“Just fill in the simple form and in anywhere from an hour to a day we’ll hand you $150,000 for commercial equipment.” The increasingly technology-driven world of small business credit decisions is a wonderful thing. Right?
Well, it can be. It can also be riddled with problems, over-promising and under-delivering. As you look to application-only lending for your commercial equipment needs, here are some important items to consider:
Easy vs. right. Easily getting your hands on the money for a sale feels good, but the devil is in the details. Just because you are approved doesn’t mean it’s a good deal. A quick and easy win might lead to longer term issues if you’re not with the right finance partner.
All that glitters. What are the end-of-term provisions? How much money up front? Are blanket liens placed on your business? We could go on and on. The equipment finance business is full of lenders that seem to offer wonderful terms, but on review, the details of the finance structure can be harmful or at least not as good as they could be. Be careful not to let your equipment needs fall prey to promises that may be too good to be true.
Seduction by interest rate. Finance geeks are great at “hiding” the interest rate. They may advertise 4% financing, but it’s hidden in a rebate where the equipment price is increased to cover the low rate. Or they ask for more payments up front as a way to massage the faux interest rate down. Other parties may get you in the door with a low-rate offer that virtually no one can actually get. The old bait-and-switch is always waiting for the low-rate shopper. Be careful about how closely you tie your equipment needs to interest rate anyway. It’s really only one piece of a larger puzzle.
Business owners don’t know what they don’t know. This biggest problem with application-only lending is that most business owners simply don’t know what to look for, questions to ask or whether the finance deal in front of them is actually a good deal. Find a partner with a simple, transparent process that demonstrates a long track record of returning customers.
At LEAF, we help business owners acquire equipment with competitive financing. If you need an expert with decades of experience guiding business owners through the process, contact us today.