But today we’re going to discuss Financial Disclosure Equipment Financing. This is where the lender needs more information to make a credit decision. In the case of Crest Capital, it’s typically because the loan amount is greater than $250k – once the amount borrowed exceeds that, we will need more information.

(note, as I went over last time, that $250k threshold is ours. Some lenders, like many banks, may require Financial Disclosure for any amount.) So let’s go over what is typically needed with Financial Disclosure Equipment Financing.

Financial Disclosure Equipment Financing

For financing larger amounts, lenders will need more information, particularly on the operations and financial health of the business itself. 

Financial Disclosure will involve all the information in an Application-Only deal, plus details like tax returns for both the company and the main principals, financial statements, details on revenues, debt, assets, other liabilities, cash flow, shareholder equity, and more. 

The information checked will also increase. The same instances from Application-Only will be used (credit reporting bureaus, D&B, etc.), but will also involve an analysis of the preceding financial reports. 

In addition, depending on what is being financed and what information is already gleaned from the statements, other factors could be checked if deemed necessary. These could include an analysis of the industry, the current and future market, outside factors that could affect profitability, industry competitor performance comparisons, and more. These don’t happen every time – it depends on the unique details of the company and the applied-for financing.  

Financial Disclosure sounds like a lot of steps, but it can still all happen quite quickly – Financial Disclosure equipment financing can usually be completed in a matter of days. But for companies that are borrowing, they do understand that these larger deals will take more time. 

So now you know what Financial Disclosure Equipment Financing means – a call to your accountant (or a trip to the basement) for statements and tax returns. But it’s all for a good cause – getting you the funds you need for that major equipment purchase! 

My last post introduced our new tool for a self-assessment / pre-qualification for equipment financing. And while pre-approval is indeed a common phrase, we, like almost all lenders, do not actually approve any deal before seeing all of the details, regardless of any pre-approval status (plus, we procedurally buy the equipment for you, so the collateral part needs to be in place as well, but that’s for another post).

I wanted to take a moment and go over what customers can expect from our “pre-approval” tool, and how it fits into the equipment financing approval process.

As I’ve discussed in past posts, while the actual approval process is quite intricate and detailed, we have several “big picture” parameters that serve very well in giving us (and customers) a fairly accurate picture of whether a company can qualify for credit. The big picture parameters are time in business, revenues, whether a company is profitable, and how good their credit is.  Our tool takes all of these into account, and if you pass these parameters, you are “pre-approved” subject to remaining requirements.

But there are other, deeper parameters that could upend any pre-approval status. The equipment type will matter to a degree, as will the industry your business operates in, the overall dollar-size of the transaction, and so on. These are questions our tool does not ask, because the answers do not lend themselves to a black and white “yes or no” response. What I mean by this is we generally do not finance companies within industry XYZ, but there are exceptions where we do. Or we generally do not finance equipment type ABC, but again, there are exceptions.

(Note: I am purposely staying away from mentioning specifics here because again, there are exceptions.  Suffice to say, 95% of industries and 95% of equipment are just fine.)

The above stated, our pre-approval tool has proven to be very useful, and our customers love it as well. It gives them a great idea of where they stand in the equipment financing approval process, and that makes for a better, easier process all the way around.

These are always tricky questions to answer without knowing all the details for a company. However, the questions have merit, and they are asked often enough that yes, there should be some way for a company to self-assess itself to see if they can get approved for an equipment loan.

So this was brought up in a company meeting, and to my surprise, almost everyone else got those same “will I be approved” questions over and over. So Crest Capital got to work, and are proud to announce what we feel is the best online self-assessment for equipment financing available. You can check it out right here.

Now obviously, there is no self-assessment for any kind of financing that is bulletproof. But we’ve taken the main business loan criteria and programmed them into a simple (and fun) business credit assessment. Going through it will give companies an excellent idea whether they will qualify for equipment financing.

But we went one step further. Whenever there’s a business credit tool of any kind (whether official or self-assessment), the saying “no” part is always tricky.  So if a company’s self-assessment does not quite meet our criteria (e.g., no startups / etc.), they are shown several credit options that may be able to help them. We feel it’s the least we can do, and truthfully, we want all businesses to succeed, even those we can’t finance equipment for.

In our connected, always online world, we feel offering tools that help companies help themselves will always have merit. So for equipment financing, we led the way with offering a “will I be approved” equipment financing self-assessment. And we’re proud of that.

Ok, you say that doesn’t hit home because you don’t really know what that means… no problem, let me clear it up. Basically, what it boils down to is this: the bank is going to be VERY interested in your businesses financial health – both now AND later. The will constantly look at things like your maximum debt to equity ratio, whether you have a loss in consecutive quarters, etc. And if any of these conditions are met, they will have the right to call in the loan (which could mean sending out Bruno.)

Why is the bank interested in that? Aren’t ebbs and flows part of doing business? What happens if you have a bad few quarters… sometimes, that happens. Let’s pretend something: you’re a manufacturer of boats, and your biggest customers are on the Gulf of Mexico – you sell hundreds of thousands of dollars of boats and equipment to fishing companies and tourism companies. Then this big oil company (who shall remain nameless) forgets to turn off a switch, and BOOM, an oil rig explodes (ok, that’s an extreme – I think it’s more than one switch, but I digress). Oil leaks into the gulf, affecting everything from fishing to wildlife to tourism to… well, all of it, really. So one after another, your customers call you and cancel new boat orders – seems like this could be a down year for them (gee, ya think?)

So, in a roundabout way, YOUR business is affected – it’s going to be a down year for you, too. Yes, you’ll survive, but you will post three or four losses in a row – can’t be helped.

Oh wait… that’s going to be a problem, because you took out a bank loan last year, and they have a covenant saying “no consecutive losses, or else”… your mind wanders, eventually settling on Bruno, a tire iron, and… ok, this is fiction so we’ll leave it at that.

The point is, the bank is all nosey about your business, both when they give you the loan and later. And us equipment financing companies? We really don’t care. And while we do have a guy named Bruno here, he’s in charge of interior decorating, and hates getting his hands dirty.