Equipment Finance: Blind Date or Running for Office?
Applying for equipment financing or a working capital loan shouldn’t be like going on a blind date where you only tell the other person the best things about yourself and omit the not so stellar parts. The analogy for the application process should be more like running for public office where everything hidden in those closets comes out. It makes sense to lay all your cards on the table because a late discovery of a tax lien or default, even it if was many years ago, can crush your chances for approval. It can also diminish your chances of working with that finance agent again.
So that you don’t waste your time and your lender’s time, disclose everything negative right at the onset when applying for business financing. Include explanations with details for those events when possible; a medical issue or key customer moving away can be valid reasons for a financial dip in your business and can sometimes be overcome in getting an approval. If you have documentation; letters, statements, etc. to support your explanations then that will strengthen your chances for making a clear case for the negative things that occurred. At least it will show effort and build up the “character” portion of your request which many applicants underestimate. Remember, this is a people business and perception still adds to the equation.
In the cases where the negatives are so significant they can’t be worked through, it is best to know sooner than later to save you time and effort so that plan “B” can be initiated. There is always a plan “B”… that includes using higher risk lenders which specialize in approving clients with mild to severe credit issues. If an offer from a higher risk lender is not acceptable, you still have the choice of turning it down without any expense from your part other than time and effort.
In business, like in most other parts of life, the goal is to get a positive outcome done quickly and efficiently. The sooner you know if your equipment acquisition or expansion can be approved, the faster you can move on to other strategies for your business success. We know the pain point for many companies is going through the paperwork process which for the most part cannot be avoided but if you share the issues you’ve had in the past, many finance agents can preview your profile without pulling credit or requiring a complete financial package prior to having a good idea if you can be approved or not. That way if you do have to go through the paper shuffle you will know it’s headed toward a likely approval.
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