Equipment Financing -- Got Money?February 2009 By Erik Cagle
Cash flow lending certainly is sporting a black eye these days. In recent months, an untold number of printers have shuttered their doors because their banks have been unwilling to extend them a revolving line of credit. Term loans for equipment, on the other hand, may not be as unattainable as you think. And for those with excellent financials, a pleasant surprise awaits.
How difficult it is to get financing in the current climate is a matter of opinion, but several authorities on lending see a golden opportunity for those companies that have historically taken great care in managing their businesses.
“Standards are more stringent; the deals are looked at more carefully,” says Jeff Shaner, executive VP with Great Atlantic Capital. “Deals that might have gone through in 2007 or even last spring, might not get done today. If you rate credits at different levels—A, B, C—maybe we won’t do a C-minus deal now, only C-plus and higher.”
Requisites Still the Same
The burden of proof probably isn’t all that much different now than it was 12 months ago. Requisites include three years worth of financial statements, numbers that indicate profitability, and an ability to fund past and future debt, Shaner notes. The more recent the statements, the better. Obvious red flags are a bad payment history and past bankruptcies, while outdated financials can bog down the process.
Lenders also like the fact that capital equipment retains its residual value. “If you have a strong piece of iron that holds its value well, you might bend your rules a little bit,” he adds, emphasizing the importance of the opening pitch businesses make to lenders in the process of trying to secure a term loan.
For Mickey Urquhart, senior VP of sales for People’s Capital & Leasing, the pitch can make or break a printer’s ability to secure financing.
“I like to see the borrower’s passion for the investment,” he says. “If there’s an ambivalence toward it, that’s a whole different story. The passion to move forward with the technology and the investment is big. I’ve had printers tell me, ‘If I don’t do it, I’ll go out of business.’ I’d rather hear that they’re making the purchase for efficiencies, growth and technological advances.”