What Is The Difference Between Net Worth And Cash Flow A Finance Approval Can Be a Moving Target

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A Finance Approval Can Be a Moving Target

Equipment financing in all markets is always a bit of a moving target. Firm credit rules are constantly changing as underwriters and credit teams are under pressure to make the right decision; their jobs depend on it. On the one hand, lenders have the task of minimizing bad debts by avoiding financing clients who end up in default. On the other hand, lenders and investors need to make a profit, and federal regulations require them to approve a certain number of loans. The scenario is frustrating for both the buyer and the financial agent, but we can confirm that investors are still lending and approvals are much higher than last year.

What are the usual approval guidelines?

Complete financial information is best for quick decision making. Knowing what your credit standing, assets, liabilities and how your company is doing will provide the sponsor with a complete picture, allowing them to offer the best possible terms. Hiding bad debts almost always comes to light and simply delays or stops the appraisal process so you put all your cards on the table. Explain specific losses or why certain bills remained unpaid.

Check your credit score or Dun & Bradstreet report; if something negative appears, try to correct or fix it before filling out the application; There are many agencies that help to quickly correct or repair credit. Fix the problem and have proof that it is fixed; this step will show the underwriter that your credit is being properly managed.

If you are a smaller company, be prepared to manage (personally guarantee) your finances. It’s a blanket bond with your property as a pledge that you’ll make your payments. If you don’t, then like any creditor, they will use or take your assets to pay off the debt. Many years ago small businesses were not regularly asked for PG, but now they are. Lenders believe that if you don’t “believe” in your business and aren’t prepared to stand behind it, why should they. Additional note; often high net worth individuals with poor cash flow feel they should get approved based on what they are worth. This is often not the case, lenders are not in the business of filing lawsuits and chasing after assets for repayment, which often results in a loss for them anyway. They want to lend to companies that have a high probability of paying them back through their normal operations.

Finally, write a brief summary about yourself, your business, and why the funding request will benefit your company. Whether you’re a supplier or a borrower, putting a human hand into a funding application goes a lot further than many people realize. Describe the length of the business, who the owners are with a brief background, what products you sell and the areas or markets you operate in, and describe the opportunities. This is how you would describe the job in a two-minute introduction to a stranger.

This market requires awareness and flexibility on both sides of the transaction; lending is not what it was five years ago, but in the long run we will all be much better off. Remember, you are asking to borrow money from a stranger who must be satisfied with your ability and willingness to pay it back.

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