| Equipment financing lenders, as well as
| |
| | want to see that any company applying for
|
| banks, use the Five Cs to evaluate loan
| |
| | a loan earns enough money to meet
|
| applications: Character, Credit, Cash
| |
| | payroll, cover fixed operating expenses,
|
| Flow, Capacity and Collateral. However,
| |
| | and comfortably make timely payments on a
|
| while banks look at small-to-medium size
| |
| | new equipment loan or lease. While there
|
| companies from a Fortune 500 perspective,
| |
| | are a number of ways to define cash flow,
|
| equipment financing companies see
| |
| | lenders most often calculate the cash
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| applicants from a small business
| |
| | flow available to repay new debt as net
|
| perspective, which highlights a sixth C:
| |
| | profit plus such non-cash expenses as
|
| Common Sense. Here is what a lending
| |
| | amortization and depreciation. Capacity -
|
| institution means when referring to the
| |
| | Capacity is similar to a football team's
|
| Five Cs: Character - Every lender wants
| |
| | depth chart. The capacity to weather bad
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| to understand what type of borrower an
| |
| | times is equally important to a company
|
| applicant will be in order to make smart,
| |
| | seeking funds. Capacity acknowledges that
|
| safe credit-granting decisions. The
| |
| | sometimes unforeseen things happen: a key
|
| longer a company has been in operation,
| |
| | employee becomes unable to work; a major
|
| the more its payment history and
| |
| | customer is lost; an economic turn-down
|
| outstanding credit reveal management's
| |
| | drastically reduces demand for product or
|
| attitude toward debt and making timely
| |
| | services. Any number of other unlikely -
|
| payments. Public records and references
| |
| | yet possible - disruptions can negatively
|
| can come into play; still, the most
| |
| | affect a company's cash flow. And these
|
| reliable yardstick is the character of a
| |
| | disruptions can be temporary or
|
| smaller company's owners. How they manage
| |
| | permanent. So, capacity measures a
|
| their personal financial obligations is
| |
| | company's ability to pay off an equipment
|
| usually a reliable indicator of the
| |
| | loan or lease with cash reserves or its
|
| likelihood of their making timely
| |
| | ability to quickly convert real estate,
|
| payments. The more closely held a
| |
| | stock, or other assets into enough funds
|
| company, the more attention given the
| |
| | to cover debt. Collateral - How much
|
| personal credit history of those in
| |
| | collateral, above and beyond the
|
| charge and their prior business history.
| |
| | equipment being financed, a company needs
|
| No matter how solid a business plan
| |
| | to secure a loan or lease depends largely
|
| appears and how reliable a company's
| |
| | on the nature of the lender and status of
|
| owners have been in the past, the
| |
| | the business. A traditional bank often
|
| realistic lender also wants the assurance
| |
| | requires a blanket lien on all assets of
|
| of personal guarantees from the company's
| |
| | the business while an equipment finance
|
| owners. This may take the form of a
| |
| | company normally uses only the equipment
|
| signature or a pledge of cash or other
| |
| | for collateral. A few lenders also offer
|
| collateral. Credit - Business credit
| |
| | sale-leasebacks and refinancing of
|
| reports offer a quick glance at a
| |
| | existing equipment debt. This allows a
|
| company's willingness to pay trade
| |
| | company to free up cash flow or lower
|
| accounts on time, as well as any
| |
| | their monthly payment through equipment
|
| derogatory public records, such as suits,
| |
| | loans or leases. Common Sense - Every
|
| liens, or judgments that negatively
| |
| | decision to purchase and every decision
|
| affect a company's credit rating. Such
| |
| | to grant financing must be based on
|
| reports also show any UCC filings.
| |
| | common sense. A lender needs to
|
| Potential equipment lenders are
| |
| | understand how additional equipment will
|
| interested in the depth of a business's
| |
| | increase the company's stability and
|
| borrowing history. The longer a company
| |
| | growth. Notwithstanding the risk every
|
| has been in business, the easier it is
| |
| | lender takes and the gamble every company
|
| for a lender to determine credit stature;
| |
| | makes when purchasing new equipment, for
|
| a good ten- or twenty-year credit history
| |
| | both lender and borrower, the foundation
|
| obviously carries enormous weight. This
| |
| | of a decision to finance equipment begins
|
| places a startup company less than two
| |
| | and ends with common sense.
|
| years old at a disadvantage. So, when
| |
| | This article was written courtesy of
|
| traditional data sources, such as Dun &
| |
| | Crest Capital, a a commercial equipment
|
| Bradstreet and Paynet cannot supply
| |
| | financing, business equipment leasing and
|
| adequate information, the personal credit
| |
| | software financing company servicing all
|
| histories of a company's owners become
| |
| | 50 states.
|
| highly important. Cash Flow - Lenders
| |
| |
|
