I recently talked about “captive financing” and how many companies are turning to equipment financing companies instead. Today, I’m going to stay on that same general theme, but instead talk about when you already have an equipment financing partner.
Let’s say you have an equipment financing company that you partner with. For years, it’s been a cozy, mutually beneficial relationship, complete with Christmas cards, “how are the kids?” and an occasional lunch. You realized the benefits of offering easy equipment financing and equipment leasing, and the equipment financing company had a nice flow of financing customers.
But lately you’ve noticed something…. Not only have revenues fallen over the last 18 months (like everyone else’s), but you also notice that percentage-wise, there just aren’t as many equipment financing approvals, despite the same level of customer as always. It’s almost like the equipment financing company has raised their lending criteria a little higher than you (and your customers) would really like to see. And by the way, where was last year’s Christmas card anyway?
The above really isn’t uncommon – as the credit crunch increased, banks and other lenders have tightened their lending criteria (in some cases, squeezing the life right out of it), and equipment financing companies have followed suit. This is normal.
However, not all equipment financing companies are created equal. While a tightening of lending criteria has happened across the board, there are different degrees of tightening. Some equipment financing companies are in a good position with their portfolios, and are still willing to finance or lease equipment to solid companies who have demonstrated an ability to repay the loan.
So basically, my point in this post is to let you know that not all equipment financing companies are the same – they are all unique in terms of who they will loan to, what rate they will charge, etc. If you notice things have changed with your equipment financing partner, it’s ok to take a look around at what else is out there.
Next time, I’ll give you some warning signs (besides the Christmas cards) that your equipment financing relationship might be in trouble.