Gerald G. Oestreich
Thirty-nine years ago, I was stopping by to visit a new vendor who was in the business of selling new and used garbage trucks and containers. As I approached the front door, I was met by a gentleman about my age who said, “Chuck said I should see you, because my bank doesn’t want to finance my used rear load truck.”
That was my entry into the world of offering help to the many people in the industry whose bankers cannot keep up with their rapid growth and expansion. Bankers have no idea how much more a 10-year-old truck chassis is worth, with a roll-off frame or rear load packer mounted on the back of it. The truck might be worth double the book value with a good piece of equipment on the back end.
Banks will not take into consideration how much your income is going to improve, when you start that new contract in a month or two with that village or homeowner’s association. They also will not acknowledge how much your income is increasing because one of your competitors went out of business.
Unfortunately, rules and regulations prevent many bankers from moving beyond last year’s tax returns and your most recent six-month-old Profit and Loss Statement. Additionally, most of them will not lend against carts or containers that are going to be delivered all over town to customers, earning good money for you, because the bank is concerned about finding them if you default.
A Financing Alternative
Fortunately, leasing companies and business financing companies do not have the same set of auditors looking over their shoulders that bank regulations require. This allows them to take a look at what your past three months’ business bank statements reveal and get a good feel for your current level of business, as opposed to what you did last year. Leasing and business financing companies also take a good look at what is revealed by your personal credit report and are able to assess and review how you have been handling your personal debt.
Business owners often feel that if their business is paying all of its debts on a timely basis, everything should be ok. However, for the average family-owned business, how they handle their personal debt is equally as important. It is a big indicator of the financial health of their small business. There are other services that report on the handling of business debt that lenders also look at and review. Repossessions, low credit scores and recent tax liens can frequently challenge qualifying for a competitive rate.
Paperwork Challenges
Being able to borrow $250,000 for a new truck, $45,000 for a 10-year-old truck or $10,000 for a small order of toters by just submitting a credit application by e-mail or fax is usually pretty impressive. Submitting a credit application, having it approved, plus often signing eDocs on your phone the same day, can be really helpful. Payment to your vendor can also be completed the same day in many instances, allowing for immediate shipment. However, it does not always work that way depending on the lender. Toter or container financing may only be available from a bank in conjunction with a vehicle or some other collateral.
Sometimes mountains of paperwork and financial records, such as business and personal tax returns, plus current business and personal financial statements, are required by the average bank. They can be challenging to pull together while also running a business. Plus the accountant might not have yet prepared the current requested documents. The bank rates may be a bit lower, but there is very competitive pricing available from brokers arranging the financing and who make the process easier and faster. And time is money! Banks may have great rates but only two answers: Yes or No!
Brokers have many different rate appropriate options and terms available, depending on time in business, personal credit, comparable borrowing history and business credit.
Private lenders usually only require a signed credit application, an equipment quote and sometimes the first page of the last three month’s business bank statements, for a credit approval in two to four hours rather than a couple of weeks. The speed of approvals and financing is improved because of the business credit models and platforms used by the private lenders.
Finding Your Private Lender
Look for a private lender who is familiar with your industry and has a good record plus good references with the vendors in your industry. Sometimes the lenders or brokers can be found in trade journals of that industry. The dealers and manufacturers might recommend lenders or brokers they work with regularly.
In summary, look for a truly experienced source in arranging financing in your industry. They need to have numerous lenders to cover all credit and collateral situations, whether you are buying from a private party or a dealer. They need programs for startups as well as appropriate programs for a 25-year-old company.
Gerald G. Oestreich is President of ABC Lease Accounting, Ltd Dba ABC Leasing & Financing (Delmar, NY). He started in the business in 1979 and has been a Charter Member of the National Association of Equipment Leasing Brokers (NAELB), as well as former President and Board Member. He has recently partnered with his son Greg Oestreich who has opened his office in the Tampa area. Gerald can be reached at (518) 857-5206 or e-mail [email protected]. For more information, call Greg Oestreich (518) 330-4113 or e-mail [email protected].