When you apply for credit, whether that be personal credit (credit card, mortgage, etc.) or business credit, you provide a lot of information to your lender. The information gives the lender great insight into your financial history and condition and allows them to assess your credit worthiness and their risk. This is standard business practice.
But do you perform the same due diligence on your prospective lenders? Are they the right lender for you?
Particularly when it comes to equipment financing, reverse the roles and ask yourself if you should do business with them?
Why does knowing your lender matter?
There are lenders a plenty and they vary widely. Services and products offered, industry expertise, time in business, levels of customer service provided, type of lender (bank, independent, captive), etc. The key is to find a lender that can best serve the needs of your business.
Getting to know your lender
You can get to know your prospective lender(s) simply by asking a few questions. There are no right or wrong answers, but the answers will help you determine which lender is the best fit. Keep in mind, that there is nothing wrong with having relationships with multiple providers.
What services does your lender offer?
Financial services come in many forms, including checking and savings accounts, commercial and equipment loans, to lines of credit and credit card services. Most banks have commercial banking service offerings, but there is a great deal of difference between traditional banking services (checking and savings accounts) and equipment loan services.
Many banking institutions offer commercial loans, and some offer equipment loans. However, equipment lending is a secondary service for them. Independent equipment finance companies and OEM (original equipment manufacturer) captive lenders specialize in equipment loans and leases and don’t offer traditional banking services. If you are looking for an equipment loan, which would you assume to be the better fit?
In addition to purchasing new or used equipment, you may have need for working capital, or a desire to refinance or consolidate debt. If this is a potential need, you should ask a prospective lender if they provide those products as well.
How deep is their industry and equipment expertise?
What industries does the lender serve? Is your industry within their main service scope?
Industry expertise and equipment knowledge is very helpful when it comes to assessing the value of the equipment being financed, especially used equipment. A knowledgeable lender can assess value internally without using an outside appraiser. Being able to value equipment internally is most often quicker and less expensive than utilizing an outside resource.
A lender’s industry knowledge is very helpful to the credit review process. If the lender understands your industry, they can ask better questions and often render credit decisions faster. Additionally, they understand the nuances of your business, for example, seasonality, and can help structure loans to best serve your needs.
You should also consider the lender’s commitment to the industry. Some lenders finance equipment but then sell the loans to outside loan servicing companies. They specialize in selling the loans but not servicing them, meaning your points of contact and flexibility change after the loan closes.
Banks have a tendency to move in and out of the equipment financing space, offering equipment loans during the economic upturns, and pulling back during the downturns. Dedicated industry lenders are in it for the long haul, regardless of business cycle.
What is the customer service process and who is your point of contact?
When applying for an equipment loan, many borrowers don’t think beyond the initial funding. They don’t concern themselves with ongoing customer service. But what happens if you need assistance?
Will you be able to make a single, direct call to talk with a real person to ask questions? Or will you get stuck in on-hold purgatory trying to find the right button to push to talk to reach a human being?
It’s one thing if you simply need some paperwork – tax documents, amortization schedule, etc. But what happens if you can’t make a payment and simply want to explain your situation to someone who will listen and help you through it? When the going gets tough, will they be there for you?
In it for the long haul
We understand that for some businesses, obtaining an equipment or business loan may not be easy. Past financial issues – late payments, tax liens, bankruptcy, judgements – can seriously limit the number of lenders willing to extend credit, thus limiting your options for financial partners.
But if you do have the opportunity to be selective, wouldn’t you want to work with a lender that specializes in your industry and your equipment? A lender that gives you financing options, no matter the current business cycle? A lender you can count on through the life of your first loan through your twenty-first loan (and beyond). A lender that provides you with a personal point of contact?
If that’s the type of lender you are looking for, give CCG a call or apply now. We’ll be happy to explain our process, our commitment and our desire to help your business grow and thrive.