The Leasing GroupThe Leasing Group

By Bob Callander

Borrowers…What are You Looking For?

Borrowers…What are You Looking For?

(Seven Questions)

 

So, your company is acquiring new equipment and you’re ready to search for a lender, loan broker, leasing company or maybe even a supplier financing option.  In today’s economy, the choices are many and growing fast.  With such a vast array of financing providers how does a business sort them out?  Maybe it’s simply a matter of deciding the best fit.

There are certainly any number of traditional big banks in your market, in addition to numerous loan shops, smaller community banks, equipment leasing specialists, internet lenders and captive financing companies.  Only you can decide which is best for your needs.

To help you sort them out, start by making these comparisons:

  1. Do I need a traditional big bank with unlimited capacity or would a smaller community bank or perhaps non-traditional lender provide enough capacity?
  2. Do I prefer an on-line application or a face-to-face experience?
  3. Is an existing relationship best or someone new?
  4. Should I seek a provider with the lowest rate along with possible side fees and charges, or a provider offering a fair rate with no surprises?
  5. Do I need a quick credit decision (less than ten minutes) or would a processed decision based on mutual respect, trust and communication be fast enough?
  6. Is this a one-shot deal or is it better to line up future financing with a trusted credit partner for many deals over many years?
  7. Am I okay with a lender who will plug my company’s financial statements into their credit scoring model or one which will look beyond the numbers and ask questions to personally understand my story?

It all ties back to finding a lender that serves your needs first.  How important is pricing?  What about trust, timeliness, longevity, integrity, experience?  How important is building a future relationship?

There is no right or wrong lender for your business.  Most are very good at what they do.  So, go find the one that best fits your needs.

By Bob Callander

Credit Scores are on the Rise

Credit Scores are on the Rise

Summarized from The Wall Street Journal

 

Consumer credit scores continued to climb in the U.S. this past spring due primarily to lower unemployment and steady economic growth.  This trend is further enhanced by the credit agencies and the way they report historical consumer financial problems.  Foreclosures and bankruptcies originating during the “great recession of 2008 – 2010 are just now starting to fall off individual credit reports.  More than six million U.S. adults will soon have their recession-related financial problems completely wiped out.  Higher credit scores will follow.

Average credit scores nationwide surpassed 700 in April 2017, the highest average scores since 2005.  This helps the economy since higher scores enable lenders to not only make more loans but make them at lower / less risky interest rates.  Most affected will be the purchases of “big-ticket” items as consumers buy more cars, boats, appliances, furniture, and homes.

Credit card borrowing, already on the rise, should also continue to trend further up thanks to higher card limits and more competitive / lower interest rates.

Altogether, higher credit scores are good for borrowers, lenders, and the economy in general.  Look for a flood of new loan solicitations and credit card promotions.  The economic cycle leading to easier credit for more credit worthy consumers is well underway.

By Bob Callander

What to Know Before Your Manufacturing Company Applies for Credit

What to Know Before Your Manufacturing Company Applies for Credit

As a manufacturing or processing company, you must constantly stay current with technological improvements in advanced machine tools, computerized conveyors, material handling equipment, storage facilities, etc.  This equipment does not come cheaply.  While lease and loan financing are available, applying for credit can be tedious, time-consuming, and frustrating, even for those companies with extensive and positive credit history. Fortunately, there are ways to make this process less painful, while also enhancing the probability of credit approval.  Wouldn’t it be nice to hear, “Yes, your credit is approved,” more often?

It all starts by understanding credit from a financial institution’s point of view.  Credit professionals typically cope with two opposing forces…wanting to extend credit as often as possible and wanting to keep their institutional money safe. Here are a few ways you can help:

  1. Ask for a reasonable amount of credit in relationship to your company’s capacity to pay it back. Cash flow is the key. You must show how and where your company will get the money to make repayment.  Will the loan be used to lower your costs, produce greater revenue, or both?  Be specific and detailed.  This is exactly what your financial institution is looking for.
  1. Tell your company’s story in a way that makes sense and helps your financial institution understand your complete history. When and how did you start your business?  How much did you personally invest?  Where did other money come from?  What are key elements of your success?  How will adding new equipment now help you expand?  Will the cost of expansion pay for itself?
  1. Prepare and provide historical financial statements that answer the questions your financial institution will ask. The numbers must support your request.  Confusing and inconsistent financial statements always throw up a red flag, thus slowing the process and lowering the probability of credit approval.
  1. Don’t try to hide the bad news. Every business goes through difficulties.  Your financial statements will show this.  Talk about these problems as openly and willingly as you would your successes.  If you make your financial institution dig for the explanations you will slow the process.  They always discover the whole truth eventually, so why not just save everyone a lot of time.  Besides, your honesty will build trust and credibility.

Prepare and provide financial projections to help your creditor see into your future the way you do.  They don’t know your business or share your vision.  If your projections are both realistic and positive, they’ll hop on board and want to help you succeed.  That’s when you will hear them say … “Yes, your request is approved.”

By Bob Callander

Top Five Questions to Ask before Financing Medical Equipment

Top Five Questions to Ask Before Financing Medical Equipment

Starting a medical practice or any other healthcare business is tough. Running it successfully over several years can be even tougher, especially given the slow pace of government and insurance company payments. With unpredictable cash flow, there’s very little forgiveness if a new business stumbles out of the gate. Everything must be right, including the equipment financing.  Here are the top questions to ask your financing provider…before agreeing to terms and conditions of an agreement:

  1. As the owner of the business or practice, am I personally responsible for this debt?

Typically, the answer is YES you are.  However, once your business experiences several years of confirmed profitability, liquidity inside the company, accumulated unencumbered assets, and good credit history, owner guarantees will become less important to lenders.

  1. Must new debt be secured with business and/or personal assets other than the financed equipment itself?

Maybe. While this is often a requirement, it doesn’t have to be. The strength of your personal credit and your business’s historical profitability will come into play. Also, while bank loans are more often approved based on the value of all business assets, equipment leases tend to be secured only by the assets included in the lease.

  1. If my business fails before the equipment debt is paid off, will I still owe the entire balance or will the equipment’s resale value cover what is owed?

Banks do not want to be in the used equipment business. Neither are they venture capitalists. Prepare to pay off equipment loans and leases in full. If the equipment is worth more than owed, sell it after paying off the debt, not before.  In short, don’t make selling the equipment your banker’s responsibility.

  1.  If my business takes off, will I likely qualify for additional financing to expand?

Maybe. Once you show a proven and profitable business concept and a good payment history, financing will become easier. Lenders want to see you do well. And, they want you to come back often, if you can show steady and profitable growth. Expect the financing doors to open wider over time.

  1. When loan and/or lease payments are not made on time, should I expect added fees, interest assessments, late penalties, etc.?

Financing contracts typically contain fees, penalties and additional interest if you don’t live up to the payment terms. This should be expected, and can get quite expensive. Don’t take missed and late payments lightly. Your personal credit score will be affected along with your business credit.  Avoid this!  It’s best to make payments on time.

Equipment financing and leasing for any business can be a great way to leverage your capital, but know what to expect. Ask these questions before agreeing to any non-cancelable agreements and don’t sign until you have the answers. You’ll be glad you did.

By Bob Callander

Buying, Borrowing and Leasing

Buying, Borrowing and Leasing

Which is best?

#2 – Bank Loans

 

When considering business equipment financing, your bank is often the first and preferred “go to” solution.  You know your banker.  You trust your banker to be truthful and fair.  Your credit history is good.  You and your bank are business partners with a long and mutually beneficial relationship.

The use of bank financing is an obvious way to pay for new equipment without burning your pile of operating cash.  But is it always the right solution for your company’s future?

First consider the following questions:

  1. What is your “global” borrowing capacity?  Does your bank also finance your building, your home, personal vehicles, and your kid’s education?  How will adding one more loan affect your entire borrowing relationship?  Given other obligations, can your bank make a quick decision, or will your cumulative loan balances slow the process, requiring lengthy bank evaluation at multiple decision levels?
  2. What about loan covenants and collateral attachments?  Will your bank require all business assets to be pledged or ask you to maintain specific cash deposits?  How about cash flow coverage ratios and debt ratios?  Will these covenants restrict growth during the loan term?
  3. What about your loan’s interest rate?  It might look reasonable at first glance, but are there fees attached?  Can you payoff early without penalty?  Are there additional charges applied to late payments?  Is the interest rate fixed for the full loan term or is it adjustable or floating, tied to an index such as the Federal Reserve lending rate?

A bank loan can be a good option when financing equipment purchases, but not always the best.  Just make sure you understand the loan process, read the loan documents, and keep options open should your financial condition change during the loan period.

By Bob Callander

Buying, Borrowing and Leasing

Buying, Borrowing and Leasing

Which is Best?

#1 – Buying with Cash

 

Let’s assume your company is well managed, growing, and profitable and has accumulated a sizable reserve of cash.  Sales have outpaced your production and you must now acquire new equipment to propel your company to the next level.

Is there any reason to seek a bank loan or lease financing when you can easily tap a free and readily available cash reserve?

First, ask this question…”Is available cash really free or does it have a hidden value?

The earning power of cash is often the quickest and easiest way to calculate its value.  With interest on money market and short term certificates of deposit sitting at all-time lows, idle cash can appear to be worth very little.

But wait, another way to value cash is to consider its worth based on what it can do for your company and the problems it can avoid or solve.  For example, cash can fund outstanding receivables and stagnant inventory and can cover payroll swings and unexpected large expenditures.  Available cash often smoothes out the highs and lows in a company’s liquidity, allowing for greater flexibility and peace of mind during economic downturns.  Cash availability can fuel a company’s growth too.

Any fixed asset purchase is a long term event that requires a long term solution.  Cash is a short term asset and a great buffer against unpredictable contingencies.  Once cash is used to fund equipment and vehicle acquisitions, it is no longer available for more immediate uses.  Borrowing and/or lease financing might be options worth considering.  They both use OTHER people’s money!

shark tank small business advice

By Bob Callander

Traps Entrepreneurs Must Avoid #3

Trap #3 – Arrogance

The business textbooks are strewn with dead or dying bodies of the once all powerful, now struggling, and long forgotten…Penn Central, Kodak, TWA, Howard Johnson and AOL, to name a few.  These companies became too sure of themselves, unwilling to change, too comfortable with success and certain that they, rather than market forces, were in charge.  Arrogance got in the way of creativity and adaptability, the very forces that carried them to their pinnacles.

Successful entrepreneurs often credit a “stay hungry” attitude as the key to their growing profitability.  While that’s fine, don’t forget to “stay humble” too.

business leasing success approved

By Bob Callander

Traps Entrepreneurs Must Avoid #2

Trap #2 – Greed

Better, faster, easier, more flexible, more responsive, more caring, less hassle…these are valuable in today’s service-starved and price-driven economy.  They might even be the strengths that separate you from your less successful competitors.  Superior service is worth a premium price, even when your product or service is considered a commodity.

But don’t cross over to greedy.  Your customers always know when you’ve gone too far and your price is too high.  That’s when they disappear without even telling you.

Women Owned Business - Louisville Equipment Leasing

By Bob Callander

Traps Entrepreneurs Must Avoid #1

Trap #1 – Indecision

There are times to wait, to analyze again and again, to ask more questions.  That’s fine as long as indecision doesn’t become a strategy for inaction.  Entrepreneurs thrive on speed.  Our strength lies in beating the larger, slower and less nimble.  Absolute safety is not an option.  After all, we’ve already mortgaged our future for our independence.

Go create something truly amazing.  Delay is unacceptable.  The time is now!

winning at business

By The Leasing Group

Finding Your Competitive Edge

Check the Internet any day of the week and you’ll find no shortage of “experts” promoting easy paths to intelligent investing and wealth accumulation. How many times have you seen a title that begged you to see what the latest advice is for business success:  “Follow These Seven Strategies to Achieve Success.”

We’ve done the research for you and found the best business advice without any push to buy our latest book. Why you may ask? It’s simple to us, we want to help our customers become the most successful they can be. We know at The Leasing Group if we can propel you along on your path to success you’ll make our community a better  place to live,work, and grow.

Find an Edge

No company will get far without a solid value proposition, be it price, location, service, experience, quality or whatever else drives revenue.  Every entrepreneur must discover an edge.  What sets you apart from your competitors?  When you figure it out, go tell the world.

Be so good they can’t ignore you.” Marc Andressen, American Entrepreneur

Manage Risk

We evaluate options and make decisions everyday, and options carry risk.  The trick is to manage the process.  Before going bankrupt, the Penn Central Railroad bet the company on the future of passenger trains.  That was a big risk.  Penn would have been better off hedging their bet with automobiles and airplanes.

Be Disciplined

Someone once told us that a good entrepreneur never does anything between 8:00 and 5:00 that can be done between 5:00 and 8:00.  In other words, working hours are made for selling.  Paperwork comes later. That takes a lot of discipline.

Never stop learning.” – Indra Nooyi, Chief Executive Officer of PepsiCo

Stir Emotions

Make a concerted effort to get your customers, employees, and suppliers emotionally attached to your business. Products and services delivered well are great, but without emotional attachment they become another commodity.

Hire character. Train skill.” – Peter Schutz, former CEO of Porsche

Stay Flexible

Back in 2002, Apple was unprofitable.  Early Internet flops tarnished its appeal, its retail stores were viewed as dumb ideas and music-playing iPods were seen, even by some Apple executives, as relatively insignificant. Worse yet, the Macintosh wasn’t selling. Apple was flexible enough to innovate and create products and revenue streams well beyond their core sources of revenue in the past.  The rest is history as some have touted as Apple possibly being the 1st trillion $ capitalized company ever.

We’ve got to make the small things unforgettable. – Steve Jobs, Visionary

Find a market advantage, manage your risks, be intentional and disciplined, while also flexible to changing your entire focus.  Maybe you’ll be an Apple too.

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More Experience, More Sources, More Approvals

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Borrowers…What are You Looking For?
Credit Scores are on the Rise
What to Know Before Your Manufacturing Company Applies for Credit
Top Five Questions to Ask before Financing Medical Equipment
Buying, Borrowing and Leasing
Buying, Borrowing and Leasing
shark tank small business advice
Traps Entrepreneurs Must Avoid #3
business leasing success approved
Traps Entrepreneurs Must Avoid #2
Women Owned Business - Louisville Equipment Leasing
Traps Entrepreneurs Must Avoid #1
winning at business
Finding Your Competitive Edge