Can A Credit Compagny Switch From A Lease To Financing A Finance Approval Can Be a Moving Target

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A Finance Approval Can Be a Moving Target

Equipment financing in all markets is always a slightly moving target. Hard credit rules are constantly changing because underwriters and credit teams are under pressure to make the right decision; their jobs depend on it. The pressure at one end for lenders is to minimize bad debt by avoiding financing customers who end up in default. On the other hand, lenders and investors must make a profit and are required by federal regulations to approve a certain number of loans. The scenario is frustrating 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 common approval guidelines?

Full financial disclosure is better for making a quick decision. Knowing what your credit looks like, assets, liabilities and how your business is doing will give the underwriter a complete picture that will allow them to offer the best possible terms. Hiding bad debts almost always backfires and simply delays or ends the appraisal process, so put all your cards on the table. Explain specific losses or why certain invoices went unpaid.

Check your own credit score or Dun & Bradstreet report; if something negative comes up, work to correct or repair it before filling out an application; There are many agencies that help to fix or repair credit quickly. Correct the problem and have proof that it has been removed; this step will show the underwriter that your credit is being managed properly.

If you are a smaller business, be prepared to PG (personally guarantee) your finances. It is a blanket guarantee with your assets as a guarantee that you will make your payments. If you don’t, like any creditor, they will seize or tap your assets to pay off the debt. Years ago, small businesses were not regularly asked to PG but now they are. Lenders feel that if you don’t “believe” in your business and are prepared to defend it, then why should they. Side note; often high net worth individuals with poor cash flow feel they should be approved based on their worth. This is often not the case, lenders are not in the business of filing lawsuits and chasing assets for repayment, which often results in a loss for them anyway. They want to lend to businesses that have a high probability of paying them back through their normal business operations.

Finally, write a brief summary of yourself, your business, and why applying for funding will benefit your business. Whether you are the seller or the borrower, adding a human touch to the financial application goes far beyond what many people think. Describe your time at the company, who the owners are with a brief background, what products you sell and areas or markets you serve and describe the opportunities. This is how you would describe the business in a two-minute pitch to a stranger.

This market requires awareness and flexibility on both sides of the transaction; it is not what the loan was five years ago, but in the long run it will be much better for all of us. Remember, you are asking to borrow money from a stranger who needs to be comfortable with your ability and willingness to pay it back.

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