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2 | Learn more at www.capchase.com | ||||||||||
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4 | A helpful tool for evaluating Vendor Financing programs. Vendor financing helps businesses bundle financing and flexible payment terms into the purchase of their product. This improves their close rates, boosts deal sizes, and ultimately increases their margins. Not all Vendor financing solutions are created equal nor are all a great fit for all businesses. Many specialize in industries, market segments, or regions. Hopefully this helps you compare and build your case as you explore your options. | ||||||||||
5 | Evaluation Area | Guidance | Notes | ||||||||
6 | Should you consider Vendor Financing? | Strategic Objectives Alignment | Start by grounding the analysis in why you’re evaluating vendor financing. Is it to: • Improve customer acquisition metrics (conversion rate, TCV, velocity) • Reduce pricing friction or discounting • Extend reach to budget-constrained customers • De-risk Account Receivables or improve cash flow Then ask yourself, "Does vendor financing support one or more of our revenue or working capital goals?" | ||||||||
7 | Revenue Impact | Assess how financing options may influence your top line. Consider your metrics like: • Win Rate Increase: Compare win rates for financed vs. non-financed deals (before/after or A/B test). • Total Contract Value (TCV): Financing can enable upsells or multi-year deals. Measure any change in deal size. • Sales Cycle Length: Evaluate whether deals close faster when financing is offered. Revenue Impact ROI = (Δ in ACV * # of new deals * Gross Margin %) - Financing cost | |||||||||
8 | Cash Flow & Working Capital Impact | Vendor financing can accelerate cash inflows. • Cash Acceleration: Consider how quickly you receive funds (e.g. Day 1, Net 7, etc.) today compared to what the financing solution can provide. • DSO Reduction: Evaluate your current Days Sales Outstanding (DSO) metric and how financing could improve the metric and the burden from finance. • Balance Sheet Impact: Financing removes Accounts Receivables risk and may improve the cash conversion cycle (CCC). Cash Flow ROI = (Δ in DSO * Avg. deal size * # of deals) / Cost of Capital | |||||||||
9 | Overall ROI of considering Vendor Financing | Let’s say: • You close 15% more deals due to financing. • Average deal size = $200K • Gross margin = 70% • You get cash on Day 1 (vs 60-day DSO) • Cost of financing = 8% Revenue ROI: • 20 extra deals x $200K x 70% = $2.8M in margin • Cost = $200K x 8% x 20 = $320K • Net ROI = $2.48M Cash Flow ROI: •$4M in AR pulled forward 60 days = significant working capital freed | |||||||||
10 | Vendor A: | Vendor B: | Vendor C: | ||||||||
11 | Evaluation Area | Guidance | Notes | Score (1-5) | Notes | Score (1-5) | Notes | Score (1-5) | |||
12 | Which Vendor Financing Solution is the best fit? | Implementation Complexity | Consider how much of a lift working with different financing providers would be. • How long does underwriting take and how challenging of a process is it? • Is there software involved or is the process completely manual (phone & email)? • If software, how fast can you implement the solution? Will it require custom coding or configuration? • Is there a CRM application? How challenging is that to set-up? Does it require coding or development work? | ||||||||
13 | Risk & Control Assessment | Understand implications for compliance, accounting, and customer experience. • Customer Risk: Who takes the default risk—us or the provider? • Reputation Risk: Is the financing partner trusted and easy to work with? • Accounting: Are there revenue recognition implications? | |||||||||
14 | Sales & GTM Integration | Evaluate the ease of rollout and team adoption. • Sales Enablement: Do reps understand how/when to offer financing? • Marketing: Can we leverage financing in campaigns to boost funnel conversion? • Ops Integration: Is CRM and quote-to-cash integration smooth? | |||||||||
15 | Cost of Program | Quantify both direct and indirect costs, and compare between financing solutions which provides the better total package for your business. • Discount rate or fee to provider: % of contract value or a flat fee deducted • Factor in the flexibility in this fee (can it be passed onto the buyer or split) and whether the fee fluctuates based on contract size or deal volume financed through the partner. • Implementation cost: Legal, software integration, sales and finance training, maintanence • Internal resource time: Finance, sales ops, enablement. Total Cost of Financing = Sum of above (expressed annually) | |||||||||
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