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Steve Hansen
Personal Guarantees – Financial Presentation – Health of the Industry
Ways To Get Your Equipment Lease APPROVED
As a large equipment leasing company, we love growing businesses. We love to see a company grow and need capital to meet its goals. At Equipment Leases Inc., we get them the money required to buy the new equipment required.
In partnership with our lenders, we have funded equipment purchases ranging from $150,000 to $50 million. As a result, these clients are now friends, and we remain their best access to capital for all of their growth and expansion needs.
With the COVID-related changes in the economy. Companies looking for an equipment loan should consider where they fit into a risk model and how a lender will look at their company and operating history.
To assist every small business in getting approved. Consider a few suggestions that use common sense to help you get the equipment funding you need. If you have a small business, you may be interested in knowing how you can use a remittance service to pay employees.
Current Credit Markets
The credit markets have always been a complex web of banks, hedge funds, big corporations, brokerages, and the Federal Reserve. In 2008, capital flowed freely, which ultimately caused one of the most devastating financial crises. Though we have recovered, there continue to be more lenders coming into the business and personal lending space. Credit has been easy to obtain from Fintech companies because of loosened credit guidelines. They have their credit limitations, but the competition between them requires additional risk to compete.
For the past few years, the consumer driving the economy has started to come back to life. Now, however, lenders are cautious because of another wave of the virus. Each credit desk carefully evaluates new loans with an eye toward what could go wrong if we approve this company.
What is a Financial Presentation for any Business?
The chance a bank is hungry for your business and willing to take a risk in your venture is gone. Just because you think your business rocks doesn’t mean a lender will share your enthusiasm. You will need to prove to them that you know how to make money.
What every business looking for capital needs to have ready.
- The company’s last 2-3 years tax returns, along with all schedules of track-paid taxes
- The company last 2-3 years of financial statements and interim statements
- Profit and loss accounting for the past 2-3 years. (If there were significant losses, you would be wise to detail what happened and how these issues were resolved)
- Details of the corporate structure and ownership
- A detailed list of equipment needed and how it will impact the business.
- Personal financial statements from any owner of more than 20%
- Include press releases of newsworthy events that will help an underwriter get comfortable with your future.
- If your operation is a start-up, be prepared to provide a corporate guarantee from another company to mitigate the lender risk while you are launching your new venture.
What is a Personal Guarantee?
A personal guarantee is a promise from the owners that they will back the loan personally in case of default. It is an unsecured personal guarantee that functions as a second line of security for a lender.
Why do equipment Lessors and Lenders Expect It?
Leasing companies require a personal guarantee unless the company’s financials are strong enough. A promise from the owner tells a lender that you’re confident enough to back it up. If the main guys don’t think the project will work, they will walk away if it doesn’t go well. They are leaving only an equipment liquidator to come in and clean up the mess.
If you are not willing to back up your request with a PG, the chances of you getting capital are remote.
What happens If One Partner Will Not Sign a PG
Practically speaking, this is an internal issue and not the concern of the equipment lender. However, if an owner won’t participate, it signals a problem with the company’s future, and the lender will probably pass.
Conclusion
At some point in your history, you decided to take a shot and start a company. You survived through the first few years working 24/7 and sacrificing much along the way. Finally, you have a bright future and the capital to acquire the equipment needed to get the job done. Following the guidelines outlined in this blog will give you a much-improved chance of getting the money required to grow the business.
Suppose you need more information on how to stage your company for approval. Then, contact us.
