equipment-financing

Why Equipment Vendors Outsource Customer Financing to Global Financial & Leasing Services

In-house Financing Can Increase Equipment Sales by 30 Percent.

Global Financial Equipment FinancingFarm, medical, construction, restaurant, printing, manufacturing, and logging equipment is a heavy financial investment for business owners. More times than not, the only way for business owners to acquire the costly equipment necessary to sustain or grow their business is through financing.

As an equipment vendor, offering customers financing is a sure-fire way to sell more equipment. However, the world of equipment financing isn’t without complications, including:

• Building and maintaining relationships with financial institutions
• Taking on the risk of financing customers who are a credit risk
• Investing internal time and resources in reviewing applications and verifying applicants’ financial documentation
• Missing out on potential equipment sales and revenue by not financing lower tier credit buyers

Partnering with Global Financial & Leasing Services (GFLS) helps equipment vendors close 30 percent more sales. More importantly, we help you close those sales at no risk to you and without using any of your internal resources.

Could GFLS be the Financing Partner You Need?

If you answer yes to any of the following questions, it’s time to talk to the GFLS team about becoming your equipment financing partner.

Do you currently work with a lender who only finances equipment for AAA-rated buyers?

If the answer is yes, then you could be missing out on a significant number of sales. It has become more difficult for larger financial institutions to approve financing applications for those with “B-type” and “C-type” credit. GFLS specializes in lower tier credit ratings, which expands your pool of buyers to increase your sales.

Are you seeking a partnership with an equipment financing partner who specializes in less-than-perfect credit applicants?

GFLS has a long, successful of financing “B-type” and “C-type” credit because our system looks at the applicant’s “story” and additional lease documentation, allowing us to approve more applications. Great for us, but even better for you. Once the equipment financing application is approved, GFLS pays you for the equipment in full via wire or ACH. The risk is ours, and the sale is yours.

Are you concerned that approving lower tier credit applicants will take too long and cost your team sales?

GFLS’s equipment financing process is simple and fast, even when additional documentation is requested for review. Our team stays in constant communication with applicants, keeping decision turnaround time under 48 hours in most cases.

Would you prefer your financing program be branded under your company’s name?

Offering “in-house” financing is an effective marketing strategy that you can use to increase your market share and differentiate your brand from competitors. GFLS can design financing applications and a seamless process to match your brand standards. Our team then works behind the scene to handle the credit approvals.

Thirty percent more sales without financial risk to you or using your resources is possible by partnering with Global Financial & Leasing Services as your main financial lender or backup financing provider. Our long-standing relationships with publicly traded financial institutions makes GFLS a perfect partner when you want to not only approve “A-type” credit applicants, but “B-type” and “C-type” credit as well. Talk to our team about the possibilities.

Close-up of businessperson give agreement document with graph da

You Need To Package Your “Story Credit”

Important To Submit Good Credit Packages 

Package your story creditSales people are typically “coin operated,” which is to say that they are motivated by money. With that said, it is sometimes surprising to me how many sales people don’t understand the importance of submitting a good credit submission package. The reason for that might be for many of the small transactions, credit scoring drives the credit decision. The only thing the sales person needs to supply to the funding source is a completed and signed credit application and a vendor quote/invoice.

Then again, there are the larger transactions that require additional information, such as financial statements and tax returns. In larger transactions, with credit worthy accounts, nothing much more than those basic items is required. The financials (and/or tax returns) tell the “Story” for the credit committee. The Scoring solution requires minimum input from the sales person, and for the larger transactions the financials and tax returns speak for themselves. However, when the transaction is a “Story Credit,” things seem to become challenging for the sales person. This is where many sales people fail to properly “package” the opportunity to obtain the desired results from the funding sources.

What qualifies as a “Story Credit?”

If the credit submission fails either of the above credit reviews, then likely it now qualifies as a “Story Credit” submission. Here the sales person needs to identify why did it not pass the credit review at the bank. For small and mid-sized businesses (SMBs), the principals of the business will most likely be required to provide their personal guarantee on the financing. When their credit is pulled, the most frequent reason a bank declines the application is a legacy issue. Those legacy issues include foreclosures, bankruptcies, tax liens, short sales, student loan delinquencies, etc. An issue that occurred just six -months ago can negatively affected the borrowers/lessee’s FICO score. The borrowers/lessee’s FICO score might now be 710, but they had a short sale in 2014. To get these credit submissions approved, someone has to find out about the borrowers/lessee’s “Story.”

How does someone tell the “Story?”

If you want to get this opportunity approved, this is where the work begins. You, the sales person with the opportunity fulfills the roll of “Packager.” You need to ask questions of the borrowers/lessee and share that information with your funding source. What happened, how did it get resolved? If it did not get resolved, where does it stand now? Why did they file bankruptcy? If they did not file bankruptcy, but were severely delinquent with a number of creditors, what did they do and why? Are they now caught up or nearly caught up?

So, what is the funding source looking for? Typically, character of the principal, today’s cash flow and to assess the value of the collateral.

The character of the principal is a good starting point. When they faced adversity, how did they handle it? Did they file bankruptcy because of the divorce and walked away from all their creditors? Did they file bankruptcy and entered into payment plans with their creditors, paying everyone eventually all the money they owed? Assuming everything else is okay, the difference in the action one person took versus the other might mean one get approved and the other declined.

Sometimes, the opportunity is based on being awarded a contract or contracts. As a packager, the lease broker, it is important that a copy of these contracts (signed preferred) be included in the credit submission. Then there is the possible mismatch. The contract is for two years and the lessee wants a five-year financing term. Is there any explanation on how that is going to work out?

We had applicants come into our office several years ago who wanted to get a loan. They were local and since they had a credit “issue” on their credit report, it was their intention to make a good impression. We learned in that meeting that they entered into a loan on equipment with a bank several years earlier. Subsequent to that loan, as so many others did in the down turn, the vendor went out of business. We were told that since the vendor went out of business, they elected to stop paying the bank. Since the vendor would no longer service the equipment, they did not feel they needed to continue to pay the loan. The character of this applicant was clear, this was a business we did not want for our portfolio. We bid him good luck finding a lender for his financing needs. We have seen the lessee who has current or former tax liens. When you know they exist, or existed, you want to obtain the payment plans or document the closure if they have been paid off.

We entertain start-ups and they are never easy. This is where the Packager should be asking a lot of questions and submitting a “Transaction Summary” with all the information they have learned. We require the lessee complete a “Start-Up Questionnaire.” One question is “Do you have a business plan?”, if so include it. I am always amazed when the question is answered with a “Yes,” but the business plan is not included with the credit submission. Then there are those that submit a business plan, and it only contains the details of their idea for the business. No financial projections, no costs identified and no revenues, etc. I guess those folks are hoping for the best and they love the idea no matter if they can pay the bills or not. It is not uncommon for the principal to state on the Questionnaire that they have invested X dollars into the business and not include the details on where it came from nor how it was used. Those are basic details us, as lenders, want to know about and you, as the Packager, will want to include in your submission.

Global Financial & Leasing Services (GFLS) was created in 2008 for the purpose of serving these small and mid-sized businesses (SMBs). GFLS has the capability to fund a wide range of businesses. In addition to its own bank lines, GFLS has established its own equipment lease fund. Now, as a funding source, we are able to peel back the layers of a credit request to uncover value and create a structure that will work to assist SMBs secure equipment financing with or without credit blemishes. We know that not every less-than-perfect credit story may fit into the credit boxes used by banks and other financial institutions, but GFLS believes a company’s character is more than its credit rating. In closing, a good Packager is more successful with their submissions and makes more money.

Top 10 Equipment Acquisition Trends for 2017

$1.5 Trillion to be Spent Predicts ELF

Despite signs of Bad Moon rising, the Equipment Leasing and Finance Association predict optimism and spending by U.S. businesses, nonprofit and government agencies over $1.5 trillion in capital goods or fixed business investment. They predict “Businesses will find positive momentum for equipment investment as the changing economic and regulatory environment contributes to improved business conditions.”

The Demise of “Personal” Banking

Not that long ago, small businesses had personal relationships with their local banks.

But that was before the financial crisis of 2007-08 and the global economic collapse, followed by the consolidation of many institutions into fewer and fewer banks.

Today’s banks, more often than not, are national or multi-national entities that don’t see enough profit margin in giving out small business loans.

The number of loans issued by 10 of the largest banks in the U.S. has decreased 38 percent to $44.7 billion in 2014, the Wall Street Journal reports . This is compared to 2006, when it was at its peak at $72.5 billion, which was one year before the financial crisis.

A working paper published by the Harvard Business School, written by Karen Gordon Mills and Brayden McCarthy titled, “The State of Small Business Lending: Credit Access during the Recovery and How Technology May Change the Game ” (PDF) goes into great detail about why there is a credit shortage in the small business sector and the impact it is having on the largest private workforce employer in the U.S.

This has led the authors to ask “Is there a credit gap in small business lending?”

According to the Federal Deposit Insurance Corp., as reported on the WSJ, loans to large companies has increased by 37 percent from 2008 to 2015. During the same period, banks of all sizes went from holding $711 billion in small business loans to $598 billion. This clearly answers the question the Harvard paper asks.

By  contrast, the Biz2Credit Small Business Lending Index for October 2015 revealed large banks with $10 billion or more in assets have actually increased loans to small businesses. In the report, Biz2Credit CEO Rohit Arora explains, “As interest rates start going up, we expect further increase in the Big Banks appetite for small business loans. Big Banks are also warming up to buy more loans from the marketplace lenders.”

But what is important to remember here is the low overall approval rate for small business loans, which was at 49 percent for October of 2015 at big banks, the Biz2Credit index reminds us. So even though loan approvals are increasing at big banks, small businesses are still hearing “no” more than half the time.

The need for loans by small businesses along with the reluctance of large banks to give them has increased the market share of non-bank lenders from 10 to 26 percent. But some of the rates for these loans are quite high when compared to traditional loans.

The Wall Street Journal  article has an example of a restaurant owner in Los Angeles who was charged rates above 80 percent by two online lenders for a $25,000 loan. He was forced to choose this alternative after he was turned down by the bank he had been doing business with for several years.

The large banks don’t see the benefit of making these small loans, because it takes just about the same amount of effort to originate small and large loans. For small businesses, it now means getting a credit card from the large banks with the amount needed. And considering how much the non-bank lenders charge, the 12.85 percent average real banks charge for credit cards make more sense.

So why have large banks lowered their loan approval rates when it comes to small businesses? The answer is increased regulation put in place after the financial crisis, decline in community banking and lower profit margins on smaller loans.

Jay DesMarteau, head of small business banking at TD Bank, told the Wall Street Journal, “We all struggle to make money on the lending side. It’s a lot of work to try and find these little companies, underwrite them and manage the book.”

As for the banks, they are working together with not for profit lenders to provide credit to small firms. So if you are a small business looking for a loan, ask the big banks if they have such arrangements before you go and apply with a non-bank lender online that could charge you 80 plus percent.

It is important to point out not all alternative lenders charge the rates highlighted by the Wall Street Journal report. So shopper be ware and take your time, because there are many alternative lenders out there.

Article Source:  Small Business Trends (Please visit this site for PDFs and other referenced documents.)

64% of Small Business Owners Still Recovering from Great Recession

Seven years after the “Great Recession,” two-thirds (64%) of small business owners report their businesses are still in the process of recovering, according to Bank of America’s spring 2015 Small Business Owner Report. The report, based on a semi-annual survey of 1,000 small business owners across the country, says that only one in five (21%) small businesses state they have completely recovered from the recession.

However, despite these lingering impacts from the Great Recession, small business owners are still confident about the future growth of their businesses: 63% believe revenue will increase in the next 12 months (versus 62% last fall), and 66% plan to grow their business in the next five years.

“Small business owners are optimistic about the future and are working extremely hard to achieve success,” said Robb Hilson, Bank of America Small Business executive. “As they have focused on recovery, many business owners have embraced a mindset of self-sacrifice. They are prioritizing their employees and customers above all else and it is often at the expense of their own personal or financial well-being.”

Source – Bank of America’s Spring 2015 Small Business Owner Report.