If you’re a business owner or manager looking to secure financing for either new or used equipment, you’ll be happy to learn that there are a large number of potential sources of financing available to you.
In this article I’m going to provide an overview of the market place for equipment financing and how the different financing sources are categorized.
First of all, there are two basic forms of financing for business assets that fall into the equipment category.
You can either finance via loan or lease.
Loans are typically provided by banks and other institutional lenders that have a broader business financing focus which includes funding applications for equipment.
Loan by their very nature tend to relate to the lowest levels of risk or “A” credit deals. Higher risk financing scenarios do not typically qualify for an equipment loan.
The second form or financing is provided in the form of an equipment lease.
Equipment leases are offered by both stand alone leasing companies and institutional lenders.
For instance, a bank that provides equipment loans may also have an equipment leasing division.
Going one step further, the very same bank can have a leasing group for equipment under $150,000, one for amounts over $250,000, and still another group for asset based lending, which is basically higher ratio lending against a combination of assets including equipment.
Stand alone leasing companies can be categorized in a number of different ways.
Let’s discuss each in no particular order of importance.
Leasing companies will have a focus according to the size of the deal. The largest number of equipment leasing companies are in what we call the small ticket credit space which is represented by deals under $250,000 in size. There are also leasing companies that focus on larger deals only as well.
Another way leasing sources are categorizes is by the type of credit.
Most will focus on one slice of the credit profile and combine that with a certain maximum deal size.
Additional considerations to a lease company’s financing profile include the type of asset, the industry, and the area of the country where the business is located.
So on one hand there are a lot of different sources of equipment financing.
On the other hand, it can be a bit of a jungle to figure out who can help you AND who can provide you with the best deal.
Another layer of complexity is that not all leasing companies work directly with the public and instead source their deals through broker networks.
So depending on your deal requirements and your financing and credit profile, you may not have direct access to the best lending or leasing sources unless you work with an equipment financing broker.
If you’d like to know more about the financing sources that would be the most relevant for your unique requirements and profile, I suggest that you give us a call and we’ll go through your situation together and provide you with feedback right away.