As I write this, it's mid-March, 2017, and we're seeing an economic surge that we haven't experienced in quite some time. We can chalk it up to many reasons, but the one I am hearing most from our own small business customers is they simply feel that, over the next few years, they will have fewer regulations imposed on them, making them breathe a little easier. Whether that turns out to be true or not, or even whether that is bad or good, is irrelevant – it's simply how they feel.
This is something my own company, Crest Capital, has understood for quite some time. The less regulation that you impose on small businesses, the happier they are. And in the case of equipment financing and equipment leasing, the more apt they are to do business with you.
Think about this: good equipment financing companies survive not by offering the lowest, rock-bottom rate, but by being easy to work with, and allowing small business customers more flexibility than a bank. In turn, small business customers find "fewer regulations" more profitable than a few points of interest.
Here are a few examples where good equipment financing / equipment leasing companies can outshine the bank by offering fewer regulations on financed equipment:
Financial Statements and Tax Returns
Many equipment financing companies will finance equipment from an application only, meaning no digging out years of forms and/or tax returns. This makes everything a lot easier for a company looking to finance less than $500k of equipment (which covers most small business needs).
The bank usually asks for a mountain of paperwork.
Generally, when a bank lends money for business equipment, they impose a blanket lien on the company. That means everything in the company is technically tied up in the loan. Even things that exceed the value of the loan are tied up. This is usually buried in the fine print, and a company may not find this out until they try to sell something (an old machine or vehicle, perhaps) – they will need the bank's permission. Which they may not get. Oops.
Conversely, most good equipment financing companies will not require blanket liens. This allows a company to do whatever they want with their assets, without interference.
Minimum Bank Balances
A bank will not only want a small business borrower to have an account with them, they will also require that account to be kept at a certain level - sometimes as much as 80% of the equipment's value. Which is a little odd – technically, if a business cannot withdraw that money, they are really borrowing their own money, aren't they?
A reputable equipment financing company has no interest in how much you keep in the bank after the loan is given.
Requalifying Every Year
Many banks will want equipment leasing customers to requalify for the lease every year. So you'd better not have an off year that makes you look bad on paper.
An equipment leasing company won't care if you requalify (or not) for the lease a year later. As long as you make your payments, you won't be bothered.
When searching for an equipment lender, it's important to look at the entire picture. Small businesses like fewer regulations, whether they are dealing with the government, or looking to grow their company by financing equipment, vehicles or software.
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