipment, as it allows cash-strapped businesses to complete the purchase. Yet, when it comes to B2B marketplaces, financing options are still in their infancy.
The lack of financing options through marketplaces is surprising because, in some cases, it can keep suppliers from closing the sale as the buyer turns elsewhere to secure financing as part of the purchase.
Looking to fill the financing void and give suppliers another tool to close a sale, Kwipped Inc. —a B2B marketplace for renting, leasing or selling equipment ranging from medical machines to surveying tools to commercial kitchen broilers—rolled out its Approve lender network in May.
The Approve network is comprised of 17 lenders that compete for providing financing to buyers purchasing through Kwipped. The service is available to Kwipped sellers, enabling them to offer embedded financing during the sales process.
“When it comes to a capital equipment purchase, buyers don’t just put an item in their shopping cart and pay for it with a credit card. The sales process is long and consultative, leading to a price quote, after which buyers are usually on their own to procure financing, if needed,” says Kwipped chief executive Robert Preville. “With Approve, we are enabling sellers to bring financing to the forefront of the sales process.”
Offering financing as part of the sales process not only creates more opportunities for sellers to close deals with buyers, but also potentially increases buyer’s purchasing power.
Few sellers offer to finance equipment purchases
“About 67% of the equipment procured in the United States is financed, but less than 10% of our sellers offer it,” Preville says. “We talked to sellers in various industrial, medical and food-service sectors who were missing opportunities to close transactions when equipment buyers turned elsewhere for financing.”
Conversations with lenders also revealed that many were seeking a financial technology solution that would help them grow their financing business in new markets, Preville says.
One reason sellers tend not to offer financing options is they typically work with just one or two lenders, which limits a buyer’s chances of receiving favorable terms, and in some cases, approval. “When a lender recommended by a seller turns down an applicant, does not provide favorable terms or does not respond to the buyer’s initial inquiry, it reflects poorly of the seller,” Preville says. “By giving sellers more visibility into the financing process, they are more comfortable with offering it.”
Network sellers generate financing revenue
The 17 equipment finance companies in the Approve network offer financing across a variety of credit profiles and asset classes. Lenders in the network include Balboa Capital, Triton Capital, New Lane Finance, North Star Leasing and Time Payment. About 80 sellers tested Approve, with each generating about 15-20 deals a month. On average, sellers generate about $500,000 in financing opportunities a year, Preville says.
During the pilot phase, Kwipped found that originations increased 26% when financing was offered at the point of sale. Offers can be embedded on the seller’s website, a link in a product quote, in an email or text, or in marketing materials in showrooms or at a trade show.
To enable sellers to initiate the financing process in showrooms or at trade shows, Approve enables lenders to embed QR codes on sales brochures that when scanned with a smartphone initiate the financing process. “This way sellers can discuss the equipment and sales terms and start discussing financing all at once,” Preville says. “We had about seven customers at a trade show recently embed QR codes on marketing materials at their booths.”
Building a ‘competitive moat’
The move into offering financing has significantly altered Kwipped’s business model, moving the company away from being just a digital marketplace platform provider to a company that offers financing as complement to its core business.
“Approve creates a competitive moat around financing and allows us to cross-sell equipment financing,” Preville says. “By offering financing, we can get in front all of a supplier’s business, not the slice available to buyers through the marketplace.”
In addition to offering financing options, Kwipped has also launched a premium marketplace subscription service. The service, which costs $6,000 a year plus transaction fees, allows sellers to proactively market to buyers through the Kwipped platform. Sellers can send branded messages and quotes to sellers and leverage analytics to identify sales trends and opportunities within the marketplace. About 15% of Kwipped’s more than 1,900 sellers have signed up for the service.
“This service helps us teach sellers how to fish for new business, without us having to do the fishing for them,” Preville says.
Peter Lucas is a Highland Park, Illinois-based freelance journalist covering business and technology.
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