March 29, 2016
Why Should a Drone Manufacturer Offer Their Customers Financing Options?
With the recent changes in drone laws it’s a great time to finance a drone
When it comes to the commercial application of drones, many operators aren’t thinking in terms of a single purchase, they’re thinking about fleets. Those fleets can be comprised of just a few or hundreds of drones, and everything between. A farmer might just need a couple drones to do what they need to do on their field while an organization is going to need quite a few more to monitor an entire power line infrastructure.
Those costs are relative to the person or organization that is going to be paying for them, but are nonetheless the ultimate factor in terms of whether or not a purchase is ultimately made. If financing options are readily available when that decision is being made, it can change the equation for purchasers in a number of positive ways.
Being able to offer that kind of service might seem difficult, but start-ups, small companies, Fortune 500 organizations and everyone in-between are taking advantage of financing and leasing options to help their customers meet tactical business objectives. Specific to this industry, UAV manufacturers and distributors are staying competitive by partnering with lending companies to effectively help their customers acquire their products in a convenient, affordable way. For example, that farmer might not have the capital to invest in the purchase of a handful of drones, just as an organization might not have that same liquidity to obtain their fleet. As a manufacturer, being able to offer the means for them to make those acquisitions can be the difference between getting final approval to make it happen or not.
Of course, this kind of opportunity isn’t about trying to push anyone into an agreement that isn’t going to be beneficial for them. Due diligence can and must be performed on both sides, but having this option changes how potential buyers can and should approach that purchase decision and help enable it in an incredibly powerful way. Using Financing to Meet Business Objectives
The unique and diverse nature of the commercial UAV industry means that a financing program needs to meet a broad array of business objectives. The people buying these drones need to understand how financing can solve problems like matching payments with cash flow or meeting a company’s tax strategy. Additionally, this industry is experiencing ever-changing technology, and operators are always going to need to look at relevant upgrades.
Combined, these issues make offering financing flexibility around UAV products and solutions essential. Structuring a unique finance program will complement the requirement for revenue-generating equipment and technology, because concerns around ROI
are top of mind for everyone who is trying to figure out the best way to integrate a drone into their workflow or operation. By financing the purchase of UAVs, equipment suppliers can remove price objections and close the sale faster, but this isn’t just about selling products. The reality is that financing can allow purchasers to meet wide-ranging initiatives that are directly in indirectly impacted by their use of a drone.
There are various ways people and organizations looking to buy a drone can strategically use financing, and that includes:
- acquiring new UAV equipment and technology
- the purchase of tablets and ground control systems
- using financing to cover supplementary expenses related to shipping, tax and training
- taking advantage of tax saving to lower the cost of equipment acquisition
- staying ahead of issues related to cash flow and timing of profit
These are all generalities because the reality is that the people and organizations purchasing a drone for commercial purposes are as wide as they are varied. Just as a single farmer is different from an entire power company, they’re going to be looking to take advantage of different opportunities as it relates to financing. This means looking at and understanding all of the financing options that are available to manufacturers is absolutely essential. Finding the Right Financing Resource
To ensure financing is a valuable tool for their customers, UAV manufactures must meet the exact cash flow needs required for their customer’s business. This means the manufacturer must partner with a lending source that specializes and understands the industry. They have to be able to recognize what individuals and organizations want and need when it comes to purchasing and using a drone.
Drone manufactures should look around at the various options that are available when it comes to being able to offer financing to their customers. To ensure success, several key business attributes should be considered, and they specific to the UAV industry:
- Compatible Goals: The finance program needs to be beneficial in terms of being able to assist in increasing revenue and profit from new equipment for UAV customers. For example, if the objective is to enhance cash flow to help the company continue to operate, the lending source needs to fund transactions quickly. Lending partners need to have these sorts of options readily available.
- Enhanced Relationships: Business owners and equipment providers should never have to worry about risking their relationships over financing. That means your funding partner should promote UAV-related products with special financing offers and help drive repeat business within a client portal.
- Industry Expertise: The financier should have in-depth understanding of the unique aspects of the UAV industry. Due to technology advancing at a rapid pace, offering a hedge against equipment obsolescence is vital to the UAV industry.
Types and Processes
- Sales Synergy: The financial product offering and the entire financing process needs to enhance business activity and not hinder or slow the buying decision of new equipment. That means the financing process for the purchaser should take hours, not days, from credit approval to documentation to funding.
There are several types of financial products a lending partner can offer, and the financing processes can vary from fast and simple, to more complex structures. When choosing a financing resource, it’s important to consider their entire offering. Here are five important things to take into account when you’re able to get specific about what you want to be able to offer your customers. Each of them details an important consideration that needs to be taken into account.
- Consultative Financing: Does the finance company offer cash flow analysis to determine a flexible payment structure such as seasonal or deferred payment options? This will help companies match payments to cash flow and allow the equipment to generate revenue before full payments are due.
- Asset Flexibility: Does the lender finance new and used equipment? This capability allows for broader equipment and product options and savings, which is especially applicable for anyone interested in drones.
- All-Inclusive Financing: Can costs such as training, shipping and tax be bundled into the finance program? Having the ability to take advantage of 100% financing means businesses can finance these items and avoid significant upfront or out of pocket costs.
- Tax Deductions: Does the finance product meet the company’s tax strategy? Clients will always want to verify their tax situation with their accountant, but certain finance structures may help lower the true cost of equipment ownership by accelerating depreciation with IRS tax code Section 179.
- Easy Finance Process: Is the lender able to provide clients with a fast credit decision and simplified documentation? Asking the finance company how long a decision will take or if pre-approval is an option can be a good indicator about the finance process and how simplified it may be.
A few of these points are worthy of greater consideration when opting for a tailored financing plan. Often, a traditional bank loan will not cover payments such as maintenance agreements, shipping, training and other expenses known as soft costs. This means the business owner may be faced with significant up-front costs and the equipment provider may be faced with pricing challenges. This is when alternative financing may be a profitable solution.
Construction companies will use alternative financing for UAVs rather than use their bank to avoid depleting bank lines and interfering with lending limits, which will restrict future borrowing. Also, the ability for clients to have access to a working capital loan also provides an additional way for companies to acquire funds quickly for nearly any business purpose including marketing, inventory and other operational needs.
Ultimately, being able to offer a purchaser financing options can mean one less consideration that goes into their decision. By helping them with logistics as they relate to a decision around purchasing a drone, you’ll be able to provide incredible customer service while also giving your customer a competitive advantage in the market.