Latest Posts

Mobile device ban for pedestrians up for final vote at city council

Is Mobile App Translation Optimized for Your Target Market Locations? It is a fallacy to anticipate that having an internet site flawlessly designed and adequately...

DHS Says New Security Is Needed for Mobile Devices and Networks

Sales by Implementing Mobile Devices Payment Here are 5 approaches which could help improve your sales by way of presenting clients with cellular payment Incorporate mobile Devices Networks and...

Peak Performance in Sports

In the sports arena, peak performance in sports has always been a much sought after state by players and coaches of all levels. Whether...

Nokia N95 – Mobile Phone Technology with Serious Style

Nokia  is the market leader in the mobile phone industry and although they have been challenged for the top spot on several occasions have...

Your Bank and Business Financing – Reality Check




Business owners and managers want to compare equipment finance companies to their bank and for a good reason; a bank is a company’s first point of reference when borrowing money or financing equipment or an expansion project. A bank is the most obvious place to start and a secure place to store your money and use their multiple services. But what a bank does not do well, both historically because of their structure and the recent tightening of the credit market, is offer business financing for capital assets (equipment). Yet many people get confused when looking for an equipment loan because they are not seeing the whole picture; this is a case where you definitely want to compare apples to apples to get the best results.

Here are a few points to compare; these are not set in stone but based on years of experience, these trends apply a majority of the time.

1) Total Dollars Financed – banks normally require that you keep a balance of 20% or 30% of the equipment loan amount on deposit. This means they are only financing 70% or 80% of your equipment costs because you have to keep a certain amount of YOUR money in a fixed account for the duration of the loan. In contrast, an equipment finance company will cover 100% of the equipment including all “soft” costs and will only request a one or two month prepayment. No fixed deposits required.

2) Soft Costs – banks also will normally not cover “soft” costs like labor, warrantees, consulting and installation which means these costs come out of your pocket. An equipment finance company will cover 100% of the equipment price including “soft” costs and some projects can be financed with 100% “soft” costs which no bank would ever consider.

3) Interest Rates – this is the most popular question in the finance world; what’s my rate? If the bank requires 30% deposit in a fixed account then that automatically raises a 5% interest rate to a 20% rate. Now people will argue that you get that deposited money back at the end of the term but that is money which you do not have access to and has an opportunity cost associated with it. Equipment finance companies target their financing rates between 3-5% for cities and 7-9% for commercial financing which is a real fixed rate and not under-stated as the bank rates can be thus independent finance company rates are very competitive with “true” bank rates.

 

Related Articles : 

4) Process Speed – banks often take weeks to review and approve a finance request while independent finance companies normally only take a few days and can work much more quickly. Finance underwriters only review business financing while a bank has other types of requests clogging their channel.

Banks also have many more levels of approval and review to pass while independent finance companies normally only have two, underwriting and credit committee. Even with complicated deals, the finance company’s process is always faster.

5) Guarantee – banks require, as a standard part of their documentation, a blanket lien on all assets, both personal and business assets are used as guarantee against default on the loan. Your business assets, your home, your car, and your boat can all be on the line when entering into a bank transaction. This may also be the case with an equipment financing company but if your business operation is solvent then only your business will be listed as collateral and not your personal assets; this is known as a “corp only” approval.

6) Monitoring – banks require yearly “re-qualifying” of all their business accounts which means on the anniversary date of your loan each year, you must submit requested financial documents to assure the bank that everything is going well and nothing has affected your business in a negative way. Finance companies do not require anything during the term of the loan or finance as long as the monthly payments are made on time. Nobody will be checking into your business or policing what you do.

When comparing your bank financing to an independent equipment finance company, you have to make sure you are evaluating all the key parameters, not just one. Clearly, the fine print and terms of the transaction are more important than the big numbers. Banks work well within their space but have proven time and again not to be as flexible or solution-oriented as an independent finance company which solely focuses on business lending can be.

Lester M. Salvatierra has 15 years experience as a licensed Finance Specialist with First U.S. Finance. He helps small to mid-size companies lease or finance a wide variety of equipment and special projects nationwide. Sign up now at: http://www.firstusfinance.com/blog and follow his blog to get the latest valuable updates on the business financing market.




Latest Posts

Mobile device ban for pedestrians up for final vote at city council

Is Mobile App Translation Optimized for Your Target Market Locations? It is a fallacy to anticipate that having an internet site flawlessly designed and adequately...

DHS Says New Security Is Needed for Mobile Devices and Networks

Sales by Implementing Mobile Devices Payment Here are 5 approaches which could help improve your sales by way of presenting clients with cellular payment Incorporate mobile Devices Networks and...

Peak Performance in Sports

In the sports arena, peak performance in sports has always been a much sought after state by players and coaches of all levels. Whether...

Nokia N95 – Mobile Phone Technology with Serious Style

Nokia  is the market leader in the mobile phone industry and although they have been challenged for the top spot on several occasions have...

Don't Miss

MNO Portal Services For Mobile Operators

In the current scenario of declining voice revenue and greater competition, mobile operators see mobile content and applications as a way to both increase...

Windows Phone – Future of Mobile Operating Systems

Rapid advancements in electronics and telecommunications technology brought about a revolution in the way people communicate. The computer, which used to be bulky and...

Android Mobile Operating System Market Dominance

Android is Mobile Operating System (M-OS) that was initially developed by Android Inc., a company that was purchased in 2005 by Google. This mobile...

Enterprises – What Mobile Operators Are Not Telling You

Businesses are experiencing the proof in the pudding - mobile(text) messaging is a very powerful marketing tool and some enterprises are catching on to...

The History Of The Android Mobile Operating System

Android devices enjoy a majority share in the total sales volume for all smartphones and tablets. This could be attributed to several reasons, the...

Stay in touch

To be updated with all the latest news, offers and special announcements.