EQUIPMENT FINANCING: A MOVING TARGET

Financing equipment in all markets is currently a bit of a moving target. Hard rules are constantly changing so guidelines are all we can hope for because underwriters are squeezed at the moment. The squeeze on one end for lenders is to minimize bad debt losses by financing to clients which end up in default. On the other side, there are many Federal programs and incentives in place to stimulate the market by increasing lending to small businesses. The scenario is frustrating for both the customer and finance agent but I can verify that lenders are still lending and approvals are much higher than last year.

What are some common approval markers?

Complete financial disclosure is best for getting approved. Knowing your assets, liabilities and how your company is performing will provide the underwriter a complete picture thus allowing them to offer the best terms possible. Hiding bad debt almost always comes out and simply delays or terminates the evaluation process.

Check your own credit score or Dunn and Bradstreet report; if something negative pops up then deal with it before you fill out a finance application. Rectify the issue and have proof that it has been cleared; this step will show the underwriter that you’re on top of it and that your credit is being managed properly.

If you’re a smaller business, be prepared to PG (personally guarantee) your finance. It’s a blanket guarantee with your assets as a pledge that you will make your payments. If you don’t, then like any creditor, they will come after your assets to repay the debt. Years ago, small businesses were not asked too often to PG but now, they are. Lenders feel that if you don’t “believe” in your business and are prepared to stand behind it, then why should they.

This market requires awareness and flexibility on both sides of the transaction; it’s not what lending was 5 years ago but in the long run it will be much better for all of us.