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Drive Up Sales With Seller Financing

Spotlight – Banking and FinanceSpotlight – Banking and Finance

When a multimillion dollar deal between a New Jersey-based medical equipment company and the federal defense department almost fell apart because of the agency’s budget shortfall, the manufacturer came up with a creative solution: seller financing.

“The equipment firm ended up financing the transaction itself, through a leasing deal,” says Louis Miele, a partner with the Fairfield CPA firm of Leaf, Saltzman, Manganelli, Pfeil & Tendler, who worked on the deal.

Under the arrangement, the manufacturer financed the construction of the equipment and then leased it to the federal agency, letting it spread the financial impact over multiple periods instead of taking a one-time budget-crippling hit. A seller who finances his or her customer’s purchases takes on some extra risk—although it’s minimal when the buyer is a government agency—but if it’s structured right, the strategy can be profitable.

B. Moss Clothing, a Paramus-based retailer with 20 stores across the East Coast, does some $60 million a year in sales. It uses private-label credit cards to help finance consumer purchases. B. Moss contracts with the Mahwah firm Shoppers Charge Accounts, a division of TD Banknorth, which issues the cards and takes care of billing, card marketing and other administrative work.

The convenience of plastic drives higher sales, while the private-label card lets the retailer custom-tailor programs that can draw shoppers back to the store, says Mark McNerney, B. Moss’ vice president of finance.

“When customers use cash, their average spend per visit at our stores is about $40,” he explains. “That rises to about $65 when they use Visa or another card, and climbs to almost $90 when they use a B. Moss-branded card.”

The company also uses the cards to track customer usage, and ties spending levels to a rewards program that encourages the purchase of even more merchandise.

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