Darn Those Beancounters

The printer and the vendor had come to terms. The printer, though small, had a long track record of success, and a reputation for careful evaluation and early adoption of new technology. The vendor had a new production inkjet press that was well-suited to the printer’s operation; better suited than any similar press the printer had previously examined. The vendor’s sales team turned on the charm and the incentives, hands were shaken, and the paperwork was signed.

The printer was excited. He had wholeheartedly embraced digital, keeping ahead of his customers’ needs for shorter and shorter runs, but he felt limited by the relatively slow speeds and high click charges of toner devices. This new inkjet press, by far the largest single purchase he’d ever made, was just what was needed to re-energize his digital business.

The vendor’s sales team was excited. The printer had really put them through their paces, with multiple demos, out-of-town site visits, and tough negotiations for purchase price and ink contracts. A below-market interest rate from the vendor’s leasing arm had clinched the deal, and now the salesman and his team were salivating over the big commissions that awaited them when the deal was approved.

Today’s production inkjet engines have sticker prices in the millions of dollars. Even the entry-level press that the printer was buying had a pricetag in the high six figures. The sales commission would far surpass that of previous deals between the printer and the vendor, even for the purchase of multiple toner engines.

Everyone was giddy with anticipation when, in an instant, their hopes and dreams were shattered. The vendor’s leasing company declined the deal. The printer’s credit application had been turned down.

Those darn beancounters! Killjoys! Dealwreckers! The bankers and the corporate moneymen are always there to rain on our parades! They are just being barricades on our road to innovation, success and glory!

The printer’s credit was excellent. He had a proven track record with the vendor. No bankruptcies, no lawsuits, not even late payments. His trade credit history was stellar, as vouched for by paper companies and other suppliers. His cash flow was good. Sales had been a bit off in the most recent year, but darn it, that’s why he needed new technology!

Fortunately, the printer was in a position that he could arrange other financing. Ha! That’ll show those beancounters. With that, everyone is sure to live happily ever after …

Whoa. Let’s press the pause button for a minute. The job of finance people, whether bankers or leasing agents, is not to kill deals. Their sole purpose is to make good loans. They are paid to make loans. They make nothing if they don’t extend credit. The leasing arms of most manufacturers are more profitable than the companies themselves. Yes, they very much want to approve your application.

In the case of this story, the leasing company didn’t reject the printer’s credit in general. They would have been happy to write a lease to put yet another toner box on the printer’s floor. What they rejected was the deal for the big inkjet press. Their concerns were about the impact the purchase would have on ratios of the printer’s balance sheet. In non-financial parlance, they thought the printer was biting off more than he could chew.

Perhaps the finance people were being overly cautious by ruining a good deal. Equally possible, they were preventing their buyer from making a potentially ruinous purchase. How to tell which?

When turned down for financing, ask why. Next, ask what additional information you can furnish to gain approval. Once you have your answer, do your homework. Crunch the numbers, fill in the blanks, run different scenarios, then double-check the calculations. Satisfy the lender, but more importantly, satisfy yourself that the numbers do add up, the cash flow and the profits will be there, and that you are indeed making a wise business decision based on solid projections, not just hopes and dreams.

Still comfortable with your purchase? If so, go for it. If not, send the vendor’s sales team back to the drawing board to construct a more workable deal. That might even mean a different piece of equipment is in order.

They are your beans. You should be the one counting them.