We’ve covered a lot so far in my “why an equipment financing company is better than the bank” series, and we’ll move into our second half today with reason 6, which is “preserving your credit availability”.
Basically, what I mean by this is the fact that while I think an equipment financing company is MUCH better than the bank for financing equipment, the bank does have their uses. Lines of credit help many companies meet payroll while waiting on receivables, a bank can help finance a new building / property, etc. So I say, use the bank for that stuff, and leave the equipment leases to companies like mine.
This is because the bank is only going to give a company so much credit. There will be a time when they say “ok, you’ve had enough”. And that time is usually when you need them the most. Here’s an example:
Let’s say you go and finance equipment through the bank, and also have a building mortgage with them. And everyone is happy… But then you get a HUGE new customer that means taking on an additional 20 people. And while this new customer means big things for you, you won’t see profit for six months – those 20 new people are still going to want a paycheck (us workers are funny that way.) So you go to the bank and ask for another line of credit, and they look at you like you have three heads. Seems like they feel they’ve loaned you enough money. After all, you have a mortgage and an equipment loan with them.
The above wouldn’t happen if you used an equipment financing company to finance equipment – in that scenario, you’d only have the mortgage with the bank, and they would be happy to give you the line of credit so your new workers don’t revolt. And the new customer is happy and orders more, meaning you even hire more workers (because now you have your profit and can afford it). And hiring more workers make the town you’re in really happy – happy enough to give you a parade. Yes, a real parade!
Don’t you want a parade? Then finance equipment with an equipment financing company, and leave the bank there for emergencies.
Now if only MY company would give me a parade…