{"id":50090,"date":"2022-05-27T11:37:40","date_gmt":"2022-05-27T18:37:40","guid":{"rendered":"http:\/\/www.enxmag.com\/twii\/?p=50090"},"modified":"2022-05-31T23:25:36","modified_gmt":"2022-06-01T06:25:36","slug":"in-house-leasing-arms-provide-another-point-of-differentiation-value-add-for-dealers","status":"publish","type":"post","link":"https:\/\/www.enxmag.com\/twii\/state-of-the-industry\/2022\/05\/in-house-leasing-arms-provide-another-point-of-differentiation-value-add-for-dealers\/","title":{"rendered":"In-House Leasing Arms Provide Another Point of Differentiation, Value-Add for Dealers"},"content":{"rendered":"\n

Competitive advantage is at the heart of every viable office technology dealership. In a landscape where resellers are touting much of the same equipment and many of the same services as the dealer down the street, developing a point of differentiation\u2014no matter how perceptibly small\u2014can make all the difference in winning an account.<\/p>\n\n\n\n

Thus, it\u2019s not surprising that several of the most successful, high-dollar volume dealerships are offering in-house leasing as another viable option for end-users to obtain equipment while opening the door to added profits. But it\u2019s not just a tool for the well-heeled; dealers with sub-$10 million revenues see it as an attractive value proposition to make lease acquisitions a reality for the smallest and unestablished clientele among their customer ranks.<\/p>\n\n\n\n

In this month\u2019s State of the Industry report on leasing, we focus on a core of dealers, both large and small, that created in-house leasing arms. We learn about the hows and whys of their financing journeys and the challenges they\u2019ve faced developing and growing their portfolios. We also invite you to check out a complementary roundtable of some of the industry\u2019s leading leasing firms, from stand-alone financial institutions to industry manufacturers, on page 26.<\/p>\n\n\n\n

In the case of Gordon Flesch Company (GFC), the Madison, Wisconsin-based dealer developed GFC Leasing so customers could have the benefits of one-vendor service from the beginning to the end of a transaction. It helped that GFC acquired a local leasing company, which enabled the dealer to furnish innovative financing options for everything under the office sun as opposed to merely printers, copiers and technology services.<\/p>\n\n\n\n

\"\"
Jennifer Watts,
Gordon Flesch Company<\/figcaption><\/figure><\/div>\n\n\n\n

The benefits are twofold, according to Jennifer Watts, GFC\u2019s manager of leasing operations. For one, it allows the dealer to simplify and improve the leasing experience for clients. Also, it serves as a huge competitive advantage.<\/p>\n\n\n\n

\u201cIt allows GFC to serve the customer beyond the initial sale and creates a long-term bond with them,\u201d she said. \u201cIt\u2019s a huge selling point because customers realize they can get better service and a long-term partnership from GFC, which is something they can\u2019t get buying directly from a manufacturer.\u201d<\/p>\n\n\n\n

A majority of GFC\u2019s challenges have been largely opaque to the client, primarily involving building out the back end operations. Investments to tie the technology together and build more robust workflows were needed due to the many new customers added via acquisitions. Technology and automation, Watts believes, will be vital moving forward.<\/p>\n\n\n\n

Even now, we\u2019ve seen more interest in leases with initial deferred payment options or more flexible terms.<\/p>\u2013 Jennifer Watts, Gordon Flesch Company<\/cite><\/blockquote>\n\n\n\n

Flexibility has been one of the keys for GFC programs during the pandemic era, which appears poised to remain a factor for the foreseeable future. \u201cEven now, we\u2019ve seen more interest in leases with initial deferred payment options or more flexible terms,\u201d she added.<\/p>\n\n\n\n

While the company has existed for more than 65 years, RJ Young of Nashville, Tennessee, entered the leasing business a little more than 20 years ago. It was launched in conjunction with an asset-backed line of credit through the dealer\u2019s then-banking partner. The Crunk family ownership saw a significant strategic and financial opportunity in the flexibility that comes with \u201cholding the paper,\u201d not to mention a vehicle for growing the office technology business.<\/p>\n\n\n\n

\"\"
AJ Baggott,
RJ Young<\/figcaption><\/figure><\/div>\n\n\n\n

AJ Baggot, COO for RJ Young, notes the company viewed the in-house leasing portfolio as a secure, long-term profit center, one that\u2019s helped fund much of the dealer\u2019s substantial acquisition growth. In fact, RJ Young holds 99% of the leases at its 32 locations. The competitive advantage realized can\u2019t be overstated.<\/p>\n\n\n\n

\u201cThis allows for significant flexibility when building large bid opportunities, rightsizing a customer\u2019s needs or just getting creative in winning new business,\u201d Baggot said. \u201cIt also gives us sole control of the relationship with the customer and our ability to create terms that fit the customer as well as the deals that we\u2019re working on. We don\u2019t regularly work with any leasing partners outside of those that we\u2019ve inherited through leases from an acquisition.\u201d<\/p>\n\n\n\n

While the dealer doesn\u2019t advertise specific promotions, it can provide the needed flexibility that addresses client requirements. RJ Young has made a lot of adjustments \u201con the fly\u201d to assist clients hardest hit by the pandemic, offering payment deferrals, lease holidays and occasional promotions in the past.<\/p>\n\n\n\n

(In-house leasing) allows for significant flexibility when building large bid opportunities, rightsizing a customer\u2019s needs or just getting creative in winning new business.<\/p>\u2013 AJ Baggott, RJ Young<\/cite><\/blockquote>\n\n\n\n

From the \u201csome things never change\u201d department comes the notion of creating an internal leasing company to take away market share from manufacturers that are in the business as well. This was the case in the 1970s when Edwards Business Systems (EBS) of Bethlehem, Pennsylvania, sought to compete against Xerox\u2019s highly successful program. Now-chairman Jim Edwards devised a cost-per-copy (CPC) program that was somewhat revolutionary at the time and provided an alternative to the OEM while giving customers another option to using cash.<\/p>\n\n\n\n

\"\"
Jim Dotter,
EBS\/VBS<\/figcaption><\/figure><\/div>\n\n\n\n

According to Jim Dotter, president of Virginia Business Systems (EBS\u2019 sister company), Jim Edwards worked with Art Habeburger, the CEO of American Equipment Leasing, to develop the program. It was then used to offer clients a cancellation clause for cause should the dealer not fulfill its obligation to support the contract.<\/p>\n\n\n\n

\u201cThis was effective when opening new branches as we grew and (prospects) didn\u2019t know our company\u2019s reputation in the marketplace,\u201d Dotter recalled. \u201cIt was `putting your money where your mouth is\u2019 and gave prospects confidence in moving forward with an unknown company. Occasionally, we take a customer that isn\u2019t credit approved if we feel the risk and business plan support it, often fulfilling with off-lease equipment so (the client) can establish credit.\u201d<\/p>\n\n\n\n

Occasionally, we take a customer that isn\u2019t credit approved if we feel the risk and business plan support it, often fulfilling with off-lease equipment so (the client) can establish credit.<\/p>\u2013 Jim Dotter, EBS\/VBS<\/cite><\/blockquote>\n\n\n\n

Dotter notes that through the years, the program has expanded to accommodate Fortune 500 companies, colleges, universities and school districts that required terms the traditional leasing companies wouldn\u2019t accept. While EBS\/VBS also partners with GreatAmerica, CIT and U.S. Bank, the flexibility of its in-house portfolio has helped clients weather the pandemic.<\/p>\n\n\n\n

It hasn\u2019t been an easy journey for EBS\/VBS. During the 1990s, the dealer built a significant debt level with its portfolio, which was cause for concern in the bank\u2019s eyes\u2014despite the fact that EBS\/VBS was profiting from the venture. The bank had based the dealer\u2019s covenants and ratios on operating copier dealerships as opposed to a leasing company.<\/p>\n\n\n\n

\u201cOver the years, we\u2018ve pushed more toward traditional third-party leasing companies to ease our debt load and cut down on the administrative burden of running a leasing company,\u201d Dotter added.<\/p>\n\n\n\n

EBS\/VBS\u2019 CPC program evolved into a private-labeled, single payment plan (SPP) providing one invoice for equipment, maintenance, supplies, clicks, etc. under the SPP branding. Seeing the success Konica Minolta enjoyed with its One Rate program, EBS\/VBS rolled out an all-you-can-eat Simplify branded offering. Fortified with no overage charges or meter readings and a static monthly invoice, it\u2019s been a selling point for net-new clients and a strong upgrade option for existing customers.<\/p>\n\n\n\n

\u201cThere are no surprises or annual increases with Simplify,\u201d Dotter noted. \u201cClients like the predictability.\u201d<\/p>\n\n\n\n

In-house leasing represents over 90% of all financing deals offered by Little Rock, Arkansas-based Datamax Inc. Leasing actually predates copiers\/printers in the dealer\u2019s portfolio, as its product offering primarily consisted of mimeograph machines and offset presses when the in-house portfolio launched in 1975. It was a significant point of differentiation at the time and remains a vital value proposition for packaging equipment with services, notes Steven J. Sumner, vice president, secretary and treasurer for the dealer.<\/p>\n\n\n\n

\"\"
Steven Sumner,
Datamax<\/figcaption><\/figure><\/div>\n\n\n\n

Sumner refers to the leasing arm as one of personalized service and customization for the dealer. Leases are often complicated, requiring reviews and right-sizing in order to create an exceptional customer experience. Datamax\u2019s creativity has helped keep clients in-house.<\/p>\n\n\n\n

Sumner says that one of the major benefits people see when leasing in-house with Datamax is accountability, citing the fact that \u201cwe\u2019ll care for your technology throughout the term of the lease. The same company that you develop and acquire your technology solution from is the same company that services and cares for it. Since that\u2019s the same company that holds your lease and to whom payments are made, accountability empowers the business relationship,\u201d he added.<\/p>\n\n\n\n

The same company that you develop and acquire your technology solution from is the same company that services and cares for it.<\/p>\u2013 Steven Sumner, Datamax<\/cite><\/blockquote>\n\n\n\n

Additionally, Datamax\u2019s flexibility has been front and center during the pandemic, offering relief programs for clients uniquely affected by COVID-19. The dealer also provided special financing programs for certain product lines and flexed its 36-, 48- and 60-month leases to 39, 51, and 63, respectively, with varied terms that proved popular with clients.<\/p>\n\n\n\n

In the aftermath of the pandemic, Sumner notes the imaging industry may be facing challenges that include higher interest rates, continued supply chain disruptions and inflation. \u201cWith respect to the supply challenges, Datamax has provided interim loaner units to customers for whom lease commencements have been disrupted,\u201d he said. \u201cAs for rising interest rates and inflation, some of the full impacts of these challenges remain uncertain for the imaging industry.\u201d<\/p>\n\n\n\n

\"\"
David Carson,
Plus<\/figcaption><\/figure><\/div>\n\n\n\n

As was the case with Datamax, copiers and printers weren\u2019t yet on the menu at Plus Inc. when the Greenville, South Carolina-based dealership launched Piedmont Leasing in the 1980s. Typewriters and dictation equipment were the go-to offerings for Plus, according to President David Carson, and clients were keen on obtaining low-cost leases spanning 12 or 24 months. He estimates the dealer carried about 25-50 leases during those initial years of Piedmont Leasing\u2019s operation as a stand-alone company.<\/p>\n\n\n\n

Leasing capital is the primary challenge for Plus, and it\u2019s funded out of the growth of the capital in the company. Wells Fargo and U.S. Bank are the dealer\u2019s go-to lessors, with a lion\u2019s share of the Piedmont business centered on used equipment and dollar-buyout leases. The in-house offering is particularly valuable for start-up clientele unable to obtain financing through one of the conventional lenders.<\/p>\n\n\n\n

\u201cIf I had the capital, I would do every lease in-house,\u201d Carson noted. \u201cYou can make a profit selling and servicing the equipment, so it just makes sense to add profit through leasing. We have a strong supply of used equipment to sell, and between our upgrade options and early buyouts, there\u2019s just so much more flexibility to have it in-house that you don\u2019t have with a third-party leasing company.\u201d<\/p>\n\n\n\n

We have a strong supply of used equipment to sell, and between our upgrade options and early buyouts, there\u2019s just so much more flexibility to have it in-house that you don\u2019t have with a third-party leasing company.<\/p>\u2013 David Carson, Plus<\/cite><\/blockquote>\n\n\n\n

It\u2019s an attractive offering for Plus\u2019 smaller clients and those that haven\u2019t established themselves from a credit standpoint. Carson will work with a client that wants a $3,000 device over 24 months, culminating with a dollar buyout, which guarantees profit for the dealer. IT-related in-house leases were fairly popular when it was more difficult to obtain a traditional lease, although that\u2019s changed in recent years and the major companies have become more flexible, according to Carson.<\/p>\n\n\n\n

\u201cThe dollar-buyout leases are very popular,\u201d said Carson, who has a lease portfolio of $600,000. \u201cIt\u2019s effective when you\u2019re dealing with a new law firm or another customer that can\u2019t get leasing because they\u2019re less than two years old. If I can determine they\u2019re good, we don\u2019t have to jump through hoops to get them leasing.\u201d<\/p>\n\n\n\n

The dealer also benefits from a strong core of new equipment that it leases at fair market value. That helps provide a good source for used equipment along with the ability to sell to the client at lease end\u2014either of which benefits Plus\u2019 sales reps.<\/p>\n\n\n\n

\"\"
Mark DeNicola,
Centriworks<\/figcaption><\/figure><\/div>\n\n\n\n

Another in-house leasing arm with 20-plus years under its belt is Centriworks, which furnishes Centriworks Financial as another option to go with its GreatAmerica and U.S. Bank partnerships. The platform was created internally, according to Centriworks CFO\/CSO J. Mark DeNicola, in part to leverage financial advantages including the tax treatment for owned assets. In addition to providing monthly recurring revenues, the Knoxville, Tennessee-based dealership enjoys greater control and flexibility of transaction terms during the lease, enabling the dealer to capture contracts that weren\u2019t possible with third-party leasing options.<\/p>\n\n\n\n

(Controlling terms has) generated higher cash flows, both in the extensions of leases and the divestiture of the owned equipment.<\/p>\u2013 Mark DeNicola, Centriworks<\/cite><\/blockquote>\n\n\n\n

According to DeNicola, having control and flexibility of the transaction terms is also beneficial at lease ends. \u201cIt\u2019s generated higher cash flows, both in the extensions of leases and the divestiture of the owned equipment,\u201d he said.<\/p>\n\n\n\n

Most impressively, DeNicola points out that Centriworks hasn\u2019t experienced significant challenges furnishing an in-house leasing option. The dealer has thrived the most in offering CPP, bundled leases and flat-rate contracts. <\/p>\n","protected":false},"excerpt":{"rendered":"

Competitive advantage is at the heart of every viable office technology dealership. In a landscape where resellers are touting much of the same equipment and many of the same services as the dealer down the street, developing a point of differentiation\u2014no matter how perceptibly small\u2014can make all the difference in winning an account. Thus, it\u2019s not surprising that several of the most successful, high-dollar volume dealerships are offering in-house leasing as another viable option for end-users to obtain equipment while opening the door to added profits. But it\u2019s not just a tool for the well-heeled; dealers with sub-$10 million revenues see it as an attractive value proposition to make lease acquisitions a reality for the smallest and unestablished clientele among their customer ranks. In this month\u2019s State of the Industry report on leasing, we focus on a core of dealers, both large and small, that created in-house leasing arms. We learn about the hows and whys of their financing journeys and the challenges they\u2019ve faced developing and growing their portfolios. We also invite you to check out a complementary roundtable of some of the industry\u2019s leading leasing firms, from stand-alone financial institutions to industry manufacturers, on page 26. In the case of Gordon Flesch Company (GFC), the Madison, Wisconsin-based dealer developed GFC Leasing so customers could have the benefits of one-vendor service from the beginning to the end of a transaction. It helped that GFC acquired a local leasing company, which enabled the dealer to furnish innovative financing options for everything under the office sun as opposed to merely printers, copiers and technology services. The benefits are twofold, according to Jennifer Watts, GFC\u2019s manager of leasing operations. For one, it allows the dealer to simplify and improve the leasing experience for clients. Also, it serves as a huge competitive advantage. \u201cIt allows GFC to serve the customer beyond the initial sale and creates a long-term bond with them,\u201d she said. \u201cIt\u2019s a huge selling point because customers realize they can get better service and a long-term partnership from GFC, which is something they can\u2019t get buying directly from a manufacturer.\u201d A majority of GFC\u2019s challenges have been largely opaque to the client, primarily involving building out the back end operations. Investments to tie the technology together and build more robust workflows were needed due to the many new customers added via acquisitions. Technology and automation, Watts believes, will be vital moving forward. Even now, we\u2019ve seen more interest in leases with initial deferred payment options or more flexible terms. \u2013 Jennifer Watts, Gordon Flesch Company Flexibility has been one of the keys for GFC programs during the pandemic era, which appears poised to remain a factor for the foreseeable future. \u201cEven now, we\u2019ve seen more interest in leases with initial deferred payment options or more flexible terms,\u201d she added. While the company has existed for more than 65 years, RJ Young of Nashville, Tennessee, entered the leasing business a little more than 20 years ago. It was launched in conjunction with an asset-backed line of credit through the dealer\u2019s then-banking partner. The Crunk family ownership saw a significant strategic and financial opportunity in the flexibility that comes with \u201cholding the paper,\u201d not to mention a vehicle for growing the office technology business. AJ Baggot, COO for RJ Young, notes the company viewed the in-house leasing portfolio as a secure, long-term profit center, one that\u2019s helped fund much of the dealer\u2019s substantial acquisition growth. In fact, RJ Young holds 99% of the leases at its 32 locations. The competitive advantage realized can\u2019t be overstated. \u201cThis allows for significant flexibility when building large bid opportunities, rightsizing a customer\u2019s needs or just getting creative in winning new business,\u201d Baggot said. \u201cIt also gives us sole control of the relationship with the customer and our ability to create terms that fit the customer as well as the deals that we\u2019re working on. We don\u2019t regularly work with any leasing partners outside of those that we\u2019ve inherited through leases from an acquisition.\u201d While the dealer doesn\u2019t advertise specific promotions, it can provide the needed flexibility that addresses client requirements. RJ Young has made a lot of adjustments \u201con the fly\u201d to assist clients hardest hit by the pandemic, offering payment deferrals, lease holidays and occasional promotions in the past. (In-house leasing) allows for significant flexibility when building large bid opportunities, rightsizing a customer\u2019s needs or just getting creative in winning new business. \u2013 AJ Baggott, RJ Young From the \u201csome things never change\u201d department comes the notion of creating an internal leasing company to take away market share from manufacturers that are in the business as well. This was the case in the 1970s when Edwards Business Systems (EBS) of Bethlehem, Pennsylvania, sought to compete against Xerox\u2019s highly successful program. Now-chairman Jim Edwards devised a cost-per-copy (CPC) program that was somewhat revolutionary at the time and provided an alternative to the OEM while giving customers another option to using cash. According to Jim Dotter, president of Virginia Business Systems (EBS\u2019 sister company), Jim Edwards worked with Art Habeburger, the CEO of American Equipment Leasing, to develop the program. It was then used to offer clients a cancellation clause for cause should the dealer not fulfill its obligation to support the contract. \u201cThis was effective when opening new branches as we grew and (prospects) didn\u2019t know our company\u2019s reputation in the marketplace,\u201d Dotter recalled. \u201cIt was `putting your money where your mouth is\u2019 and gave prospects confidence in moving forward with an unknown company. Occasionally, we take a customer that isn\u2019t credit approved if we feel the risk and business plan support it, often fulfilling with off-lease equipment so (the client) can establish credit.\u201d Occasionally, we take a customer that isn\u2019t credit approved if we feel the risk and business plan support it, often fulfilling with off-lease equipment so (the client) can establish credit. \u2013 Jim Dotter, EBS\/VBS Dotter notes that through the years, the program has expanded to accommodate Fortune 500 companies, colleges, universities and school […]<\/p>\n","protected":false},"author":166,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1641],"tags":[],"_links":{"self":[{"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/posts\/50090"}],"collection":[{"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/users\/166"}],"replies":[{"embeddable":true,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/comments?post=50090"}],"version-history":[{"count":7,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/posts\/50090\/revisions"}],"predecessor-version":[{"id":50246,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/posts\/50090\/revisions\/50246"}],"wp:attachment":[{"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/media?parent=50090"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/categories?post=50090"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/tags?post=50090"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}