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Mark Meloy:

Hello, I'm Mark Meloy CEO of First Business Bank. Welcome to the First Business Bank podcast. First Business Bank has been in the equipment finance business for many years, and more recently we've evolved into what we describe as vendor financing. Whereby manufacturers, distributors, dealers have used First Business Bank as an option to conduct the sales process and more efficiently, get equipment out to their customers. I'm joined today by two experts from First Business Bank who will offer some thoughtful insight regarding this process. I'm going to ask them each to introduce themselves and then we'll get our conversation started. David, I'll start with you.

David Sook:

Thanks, Mark. My name is David, and I'm a Senior Vice President of First Business Bank's Equipment Finance team. I am responsible for the sales side of our operations.

Mark Meloy:

Stu.

Stu Goddard:

Good morning. My name is Stuart Goddard. I am Managing Director of First Business Equipment Finance business line, and my primary responsibility is to oversee the credit and operation teams.

Mark Meloy:

Thanks. Stu, I'm going to start with you. You've been in this business a long time. You're really the wizard behind the curtain, sort of speak of this part of business for us. Briefly explain how First Business Bank helps manufacturers, dealers and others sell equipment.

Stu Goddard:

Well, first off, if I'm a wizard, I got to grow a beard. I don't don't yet have one. Good question, Mark. And really we work to train our dealer partners as vendor partners, train their sales people and how to utilize and position financing within the sales cycle, because use us to and position First Business Bank to be the point of sale financing provider that they offer. It really opens up a wide range of competitive priced financing options to their customers. All of which are designed to help them overcome common selling obstacles and ultimately close more sales. So in a nutshell, that's what we bring to the table.

Mark Meloy:

Great. There might be a business owner out there thinking why would I want to get into the financing business? Is that really what we're talking about here? And could you maybe just list a couple of benefits? You just touched on it a little bit, but maybe let's talk more about, or going into greater depth on some of those benefits that are provided by offering a financing option to customers.

Stu Goddard:

Okay. When we say partnering and getting into the financing business, no, we're not suggesting that every vendor that sell capital equipment actually provides financing, but I like to use the analogy of car dealers for the last 40 years, 50 years, car dealers, everyone in the country utilizes financing, actively utilizes financing within their sales cycle, and there's a variety of solid economic reasons why they do so, we bring that those same benefits to capital equipment sellers. The most common benefit is control garnering optimal payment terms because they could, for instance, they're chasing, milestone payments from a variety of customers that they're they're working with. They could instead just work with us and they know they're going to get paid on time, rapidly and not have to collect from anybody. They bet our closing ratios because we overcome sticker price shock.

Stu Goddard:

They may be trying to sell a client a $100,000 dollars piece of equipment that the client looks at the cost and says, nope, I'm not spending a $100,000 dollars. We try to break that down to a much more palatable, convenient, easy to make monthly payment. The scope of the sale, another benefit a client may need a solution that sticking with my example may cost a $100,000 dollars, but in their budgets, they only have $50,000 budget. So they may opt to delay the acquisition entirely. They may opt to get a less optimal solution. Again, financing with us, allows the vendor to actually sell the needed solution in its entirety. And lastly, margin, maintaining and preserving margin by moving away from the conversation of pure cost into, again, the convenient monthly payment, will allow vendors to help maintain their margin and not continually just focus on that aspect of the sale,

David Sook:

Talking about creating those opportunities with our vendor partners. We were in a situation last month on some vehicles where we were talking with the customer and they didn't have budgeted funds until next year. So, the vendor is sitting there saying, well, they want to close a transaction today. The customer is saying, well, I really don't have funds today, but I've got to kind of bandaid my solution. What their thought was as well. Let's get a couple of used trucks. We'll canalize them for parts to keep our fleet moving. We came in and offered a solution where the customer could get the equipment today.

David Sook:

So they could forego having to buy those used trucks to bandaid their fleet moving forward. They got the new trucks, the vendor got the sale today versus waiting till next year. The end user got their new vehicles in up and running. So their reduction, not only their uptime, but their reduction in operating costs came down too. So it was a real win-win. And again, those are the opportunities where when we can sit down with our vendors and understand their end users where they're going, what the need is, we can come back with different, different solutions to fit that need.

Mark Meloy:

David, you lead the sales team. I might call it the relationship management team. If you will, too, a little bit, talk about your team and what they bring to that vendor in a relationship.

David Sook:

Sure, sure. So we have a sales team that is scattered across the country. We currently have 10 sales reps across the country, and each one of them bring a tremendous amount of experience and knowledge that been in the industry for thinking through our team, probably the least of which is 10 years experience in the industry. That industry experience is key. What we like to do is look at our sales team and look at the industry expertise that they bring. We have people that specialize in healthcare, in transportation, in rental equipment, veterinary equipment, across the board. So we can bring... We can plug in the appropriate sales rep based on the needs of our vendor partners. Again, to understand, to better understand their market, their end users, and how we can be that best partner for them.

Mark Meloy:

Well, in a certain way, they, they can kind of anticipate what the ultimate customer, the borrowing customers, considerations, objections or hesitations, if you will, in a transaction would be. Even ahead of that occurring to maybe coach up some of our vendor sales people.

David Sook:

Exactly, exactly. And one of the things that we like to bring is that value-added partner, but truly when you have somebody who is experienced in an industry, a specific type of equipment. We're having conversations many, many conversations throughout the day, the week, the months. And we have a sense of where the market is going, what the challenges are. We can bring that insight to our vendor partners and help them better understand maybe a broader... Maybe they have more of a parochial view of their industry, their market. We're talking to different vendor partners across the country and have a different perspective, not better or worse, it's just a different perspective. And we can bring that value and that insight to that conversation.

Mark Meloy:

Okay. Let's talk about sort of what the average size is that we're looking. I mean if I'm a business owner out there and I'm selling capital equipment of some sort, maybe I'm sending it out to a distribution network who is a reseller of it, or what have you, how do I get started? How do I know is this the right equipment? Would First Business Bank consider being a partner with me? Is my equipment size too big? Too small? How can you sort of answer those questions, how somebody might get started.

Stu Goddard:

Anybody who may be interested in partnering with at least having a discussion with us, I would recommend you reach out to us. And ultimately David and his team would engage with that vendor and talk to them about their needs and whether or not it fits within our capabilities. The last thing we want to do is, is over promise and under deliver something. So we're going to engage in the conversation and make sure it's a product and a dollar range. And that we have some expertise in so that we can execute and perform for that vendor and ultimately their clients as well.

Mark Meloy:

David, anything to add?

David Sook:

Exactly. I think what an integral piece of the equipment finance, not just on the vendor side, but on the direct side as well, is that speed to market, not only in decisioning credits, but also when we're talking about the front end of a relationship, as you referenced Mark, we want to understand what the product is, what the end user, where we're lending into what the dynamics of that, and make sure that we feel that we would be a good partner for them. If not, we're going to cut bait early. Everybody's busy, everybody's schedules are jammed. We can look at those situations. We can give a quick overview of saying, I think we've got, we've got some expertise, we've got some appetite for this type of product in this particular industry, and we can move forward and make a decision. Even if that decision is no, there's, there's nothing worse than a long known in this industry. We understand that we appreciate that everybody's busy trying to find the right partners, moving their business forward.

Mark Meloy:

Describe how a transaction might work for that vendor customer of ours and their ultimate client, start to finish high level, how's that process work timing, and what might that vendor expect and what that ultimate buyer might expect in that process.

Stu Goddard:

Well, it's going to start with the vendor positioning financing and their sales cycle, and at the very minimum on their sales quotes, instead of just having a cash purchase price list, financing available ask us how, and then we get involved and engaged directly with the borrowing client and talk to them about pricing options, payment options, programs, and their needs with respect to the acquisition of that equipment and the financing. Ultimately, we source a credit application. We process it, it's a very simple, half a page credit application we process and underwrite that within an hour, we can document a transaction the same day. And the documentation process is very quick and not terribly cumbersome. It's a one to two page loan or lease document delivered to the client for electronic signatures, or if it's web signatures, we can email them the documents all very, very, very quick.

Stu Goddard:

The most of the vendors don't get involved with the documentation process or even the application sourcing process. Although there are some relationships that they have in in-house finance skill sets and people, or an individual whose job it is to kind of coordinate that on the vendor side. So they may gather up their own credit application and submit that to us. And that's fine as well. We can work off of that. It's really starting with the vendor to offer financing.

Mark Meloy:

I think that's a great point you made there that that vendor doesn't have to have a dedicated finance expert on their team if they're working with us, because we will take that role, sort of speak and move the paper to get the application done. To kind of draw the comparison to the analogy you had at the beginning of a car dealership. The most branded large car dealerships have a finance team, or at least an expert of sorts that is doing all the transactions. In this case, we can play that total role, correct?

Stu Goddard:

Absolutely. For the majority of our relationships, that is exactly what we do to support their sales efforts.

Mark Meloy:

Good. So why wouldn't a business, just go to their bank and try and set up the same type of thing.

David Sook:

Well, First Business Bank has made a significant investment in the platform to be able to offer a solution like this, and it's a different approach. It's a different way of processing transactions and not all lenders are set up to do that. As I mentioned, First Business Bank has made a significant investment in developing the platform to make sure that we can process transactions efficiently. We can track information. It's very data intensive. It's quite impressive. The type of data that we can generate out of our system to better help our vendors understand the financing side as applications are coming in, as approvals are coming in. When you make that initial sales call through the application, through documentation funding, and then servicing that transaction, we've got that infrastructure. We've got that platform built, and it's fairly unique. It's not just an off the shelf type of solution.

Stu Goddard:

I'd like to add that, frankly, a lot of smaller banks, savings banks, credit union, etcetera, don't offer pure equipment financing as a product. Therefore, that's not really an option for many borrowers out there that have relationships with those institutions. And even if they do offer equipment financing, it probably isn't with a hundred percent financing, which is something we offer. David alluded to the underwriting process. We utilize the majority of our transactions. 90 plus percent of them are underwritten with no financial package necessary. So it's just that half a page credit application. Again, a lot of banks and other organizations, financial institutions, aren't going to underwrite that in the similar manner. So it's just, again, a lot easier to obtain equipment financing from those of us that are experts at it.

Mark Meloy:

I'll ask one closing question for both of you to respond to and that is, I'm a business owner, business leader out there. I'm selling capital equipment. This sounds really interesting. I never thought of it or I've thought of it, but never really had an outlet to do it. Where do I start?

David Sook:

It's a conversation, picking up the phone and having a conversation. We love hearing stories about our customers, where they are, where they're taking their business, what their issues are, their challenges, the competitive nature of what they're dealing with and how can we become that value added partner for them in increasing their sales, increasing margins, accelerating the sales process, overcoming those objections, everything that Stuart had talked about before, and it really just starts with a conversation and learning about your business and seeing how we can help.

Stu Goddard:

Everybody on this team, regardless of their day-to-day role, is very passionate about delivering solutions to our clients. So, as David talked about engaging and talking with clients and vendors, suppliers, that's what we do. We like to do it, and we want to help people. So if we can, it's a win-win all the way around.

Mark Meloy:

Excellent.

David Sook:

Well, I'll just tag on to one other piece. I think one of the unique things about First Business Bank and why the bank, if you look at who we are as an institution and why that marries up so well with what we do on the vendors side, we're a business bank. We are talking to small and mid-size companies every day, we understand closely held businesses, family owned businesses. We're not out trying to bank the major corporations. We're not on the retail side of banking. So at our core, at our fiber of who we are as a bank translates very, very well to looking at end user clients, to our vendor partners and understanding how to make those appropriate lending decisions.

Mark Meloy:

That's a great point. That's really what drives us is to make our clients more successful, right? Your success comes first kind of thing. I think that's... This company is really focused on that. Is helping manufacturers, distributors, vendors of all sorts, really more successful. So I think you guys have stated it really well.

Mark Meloy:

Well, David and Stu, that is all the time we have today. I want to thank you for sharing your thoughts and ideas about vendor finance and vendor finance through First Business Bank. To our audience, we hope you gained greater insight on what this delivery might do for you and keep us in mind as an option for helping to sell capital equipment through your business. Thanks again for listening. Enjoy us next time on the First Business Bank podcast.

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