This may not seem like a big deal on paper, but in the real world, it is positively massive. And I know this firsthand.

Before we launched this program, I called around to see if anyone would do this. I called financing companies, banks, you name it… and I was very specific: I wanted to finance a business-use SUV in my company name. 

I did not want a personal loan. I did not want a business blanket lien. I wanted to finance an SUV, except on the loan paper I wanted my company name first instead of mine. 

The answer I got was the same everywhere: NO.

I was offered plenty of personal loans. I was offered a large business line of credit by a few big banks, or financing for an entire fleet. But nobody would do what I was asking for – a single SUV financed in my company name.

So to us, it seemed like a niche that needed filling. Because we’re asked about this repeatedly. We got to work.

Right away, we found out why nobody offers this: it’s a nightmare. I don’t want to bore you with the details (because they are boring), but all lenders have bosses, and those bosses are not comfortable with small businesses being the lead borrower on paper for an SUV or two.

To overcome these issues, we had to significantly raise the credit requirements for this program. That proved satisfactory, and the program was launched.

This means if you meet the elevated credit requirements, you can finance a business-use SUV in your company name. Sweet, right? 

We worked hard to offer this program, and we hope it helps some companies. Click the above link to see the details.  

It was a lot of money for a kid back then. And it made me feel very secure. Money in the bank is a great feeling anytime.

I also wanted a new videogame console. I could afford it right then, but it would have put a huge dent in my bank account. And doing that made me very uncomfortable – what if I needed that money for something else, or an emergency? 

So I made a deal with my father – an advance on a year’s worth of lawnmowing at his business.

I got my console, and I kept my bank account. In essence, I had “financed” a major, bank-account draining purchase. 

While we’re talking much larger numbers (and not videogame consoles), this is the exact thought behind much of the equipment financing many SMB’s do.  Let’s discuss this.

All businesses need equipment. Machinery, vehicles, software, office equipment, computers, and so on. Much of this equipment has a finite lifespan, and it’s continually changing / replaced / upgraded / etc. This means for any successful company, the flow of equipment is ongoing. 

Every company also has a myriad of other operating expenses: salaries, advertising, utilities, rent, taxes, and half million others.  

The “operating expenses” I mention are all generally paid for in cash (liquid funds). And to operate effectively, a company needs a certain amount/timeframe of operating expenses on hand – going month to month is dangerous.

So when expensive equipment is needed (and it will be needed), it makes much more sense to finance it over time. This keeps liquid funds at a much more “comforting” level.  

There’s also another aspect to this – it’s not just operating expenses and/or comfort. Emergencies happen. Having ample cash on hand allows a company to better withstand them. 

What kind of emergencies? Plenty – things like accidents or fires or similar are obvious. But there are more. What if your biggest customer suddenly has issues, and drops you? What if a strike hampers deliveries, and your loading dock backs up? What if there’s a pandemic?  Money in the bank lets you withstand these much better. 

During the early days of the pandemic, businesses borrowed in record numbers and amounts, much of this in the form of immediate equipment financing. Why? Because in the face of uncertainty, it’s better to keep your own cash in the bank and use someone else’s to purchase needed equipment.  

One last aspect to this – tangible equipment generally loses value. While I’d argue that if it’s needed to make revenue (even indirectly) it’s an investment, the fact is, it’s also not an “appreciating asset”. And the smart money says it’s always more advantageous to finance those things and pay for them over time. 

So keep your own money in the bank. If you need equipment, you can use ours. 

I’m not really a salesperson at heart, but whenever I talk with a small business owner, I’m probably going to bring up equipment financing. Not so much because I want to bring another client on board (but that never hurts), but more because I truly believe in it. Equipment financing / equipment leasing are far and away the best way for any business, small or large, to acquire equipment.

Last week, I happened to be talking to a small business owner. He owned a tree trimming / tree removal company, and had been in business about ten years. In those ten years, he’s experienced success, and has grown his company from just him and a helper to about 10 people in two different crews. And in this time, he’s bought a few bucket trucks, a crane, 2 large chippers, and other equipment.

Anyway, during our conversation, he said he was looking for another bucket truck, so I handed him a card. And he looked at it and said “Is your jail better than the one I’m in now?” I was a little puzzled, and asked what he meant. He went on a five minute rant about his bank, and how he was in “bank restrictions jail”.

As it turned out, one of the things I mention here often was affecting him – when you finance equipment at the bank, they put a blanket lien on everything your company owns. So he financed a bucket truck, and later wanted to sell his crane privately and buy a new one. But he couldn’t sell the crane privately, even though he owned it outright – it was part of the bank’s blanket lien. He had to jump through all kinds of hoops and ask the warden (his words – he’s really liking the jail analogy) for permission to sell something he already owned.

Well, as you likely know, we have no blanket liens or restrictions on financed equipment, so I’m going to bust him out of jail. Let’s hope I don’t get caught!!

Hmmm, maybe Mrs. Fletch has a thing for the bad boy…

When I posted about financing lab equipment last time out, I stated that it’s good to finance equipment that isn’t directly tied to profit. The thought being that if the equipment isn’t going to boost your bottom line right away, it’s clearly best to finance it over time.

And while that is true, the reverse is also true. It’s also great to finance equipment even when the equipment in question is going to immediately impact your bottom line in a positive way.

There are cases where a piece of equipment will pay big dividends from day one. Think of a tree service finally adding a large bucket truck. They are immediately jumping from the small jobs to the bigger ones – that’s a profound impact. I’ve known companies who have doubled or even tripled their revenues by adding one crucial piece of equipment. A bucket truck. A new delivery vehicle. A new machine that makes your manufacturing process 25% faster… these are all things that can have an immediate effect.

So why finance equipment in these cases? Because it may result in a positive cash flow every month, without any outlay. In other words, if you pay cash for a 45k widget maker, and it results in $2,000 of new revenue a month, you will need 22 and a half months before you break even. That’s almost two years “in the red”.

But say you finance that widget maker over 3 years, with a payment of 1400 a month… you are going to profit $600 a month until the widget maker is paid off (then you profit the entire 2k a month). You “broke even” right away, and were well in the black the entire time.  And we haven’t even talked about Section 179 yet.

I see this all the time. The numbers will always work in your favor. Even if your new revenue isn’t quite as much as your payment, it’s still better for your bottom line to finance equipment.

There is no bad time to use equipment financing. Like all the cool kids say: “it’s all good”.

See, Mrs. Fletch wanted a pool. I mean, really wanted one. We don’t have a huge yard, so if there was going to be a pool, the accompanying deck would have to go partly where this tree was. So in the interest of staying married, I called the pool guy and the deck guy. And they both said “get the tree guy here first” (I’m wondering if all these “guys” are in cahoots…)

So I call the tree guy. And since this is a massive, somewhat tedious job (since there’s no room to work, they can’t just go “timmmmmber”), they roll up with the following:

• An 80’ boom/bucket truck
• A crane
• A chipper that I could only describe as “ferocious”
• 2 pickup trucks full of chainsaws and other assorted equipment
• 6 fairly large guys

And then they went at it. 6 guys wielding some of the biggest, meanest equipment I have ever seen. I mean, I typically wield a keyboard and a pen – I’m not even at risk to get a splinter. These guys had… well, let’s just say my “inner-child who loved to play with Tonka trucks” was pleased watching them work.

So anyway, I’m talking to the owner as his guys are working – it turns out, he financed all of this equipment through an equipment financing company. He was telling me that at first, he went to the local bank, but they turned him down. They were ok with the boom truck, but the chipper was a sticking point. The bank manager even said “I’ve never heard of such a large chipper”. I’m still not sure why the bank manager needs to be familiar with everything the bank finances, but the bottom line is, my tree guy wasn’t getting his chipper (which I saw eat 1’ thick logs without an issue) without someone else stepping up. Which an equipment financing company did (obviously, I gave him my card so he calls my company next time. But even if he uses the other guys again, I’m a sucker for happy endings, and I’m pleased to see any equipment financing company outdo the bank.)

Last thing:

This is an addendum I’ll be adding to my posts for the rest of the year. That’s because it’s getting later in the year, and Section 179 for 2010 ends soon. If you want that new piece of equipment (like perhaps a wood chipper), NOW is the time.