Examining the Financial Landscape

Amid the ever-changing financial landscape, a myriad of funding sources exist, each distinguished by their unique traits and provisions. However, a common question often arises, “Are all funding sources the same?” To provide insight into this, let’s examine the complex realm of lenders, their distinctive elements, and the subsequent impact on businesses pursuing funding.

The key to any lender is their criteria utilized for credit decisions. This includes submission requirements, minimum time in business, credit scores, and financial ratios. Many more criteria further distinguish one lender from another. Additionally, lenders often specialize in specific types of credit, thereby necessitating a system like a CRM, that can accurately categorize them, to make sure your submissions regularly obtain approval. This criteria changes often and requires regular updates to said CRM.

Let’s move to the credit of your customer. Are they an A, B, C, or worse credit? If they are A or B credit, you can trust them to credit-based lenders that depend on the creditworthiness of the borrower, assessing their reliability through credit scores and financial history. As you go further down the credit spectrum, you may need more of a collateral or asset-based lender. Asset-based lenders primarily focus on the value of the collateral a borrower is leasing or financing. However, some lenders adopt a balanced approach, incorporating elements of both asset and credit-based lending.

Distinctive features such as a lender’s ability to discount paper, retain services, and white label further contribute to the differentiation of funding sources. Lenders also vary in their requirement for personal guarantees versus corporate-only structures, turnaround time, and transaction size, which significantly affects the approval process.

Furthermore, lenders may be generalists or have preferences for specific equipment types and industries. These preferences, alongside any geographical limitations, can have a profound impact on a company’s choice of lender. Some specific examples are titled versus non-titled assets and we all have heard the term, “No Fly, No Float.”

Terms and fees, including the minimum and maximum term of a lease or loan, lease/loan structures offered, documentation fees, and other additional costs, should be considered as distinguishing factors. The cap on points, the ability to include your fee in the rate versus charging the customer separately, and upcharges on the documentation fee, further contribute to creating a unique lender profile.

In conclusion, while funding sources may appear similar at first glance, a closer examination reveals significant differences. This highlights the importance for businesses to thoroughly understand their funding options. While finding the right lender may seem challenging, it’s a worthwhile pursuit. Selecting a lender that aligns with a company’s specific needs can not only propel it toward its financial goals but also foster long-term, mutually beneficial relationships for you, your customers, and the lender.

About the author: Brian Trebels is the CEO of Equipment Leasing Group of America, LLC, which offers flexible funding solutions for A, B, and C credits in credit-based and collateral-backed transactions. The finance and lease options provided are tailored to the unique credit, collateral, and size of each transaction, thereby fostering long-term relationships with clients to help them achieve their goals. With a proactive and innovative approach to financing, the team seeks to meet clients’ needs effectively.