Ron Arrington Global President, CIT Vendor Finanace

CIT has shown a resilience and flexibility in surviving the ups and downs of a global economy and the shifts in alliances and partnerships that can go with it. Having reached its peak in 2007 with $9.7 billion in vendor new business volume, it seemed as if good times were ahead when, in fact, big changes were brewing. That same year, culminating a 14-year vendor partnership, Dell purchased CIT’s 30% interest in the U.S.-based Dell Financial Services.

Soon after CIT celebrated its 100th anniversary in 2008, the U.S. housing crisis triggered an economic downslide that reverberated around the world, taking many successful businesses with it. Unable to protect itself from the worsening recession, CIT took the ultimate step in 2009 when it was forced to secure rescue financing to buy time to develop and execute a reorganization plan. Amazingly, just 40 days after entering bankruptcy, CIT emerged intact. Having been with the company since 1984, Ron Arrington, global president of CIT Vendor Finance, has seen a lot of changes and is proud of the leadership position that CIT continues to hold within its small- to mid-size market.

Arrington attributes the company’s overall success to a deep understanding of its customer relationships. “Long-lasting, strong client relationships prevail at CIT, and that has held true during the whole course of CIT’s evolution,” he explains. “This is part of CIT’s culture, and it is a testament to the company and its people. During the bankruptcy, the big key to retaining customers was openness and constant communication. We said what we were going to do, and we did what we said. That, and the consistent level of service that we provided, helped us maintain relationships. It’s good to see the long list of relationships that we’ve established in addition to the new ones we are developing. I am proud of the resiliency and focus of our employees and how well they understand our business. They are the experts and backbone of CIT.”

In addition to knowing its customers and their markets, CIT Vendor Finance has used its deep industry expertise and risk management culture to analyze, assess and manage risk across its portfolio. “During the global financial decline, everyone had to work through their approach to risk management,” Arrington affirms. “Our goal is to make risk management as unobtrusive as possible for our customers. We’ve been in the market a long time, and our rigorous risk management processes allowed us to bridge the decline. Certainly we learned from the experience.”

Changing Partners
This year, on April 21, Dell announced its intent to acquire Dell Financial Services Canada, Ltd. as well as Dell’s related assets, sales and servicing functions in Europe. Rather than look at the secession as a sign of stress, Arrington sees it as a validation of having done their job well. “CIT served as an extension of Dell through the integration of infrastructure (systems, Web portals, etc.) and employees from both companies,” says Arrington. “You can’t overestimate the importance of how well employees from two companies can work together to build a seamless process that results in best-in-class service to Dell’s customers. This is the value CIT brings to its vendor partners. After Dell acquired the U.S. program that we built together, they realized how well it worked. They then looked to do the same for their programs in Canada and Europe, essentially taking what we built together and bringing it in house to expand their captive. These transactions reflect the ongoing evolution of our successful long-term relationship with Dell, which we formed back in 1997.”

CIT Vendor Finance continues to be a Dell financing partner operating on behalf of Dell Financial Services and will continue to support Dell through the transition period in Europe, expected to close midyear in 2012. “We maintain a strong relationship with Dell and will continue to work with them in a multitude of ways in a number of key markets,” predicts Arrington. “We have extended our relationship in Brazil and Mexico and continue in Asia. The formality and specifics of the relationship will vary by geography, but Dell will remain a strong partner for us.”

As one door closes, another opens: An exciting new partnership began between CIT and Lenovo last year when the two companies established Lenovo Financial Services to provide vendor financing solutions for Lenovo’s business partners and customers in North America. That partnership quickly expanded to the United Kingdom and has recently launched in France and Germany. “The Lenovo relationship is a great win for us,” he remarks. “The company is dynamic with a fast-growing global brand, and they really understand that an integrated financing or leasing program can add to their success. We are building a solid foundation for this relationship and anticipate more growth and expansion that will allow us to enter other regions.”

The Captive Advantage
Arrington says the usefulness of the captive-versus-independent financing market tends to follow cycles in the economy. A reduction in liquidity can send manufacturers looking for other means of financing their sales. When there is a need to preserve and invest cash in core business, a third-party captive can allow a manufacturer to focus on that core rather than diverting attention to financing. “Maintaining your own captive requires a large investment, and the pinch of losses experienced in the last cycle may motivate some to stay away from the risk,” Arrington conveys. “A financing partner can add more flexibility to the sales approach. Blind discounting, for example, can be easier to manage when it is kept at arm’s length, allowing for better checks and balances. The new accounting rules offer some uncertainty, too, and can be particularly challenging for captives if all leased assets are required to appear on their books. It’s an attractive alternative to work with a dedicated player such as CIT who brings a captive feel while allowing the manufacturer to focus on its strengths of developing and bringing products to market. At the same time, CIT brings its own strength — the financing infrastructure — to the relationship for a win-win result.”

Companies often underestimate the investment of capital, time and focus necessary to build their own captive. Not only do they have to build the infrastructure, but also bring on board the necessary people to run it, and this can take away from the core business. “CIT brings all this to the table while working with our partners to build their brand domestically or globally,” insists Arrington. “Our partners still have a say-so and voice in the relationship, and we make sure we are supporting their objectives, go-to-market strategy and culture. The most successful partnerships match cultures closely so that the brand is extended to the customer. This helps the manufacturer sell more product, increase margins and offer a financing alternative at the point of sale.”

Thinking Outside the Box
Since the sale is no longer just about “the box” (that is, the equipment itself), the finance partner’s ability to present structures that support service solutions can help drive incremental revenue for manufacturers and resellers. These days managed services structures are expanding beyond the technology and office products space. They might now include the management of energy consumption such as heating/air conditioning and lighting. The infrastructure must adapt to invoicing requirements and bill these services correctly.

“Our experience and expertise in managed services is a real value-add for these other industries,” says Arrington. “The technology and office products markets utilize this model and providing the services your customers need is a key selling point. We deliver services that go beyond the financing such as pass-through or specialized billing, order placement and procurement processes, and asset management services that include remarketing and data scraping. Our vendor’s customers can purchase the total solution and pay over time while maintaining cash flow.”

Looking Ahead
As the economy improves, the outlook is good for vendor finance. CIT continues to see demand for vendor programs and equipment leasing in most of its markets. “One of the advantages of being a global company is having business spread geographically, so that faster growing economies can compensate for those that are lagging,” concludes Arrington. “Small- to mid-size businesses are still hesitant to invest, but growth is occurring in various markets at a measured pace. Small business confidence is improving as pent-up demand is unleashed by businesses that have postponed equipment purchases.

“CIT’s competitive advantage remains our global offering and our people. Our employees understand the importance of providing the very best services to our vendors and their end-user customers. We have a well-established vendor franchise that allows us to take advantage of market opportunities around the world. That positions us well for the future of vendor financing.”