Financial approval can be a moving target
Financing equipment in all markets is always a moving target. Hard credit rules are constantly changing because insurers and credit teams are under pressure to make the right decision; their job depends on it. The pressure on one hand for lenders is to minimize bad debts by avoiding defaulting financing clients. On the other hand, lenders and investors must make a profit, and federal regulations require that they 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 borrowing and approvals are much higher than last year.
What are some general approval guidelines?
Full financial disclosure is best for a quick decision. Knowing what your credit, assets and liabilities look like and how your business is performing will give you a full picture of the insurer and they can offer the best possible conditions. Hiding questionable debtors almost always comes up and simply slows or ends the evaluation process, so put all your cards on the table. Explain specific losses or why certain bills went unpaid.
Check your own credit score or Dun & Bradstreet report; if something negative pops up, work to correct or fix it before filling out an application; There are many agencies that help to correct or repair credit quickly. Fix the problem and prove that it has been solved; this step shows the insurer that your credit is being managed correctly.
If you are a smaller company, be prepared to PG (personally guarantee) your finances. It is a general guarantee with your assets as a promise that you will make your payments. If you don't, they, like any creditor, will use or take your assets to repay the debt. Years ago, small businesses weren't regularly asked PG, but now they are. Lenders feel that if you don't "believe" in your business and are willing to stand behind it, why would they? Footnote; often wealthy individuals with poor cash flow feel they should be approved based on how much they are worth. This is often not the case, lenders are not filing lawsuits and chasing assets for repayment, which often results in a loss. They want to lend money to companies that have likely paid it back through their normal business operations.
Finally, write a short summary of yourself, your company and why the funding application will benefit your company. Whether you are the seller or the borrower, giving a human touch to the financial application goes much further than many people realize. Describe the duration of the business, who are the owners with a short background, what products you sell and which areas or markets you serve and describe the opportunities. That's how you would describe the company in a two-minute introduction to a stranger.
This market requires awareness and flexibility on both sides of the transaction; It's not what lending was five years ago, but it will be much better for all of us in the long run. Remember to ask to borrow money from a stranger who needs to feel comfortable with your ability and willingness to repay them.
