But what I’d like to talk about more are the restrictions that almost all banks use for business lending. I haven’t talked about these in a few years here, so 2024 seems like a good time to discuss them again.

Before I get into these restrictions, I need to state that these are restrictions that most business lenders and nearly all banks use. But some lenders do not, Crest Capital being one of them. In fact, it’s one of the major advantages we offer our clients. Forgive the commercial, but these restrictions are so impactful to your business that we need to point that out.

Ok, the main restrictions banks use are blanket liens, compensating balances, and annual requalifying. I’ll briefly discuss them below, and subsequent posts will discuss each individually.

• Blanket Liens – This is where the bank throws a lien over your entire company, which puts a lien on every single piece of equipment you own. So if you borrow money to buy a vehicle, the bank puts a lien on everything – tools, machines, other vehicles, office furniture, etc. Since they now have liens, you can’t sell any of it without an ok from the bank. Obviously, this isn’t optimal.

• Compensating Balances – The bank will want you to keep a minimum balance in an account with them. This minimum is usually 80% of the loan. So if you borrow $100k, you need to keep $80k on the sidelines in the bank, and not touch it. So… aren’t they kind of lending you your own money?

• Yearly Requalification – The bank will look at your finances every year. If they don’t like what they see, they can call in the loan immediately in full, even if you never missed a payment. And because of the previous two clauses – they have your money locked up and a lien on all your equipment – enforcing this is a breeze for them, and a nightmare for you. 

It’s very important to be aware of these restrictions, as they are buried in the fine print, and are unlikely to be discussed with any great clarity or detail. But I’ll discuss them all in detail over the next few posts – stay tuned.

Summer is traditionally a slower time for many companies. Kids are out of school, there’s a lot of “after work” activity, plenty of families take vacations in the summer, and more. So staffs are shortened, and while plenty of business still gets done, it’s quite normal for the summer months to be slower in many industries.

To me, this makes it a perfect time to upgrade with new (or new to you) equipment. This takes on even more meaning here in 2019. Here’s why:

Interest Rates Won’t be Lower for a Long Time

There is a general sense that interest rates have been too low over the past few years, and they’ve been slowly creeping up. But they are still very advantageous to borrowers, meaning the time to strike is right now, before the next rate hike (and there will be multiple hikes). So if you finance the equipment now with a fixed rate, you’re ahead of the game for years.

The Economy is Strong

The recent economic numbers surprised everyone at their strength – our economy keeps rolling along. Combined with the interest rates mentioned, right now is an ideal time to upgrade and expand. Investing in yourself when times are good is almost always the best investment you can make.

Your Competition is Probably NOT Upgrading

Let your competitors say “we’ll wait until fall / winter / 2020 / etc.” Use these summer months to retool and refit, and hit the ground running come fall. You’ll be miles ahead of everyone.

The great part about all of this is with the right fixed rate equipment financing, upgrading is really easy. You can get everything you need now (and then some, because Crest Capital will finance more than the equipment’s purchase price), and have it all in place for when business starts churning again.

Part of success is doing things when others aren’t. So take a look at upgrading your business this summer.

See, when there’s inflation (or even a threat of inflation), businesses get a renewed sense of urgency in all things financial. And a renewed sense of urgency is a good thing, because then things happen.

Now let me discuss this from an equipment financing sense. There are really two ways to look at it (both favorable to businesses):

The first way of looking at is in terms of “dollar worth”. In plain terms, if we have inflation, today’s dollars are worth more than tomorrow’s dollars. Make sense to you? Of course it does. So it’s logical to think that buying an item today (in the form of financing or leasing equipment), but paying for it with tomorrow’s “worth far less” dollars, is a nice proposition.

In other words, you pay for today’s equipment needs with tomorrows dollars, which are going to be worth less than they are today. So really, equipment financing (and equipment leasing) are solid hedges against inflation. And trust me – businesses know that. I personally have seen upticks in equipment finance applications every time there’s mention of inflation.

The second way to look at equipment financing as a hedge is simply in interest rates. Right now, rates are pretty low, and financing or leasing equipment is almost always done on a fixed rate basis. Hence, if you think inflation is coming (like I do), lock yourself in now for a low rate, because once inflation starts, interest rates will tick upward to control it.

Now, in all of the above, we get back to one basic premise – a little inflation will definitely spur business spending, as businesses clamor to take advantage of today’s (relatively) high-worth dollars and low interest rates. And higher business spending is good for the economy. So it’s kind of a win/win.

You know, in re-reading the above, I’m sure glad I paid attention in my college economics classes, and reserved my “goofing off” for Biology and things like that (because really, what does the inside of a frog have to do with anything?)