Financing equipment in all markets is always a slightly moving goal. Strict lending rules are constantly changing as insurers and credit teams are forced to make the right decision; their work depends on it. One-sided squeezing for lenders is to minimize bad debt by avoiding financing to customers who end up in default. On the other hand, lenders and investors must make a profit, and federal regulations require the approval of a certain number of loans. The scenario is disappointing for both the client and the financial agent, but we can confirm that investors are still lending and approvals are much higher than last year.
What are some general guidelines for approval?
Full financial disclosure is best for a quick decision. Knowing what your loans, assets, liabilities and how your company looks like will provide the insurer with a complete picture, thus allowing them to offer the best possible terms. Hiding bad debts almost always comes out and just slows down or stops the appraisal process, so put all your cards on the table. Explain specific losses or why some bills remain unpaid.
Check your own credit rating or Dun & Bradstreet report; if something negative pops up, try to correct or correct it before filling out an application; there are many agencies that help to quickly adjust or fix the loan. Correct the problem and have proof that it is cleared; this step will show the insurer that your loan is being managed properly.
If you are a smaller business, be prepared to PG (personally guarantee) your finances. This is a full guarantee for your assets as a pledge that you will make your payments. If you don’t, then like any lender, they will take leverage or take your assets to pay off the debt. Years ago, small businesses were not regularly requested by PG, but now they are. Lenders feel, if you don’t “believe” in your business and are willing to stand behind it, then why should you. Side note; often people with high net worth with poor cash flow feel they need to get approval based on how much they cost. This is often not the case, lenders are not involved in filing lawsuits and pursuing assets for repayment, which often results in a loss for them. They want to lend to businesses that are likely to repay them through their normal business operations.
Finally, write a brief summary of yourself, your business and why applying for funding will benefit your company. Whether you are a salesperson or a borrower, putting a human touch into a financial application goes much further than many people realize. Describe the duration of the business, who are the owners with short experience, what products you sell and the areas or markets you serve, and describe the opportunities. In this way you would describe the business in a two-minute acquaintance with a stranger.
This market requires awareness and flexibility on both sides of the deal; not what lending was five years ago, but in the long run it will be much better for all of us. Remember that you want to borrow money from a stranger who should feel comfortable with your ability and desire to return it.