Diving headfirst into the world of commercial financing is something that can be compared to jumping off a cliff into a body of water. Before you jump, there are quite a few things you’ll want to check on, right? How deep is the water? How many feet have you put between yourself and the surface? What is the temperature like? Are there any visible rocks or obstacles below you? When you jump, will you be able to position yourself correctly to prevent an embarrassing metaphorical belly flop?
You need to know your stuff or else you could get yourself in trouble
The process of getting a lease or a loan is often marketed by banks and brokers as fast, convenient and easy. The end result is always quick money and you driving off into the sunset with your new equipment! Hey, if you’re a business owner who is looking at a 750 credit score, 5 years in business, and a readily available down payment, sure! But let’s face it, not all of us fit that profile and most of us need help finding commercial financing that makes sense.
So let’s get to it.
Sure, money talks.. but your credit score SCREAMS in the world of commercial financing. Whether it is a 451 or 773, your credit score tells potential lenders, banks, and institutions how exactly you manage your personal debt. Your report typically translates to how you will manage your business debt.
Do you make your payments on time? Do you have a decent credit history that shows a variety of funds borrowed? Have you borrowed a LOT of money? Did any of your lines of credit get charged off? These are the factors that determine the financial environment you may find yourself in.
The more your report represents that you have had some bumpy times in the past, the greater the obstacles can be. These obstacles can come in the forms of higher monthly payments, higher interest rates, and larger required down payments.. etc.
So, can you pay off delinquency? Catch up on late payment? Hold off for a while as some hard inquiries fall off your report? The more you can bring that score up, the better your options will look! These are easy fixes, some are more long term with long term consequences.
There are always opportunities to improve your credit score so…
CREDIT MATTERS. Plain and simple.
But what if you know that you can’t bring the score up more than you have? No, bad credit doesn’t necessarily mean the end for you and conversely, having a high credit score alone also won’t assure smooth sailing. There are quite a few other factors that come into play.
What are the Big Risk Factors in commercial financing?
Time in business
– If you are a brand new business (Less than two years TIB), qualifying for financing could become more difficult. Seasoned owners show they have been able to stay afloat in spite of the changing currents of the economy and shows they will not easily capsize and default on payments after a bad month. New owners simply don’t have the proven experience and therefore present a higher risk.
Low cash reserves
– Having low cash reserves makes commercial financing and acquiring equipment more difficult as it limits the size of down payment available and therefore, it will most likely increase your monthly payments. This doesn’t make it impossible to finance equipment of course, but it does add some additional hoops to jump through.
Buying from a private party
– Some finance companies will not allow you to buy your equipment from a private party and work strictly through licensed dealers. (Though that isn’t an issue here at TopMark)
Buying old equipment
– Some commercial equipment finance companies do not want you to buy older equipment as this is a major risk factor. It can be mean frequent breakdowns, higher maintenance costs, and a riskier asset as a whole.
Being an owner-operator
– Some commercial equipment finance companies do not want to work with owner-operators, especially if you are a brand new owner operator… The semi-truck industry is TOUGH and comes with many risk variables. Finding a good dance partner can be challenging.
TopMark, of course, will work with any business owner looking to get the equipment that meets their business needs. You can learn more about our options here!
– A BIG factor from your credit report is whether or not you have successfully maintained or completed a similar loan to the one you are currently applying for. Regardless of whether it is a personal auto loan or a business loan, having similar loans already paid off in the past shows financial companies you will do well-borrowing money in a similar market.
Your best bet is to lower any risk factors that you can to create the best options for yourself. Another way to get the best approvals is to reach out to an adaptive and comprehensive company that will provide many options for your commercial financing needs. Being knowledgeable in what companies are looking at helps you create a better situation for approvals with the best rates you can qualify for.
Now let’s get to the infamous deal killers breakers in the business that is almost impossible to get around.
Absolute deal killers for almost any commercial financing company you go to:
- Open or Past bankruptcy (unless you discharged over 5 years ago)
- Unpaid taxes
- Past due child support
- Prior vehicle repossession
Sadly, these are some of the situations that might leave you unable to find approval. That does not mean it is impossible but you will need a minimum of 25% down, higher interest rate, etc. The best thing you can do for yourself is to repair your credit and pay off debts you can quickly. Along with improving your credit report, be honest with companies you are looking into about what is in your credit history. This will help determine if any programs are compatible with your circumstances prior to the company running your credit/adding more inquiries. However, there are some companies out there that can get you a real approval without a hard inquiry on your credit. *Cough Cough* TopMark Funding.
So, what now?
Regardless of your situation, the most important part of locating a program that
- You can get approved
- The program meets the needs of your business.
Imagine yourself in front of many doors where each one can lead you to the equipment needed to expand your business. Through all the paths, the only thing stopping you is a traditional door lock. Just like any lock, inside there are pins of different lengths that must be ordered by a key to allow the mechanism to unlock the door.
We each have our own key that is created by all the factors listed above; it’s our history in the credit world. The doors ahead are the many programs that can be explored through various financial companies; what key you bring to the table determine which doors can open. Some company’s offer many doors, others only offer one or a few. What is important is finding the correct one whose lock that best fits the key you have shaped.
How Can We Help?
We at TopMark do our best to provide our customers with many doors to get them to their desired needs. We provide 97% of people with credit grades from 500-800 an open door to walk through. TopMark understands people find themselves many different types of financial situations.. Because of that, we will be the financial partner that finds solutions and helps your key fit the right door.
Knowing the risk factors will aid you in finding the best product for you while we provide a wide variety of programs that meet your needs.
If you are looking for a partner that can aid you in your acquisition of commercial equipment, call and speak to one of our representatives today! We can provide you with a free quote that requires no hard inquiry or impact on your credit. Apply Now!