Equipment Financing -- Got Money?
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.”
When Urquhart meets with prospective borrowers, he looks at the following criteria: collateral, ratio of loan to value over the term of the loan, and historic and prospective cash flow (net income, plus depreciation, plus interest). Other elements he uses to gauge eligibility are balance sheet analytics—the liquidity of the company—and leverage, aka total liabilities to net worth.
Surprisingly, some printers are greatly mistaken as to their ability, or inability, to acquire new equipment. Some may be better off buying a lesser, more affordable piece of machinery. But the lender’s office is a terrible place for discovering that fact. Due diligence on the part of the printer can prevent this, or at least safeguard against the possibility. Meanwhile, other printers gauge general economic conditions to reach the assumption that their shop cannot add new gear, when, in fact, a purchase can be justified.
Urquhart sometimes sees the fear of commitment. This syndrome manifests itself in various forms, such as the printer’s unwillingness to provide added collateral, refusing to give personal guarantees or the failure to provide accountant- prepared statements.
Good Deal or Bad?
These aforementioned lenders have shown a willingness to make a deal. But the question is, can a good deal with favorable terms be had under these circumstances? Stuart Margolis of MargolisBecker LLC, a business and management advisory firm for the graphic arts, sees a mixed blessing for likely borrowers.