You’ll have a couple of options yourself when you decide to offer leasing and financing options to your customers. You can go it alone, and undertake the massive process of installing and managing back office software and systems, heavy financial data and risk management, or you can work out an arrangement with a financier, such as a bank or finance company. You can use the services of the financier, labelled as your own.
"Ask yourself what you’re good at,” suggests Stephen Nicholas, Accounting & Advisory Partner at Deloitte. "The answer is, most likely, being a reseller, not financing. Stick to what you’re good at.”
Don’t start until you’ve sought the advice of a qualified business accountant, who can offer unbiased advice on your economic options and the possible outcomes.
And when it comes to contracts, says LeaseTech’s Managing Director Juri Zacest, "Always beware – the big print giveth and the small print taketh away. Avoid fine print and go for contracts that can be easily read and understood.”
And if you’re going to be offering leasing and financing on software or services, make sure you understand and adhere to the user rights around software you’re selling, as some vendors will not allow you to lease their software.
"With Microsoft Finance, for example, you can factor in the whole project, allowing the customer to cover cost of deployment and implementation, while you, as the IT business, get paid,” explains Damon Kelly, CEO of Enlighten Designs. "Go with a finance company that can provide good support and sound financial backing.”
Insure and ensure
There’s a significant amount of risk management involved when it comes to selling on finance – your assets are out in the real world, out of your control. Insurance becomes vital. Make sure you have both professional indemnity insurance and insurance that will cover your activity in the finance space.
"Look at the broader client relationship,” says Deloitte’s Nicholas. "Know your customers. Understand their business, background and how sustainable their business is. This is common business sense, but its importance becomes far greater and more acute as you enter financing.”
With a specialist ICT finance company, you will have assistance in drafting terms and conditions that are tailored to your business and suit the IT equipment of services you provide, giving flexible options at the end of the lease term. "Ideally, a finance partner should have the resources to provide training on all aspects of the documentation, so resellers and their sales people have total confidence in what they’re offering,” says Russell Webber, GM for FlexiGroup NZ.
And, "it’s essential to go through the contract in detail so as to ensure that the finance company doesn’t apply hidden fees, set start dates and there are no unwanted surprises as the relationship progresses,” recommends Paul Beattie, Managing Director at Equico.
Know your limits under the Financial Advisers Act
The Financial Advisers Act 2008 aims to "promote the sound and efficient delivery of financial advice and to encourage public confidence in the professionalism and integrity of financial advisers”, and it applies to anyone operating or working for a business providing financial service in New Zealand.
Financial advisers must be registered and authorised by the Securities Commission in New Zealand no later than 31 March 2011, according to the Act, though there are exemptions. The Act will come into force fully on 1 July 2011. If your business will be providing leasing or financing advice and options, it is advised that you speak to a lawyer to fully understand your obligations, if any, under the Act, and take any necessary steps to adhere to current and upcoming regulation