First let’s talk about liens in general. In business/lending, a lien is when a lender claims the right to property belonging to the borrower until the debt owed by that borrower is discharged.

The mainstream talk on liens is usually related to vehicles. You don’t pay your car loan, and your car gets repossessed. And you cannot sell your car until the loan is paid off, and the lender discharges the lien. And of course, you should never, ever buy a car with a lien on it.

But liens can extend to any piece of tangible equipment. Very often, if you borrow money to buy a piece of equipment, the piece of equipment itself will have a lien on it. And that’s expected and fair.

But what a blanket lien does is it blankets your entire company with a lien. This means everything your business owns has a lien on it. So if you borrow money from the bank to buy, say, a new delivery truck, they will put a blanket lien on your company so everything your company owns will have a lien on it. Not only can you not sell that new delivery truck, you can’t sell the old, long-paid-off one either. You also can’t sell any machinery, tools, or anything else. 

Technically, you can’t even give anything away. Maybe you want to give your old office computer to your nephew… better check with the bank first. Because legally, they have the rights to that computer. I’m not saying they would deny that, but that’s not the point: legally, they can. 

Blanket liens are pretty cut and dried, and very enforceable. They also smother your company because you cannot sell anything without the bank’s permission (and no astute buyer will buy anything with a blanket lien in place). This severely restricts your finances and your flexibility.

It’s always my standing recommendation that you avoid lenders who use blanket liens altogether. But if you must use a particular lender who employs them, try and negotiate that clause away (it’s probably futile because it’s rock-solid protection for the bank, but you can ask.) 

Next up – compensating balances. 

I conversed with two last week, and it struck me how different they are in communication preferences.

Client one, who we’ll call John, is old school. John not only calls me on the phone, he’s one of those people who insists on phone conversations all the time. Trust me, if you don’t have a phone that gets answered, you have almost no shot at doing business with John. 

It’s not that John can’t use e-mail – he will if he must. But he doesn’t like to write, so his answers are brief, and he’ll say “just call me and I’ll explain it”. John once told me he wouldn’t hire a landscaper because the guy texted him back after John called him. He’s like that.

Now let’s go to client two, who we’ll call Pete. I’ve done business with Pete for years, and we’ve spoken maybe two times. Pete simply does not like to talk on the phone – we can have week-long conversations via e-mail, and understand everything just fine. In fact, if you *can’t* carry on an extensive e-mail conversation (sometimes covering two or three subjects), your chances of doing business with Pete are low. I’m pretty sure if Pete has a landscaper, it’s someone he hired via e-mail. 

Most people are not as hardcore as these two, and fall somewhere in the middle. But (and you’re probably wondering what this has to do with equipment financing) it illustrated to me how important it is to satisfy both types. 

Sure, we answer calls, but a few years ago, we developed a self-assessment (it’s right at the beginning of our homepage at www.crestcapital.com) where prospective customers could check their eligibility without contacting us – it has proven very popular. 

For the person who likes the phone, it can still give them a good idea if they qualify, and save them time.

And for that client who does not want to converse? It’s tailor-made for them, because they can apply right away, and even get an approval via e-mail. And while we do call and speak to clients at the listed business number before funding (that’s simply prudent), we often finance deals with minimal phone contact. The “Pete’s” of the world really appreciate that. 

Whatever your business, you probably deal with both John and Pete. And while the number of Pete’s is increasing, neither is wrong, and satisfying both is one important way to differentiate yourself. 

These are short (30 seconds to a minute and a half) recorded testimonials from real clients, all over the United States, and there are well over 100 of them. You can see the entire list here.

I realized I haven’t heard these in a while, so I spent some time listening to a bunch of them. And something really struck me as I listened to the different voices and accents from all over the country: THIS is the Sound of Small Business USA. 

Seriously, we have a walk-in freezer financed in Florida. This was for a Carvel store. 

A bit further down the list, we have snow removal equipment financing for a company in Utah.  Then there’s a boom lift financed for a campground in California (that one is funny because he goes into detail about all the collateral his bank wanted, which is why he came to us.)

More? How about a CAD/CAM Machine financed for a race design shop in Arizona? Or some equipment for a angus beef cattle ranch in northern Florida (so we’ve got both the main course and dessert covered in the Sunshine State… oh, we financed some equipment for a winery there too – it’s a full meal!)

One of the neat things about equipment financing is the types of businesses that we work with. Listening more to the list, we financed some equipment for a microscope service in Illinois. Did you even realize there are small businesses that deal only in microscopes? And while we’re on “science”, we’ve got lab testing equipment financing in Ohio, and mobile medical imaging equipment financed for a nuclear tech company in Maryland. 

This is just scratching the surface – we have thousands and thousands of customers. But even in a small sample of 100+, I am struck by the variety of industries, never mind the regional accents and speaking mannerisms.  The sheer diversity of our customers and company types is staggering, and it’s a joy to hear their voices.

The next time the news gets you down, click that link above in this post and give a listen to a few. I guarantee you’ll feel better. 

I also talk to many small business owners who feel the same way – they go to their bank who “specializes in small business lending”, and they are told the minimum loan for the special program is $250k. That’s great and all, but the 10-person landscaping company or 8-person accounting firm was only looking for $65,000. 

For us at Crest Capital, most of our customer base are companies that have between 5 and 75 employees. Yes, some are larger (and even a few are smaller), but that’s the market we serve. So when we say we’re a small business lender, we really mean it.

This is important to discuss from time to time, because of what I mentioned previously. A 12-person company goes for a loan, and it’s implied the company is too small to get favorable rates and terms. Nevermind that their revenues well exceed a million dollars a year, they have excellent credit, and the loan will help them grow even more. 

There’s another small layer to this that I want to mention. The person who owns and runs that 12-person company doesn’t think it’s “small”. In fact, that business is probably one of the biggest things in his or her life. They may have spent decades building it up. 

Even further, of those 12 employees, six of them earn full-time salaries. There are four different families whose mortgages depend on that business. Nine college educations will be at least partially paid from this business. A bunch of automobiles, hundreds of meals out, vacations, and countless dollars wasted on “silly” hobbies (according to spouses)… all of it the result of this “small” business.

No, there is no business “too small” for financing. 

As long as a company is successful, has a few years under their belt, and revenues (and credit) are good, equipment financing is available. Quicker and easier than you think, too.    

As we navigate through what is proving to be an extremely “different” business environment, I am reminded of a local planning board meeting I attended a few years ago.

Under discussion was a recent blight of failed businesses, and some empty buildings on the town’s main retail strip. The conversation turned to “what are people going to think when they see these empty buildings?”

Most answers were pessimistic. “Failure”, “Blight”, “Downtrodden”, etc. But the voice I really remember came from the back of the room. An enterprising young man, in a confident manner, said “opportunity”.

And he was right. With just a small marketing push from the town, within a year, every empty building was filled with a new business. Most of them are still in business today. And the ones that didn’t make it got filled with new owners again.

I see the exact same thing now. From my seat at the equipment financing end of the business table, I am seeing some industries shrink, but I am seeing others rise, and take advantage of the opportunities presented. For example, we just got a call from a corporate training company who needs more AV equipment. Why? Because they are expanding their workshops to include greatly expanded work at home training for both employees and executives. 

On the other side of the coin, I’m sure there’s a corporate training service out there who is scared, because big offices might not be as prevalent in the future. Same situation, different outlook.

Listen, this isn’t meant to be a feel-good “keep your chin up” post. Not every bad situation can be changed by changing your outlook. But I am saying there is always boundless opportunity. The companies who consistently look for these things are the ones who survive. 

I’ve known construction companies who financed new machines right after a disaster, and were first in line when the rebuild started, because they were ready. I already mentioned in another post about the dry cleaner who went after hospitals and first responders. These things are real, and they happen every day.

Opportunity is always knocking, folks. Sometimes the knock is soft, and sometimes it’s deafening. But it’s always there.

Predictably, a lot of business activity has paused. With many businesses forced to shut down for a few weeks, it’s only normal that some companies put expansion or improvements on hold for a bit. At least until they see how things will shake out.* 

*Side note: I personally feel the recovery will be, to borrow a movie title, Fast and Furious.

And while no lender (or equipment seller – more on this in a bit) is unaffected by this, I have noticed a distinct new business borrower who has suddenly come out of the woodwork: the successful “we have money in the bank and an excellent credit score” company that doesn’t need equipment financing, but is doing it right now to preserve their cash reserves.

These new finance-seekers are companies that, in general, are still operating right now, historically have fast-timed receivables (they get paid quickly for their product/service), and have ample assets in the bank. And in the past, when they needed new or used equipment, financing is not the way they bought it – they simply paid cash. 

But right now, they would feel better using borrowed funds for needed equipment purchases, make monthly payments, and keep their cash in the bank. I’ve talked to a few of these new customers over the past two weeks, and most of them had the same thought, which was generally “we’ll keep our money, but still get the equipment now”. 

I like hearing this, because whenever I talk about the advantages of equipment financing, it’s almost word for word what these new customers said: “get the equipment now while keeping your cash reserves in the bank for other things”. So it’s nice to see companies doing exactly that (see, Fletch knows what he’s talking about.) 

One addendum to this: equipment sellers, be aware of this new type of buyer. Because while they may have paid cash in the past, they are now looking to finance. Are you offering a monthly payment option? If not, visit https://vendorprograms.crestcapital.com  – it’s easy and free. 

Oh wait – one more addendum: hopefully these “new to financing” companies will now see that financing equipment is a good business strategy ANYTIME, and not just when we’re under quarantine. Bottom line: buying equipment via monthly payments always plays out well (and wait until they use Section 179 – boy will they be happy!) 

I want to discuss a particular aspect of equipment financing that many businesspeople really don’t understand. And that’s the difference between what I call “straight” financing (like what my company and other lending institutions do), and speculative / investor type financing (like venture capital / TV shows like Shark Tank, etc.)

I need to write about this because many businesspeople think *all* financing is somewhat speculative. And that simply isn’t true.

Most lending institutions, from equipment financing companies to the bank to credit cards, all the way to “rent to own” places, all lend money with the expectation it will be paid back, with interest. And as I’ve discussed in the past, interest rates largely reflect the risk taken – the higher the risk, the higher the rate. But the basic premise is the same – they lend money, and charge interest.

In other words, these institutions generally do not care about a businesses’ idea or potential. All they care about is the raw data (i.e., credit score, income, and other similar “real life” factors), and they base their lending decision and rates on those factors. The personality or persuasiveness of the owner, or the “business idea”, carries no weight whatsoever.

So essentially, equipment financing companies, banks, and other “name” lending institutions that charge reasonable interest rates do NOT engage in startup financing, or lending money to companies without a good track record.

And believe it or not, this is very, very surprising to many businesspeople, because they watch Shark Tank or read about how venture capitalists give startups with good ideas money. But that’s a totally different kind of financing, where a venture capital firm or rich individual exchanges money for a “piece” of the business. They do this because they believe in the idea (or the owner), and see the potential reward being worth the risk. Most of these ventures fail, but when they do hit, they can hit big (think Apple Computer).

So that’s the big difference between the two – equipment financing companies make decisions based on hard numbers and past performance. Venture capitalists and other “investment” type companies take the idea into account, but they will want a piece of the business in return.