Furniture Lending Is A Wells Fargo Specialty

July 13, 2007
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GRAND RAPIDS — Wells Fargo Commercial Bank has chiseled out a niche for itself in office furniture lending, with a specialty program specific to office furniture and the acquisition of it.

Companies can cover the cost of new office furniture with a traditional bank finance loan or a lease purchase, where they pay over time and have the opportunity to buy the furniture after a set time-period for $1, said Dawn VanVolkinburg, who works for Wells Fargo Equipment Finance and specializes in leasing arrangements for the end customers of office furniture dealers.

There's also the option of an operating lease, which VanVolkinburg said offers customers more flexibility, as well as lower monthly payments. Similar to a car lease, under an operating lease customers can either continue leasing the product or purchase it when the lease expires — or return the product to Wells Fargo, she explained. When a product is returned, the bank normally goes back to the original manufacturer or distributor to see if either wants to remarket it. If not, VanVolkinburg will work with marketers in the used furniture market to sell it.

"What's interesting to note is that most people do not return their furniture; it's an asset because the type of furniture products we finance are high end, so they maintain their value," VanVolkinburg remarked. 

She said occasionally a company prefers to stay in an office space temporarily so it has the flexibility to move into a new space with all new furniture a couple of years down the road. On those occasions, leasing rather than renting really helps, according to Volkinburg.

"When you rent furniture, you're not going to get exactly what you want — you kind of have to take what's available," she explained. "In the leasing world, you can have that same flexibility but get nice furniture that's customized for you."

Wells Fargo has an exclusive relationship with an office furniture manufacturer in this region, and VanVolkinburg manages a local program in which she works with the manufacturer's dealerships nationwide. The dealers sell the company's products to end-user customers; VanVolkinburg puts in competitive financing bids for the end users. Essentially, she helps both the manufacturer and the dealerships move their furniture products.

As VanVolkinburg pointed out, the office furniture industry has evolved immensely in the past century, and people don't always realize how costly it is to outfit their offices with high-end furniture that's ergonomically correct.

"That's where the financing really plays a critical role; it helps the manufacturer move product, helps the dealership sell their product, and also helps the end-user customer get the products that they need and desire. We give them an avenue to make that happen in a very cost-effective manner."

The average life of a furniture loan is 58 to 60 months. But it's flexible, and typically tailored to the needs of the purchaser, said Don VanDine, regional vice president of Wells Fargo Commercial. The terms can be anywhere from 18 months to five years.

Usually, office furniture transactions run $50,000 or higher, VanVolkinburg said. Costs, of course, would vary by type of company. A manufacturing company, for instance, wouldn't need a great deal of office furniture, whereas an insurance company would need office furniture exclusively.

According to research by the Equipment Lessor Association, 50 percent of companies lease their office furniture. VanVolkinburg believes the percentage is somewhat higher in West Michigan 

The process of acquiring office furniture is very different from the process of acquiring a machine tool or construction equipment, VanVolkinburg said. The process happens in phases and things change, she said.

"It's really critical for customers to work with a financial institution that has a program in place and has the furniture expertise," she said. "That's where our niche market really comes in handy for the end users, because we understand what it takes to make the deal happen for them, and we also respect the fact that they may need to keep their bank lines of credit in place for other purchases and the growth needs of the company."

There is a tremendous diversity of options available for office environments, as the recent NeoCon furniture show revealed, VanDine said. The major furniture manufacturers and their dealers have products that address every single office need imaginable, including the physical needs of employees.

"There's an immense amount of design and forethought that goes into an office build-out and furniture purchase," VanDine remarked. "I think people in general are becoming a little more spoiled, so ergonomics and a lot of creature comforts are now built into office furniture systems."

As VanVolkinburg sees it, furniture is in some ways a non-tangible asset because a pleasant, comfortable work environment and workspace is one of the ways an employer can attract and retain key employees.

"It's hard to quantify the value of outstanding furniture," VanDine added. "But you're going to readily quantify the dissatisfaction that comes with an old broken-down chair if one of your employees is sitting in it. You're going to hear about it every day."    

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