Commercial

Equipment Financing: Don't Rely on a Single Lender

Dec 03, 2018

When securing financing, getting what you need often comes down to the relationship that you've developed with the lender. You want the lender to be an expert in the nuances of your business and anticipate your preferences in structuring terms. You need them to understand things that aren't always reflected in the numbers, like your passion for the business and drive to succeed. You expect the relationship you've built with your lender to provide some advantages. When time is of the essence, you'd like your transaction to be pushed to the head of the line. When there's no clear choice on whether to extend financing or not, you'd like to get the benefit of the doubt.

Because this relationship is so important, you may think relying on a single lender for all your lines of credit and equipment financing options is the best approach. However, this could put you at a disadvantage. There are a number of benefits to having a second lender relationship.

Credit Crunch

When the housing market started to decline in 2007, banks tightened their lending standards. The immediate effect was to the housing market, but it soon spread into all areas of lending, including equipment financing. Credit became tight and financing expensive equipment became hard. As a result, many companies had to use multiple lines of credit with a number of lenders to finance equipment.

Currently, the U.S. economic outlook is healthy and capital is readily available. However, based on past history, a decline in one sector of the economy could result in a tightening of credit.

Adding a new relationship now could put you at an advantage in the future when accessing capital may not be so easy.

Niche Lender

Building a relationship with another lender can also expand the financing options available to you. There may come a time when you need a "niche" lender for a special piece of equipment or to finance one additional project.

Some niche lenders differentiate themselves based on industry knowledge or structuring flexibility. Instead of offering boiler-plate financing products, they focus on developing strong asset expertise and an array of products and structures suited for those assets. This can provide a clear value-add when you're looking for customized capital options.

Here are some examples of the options a niche lender may be able to provide:

Greater range of loan amounts — anywhere from $50,000,000 down to $500,000
Large, flexible limits that you won't outgrow
Diverse range of equipment financing options, including soft assets:
- software and programming
- data conversion
- implementation and training
- build out and leasehold improvements
- shipping
Master lease options — to accommodate changes in your leasing needs
Additional underwriting flexibility including a willingness to work with:
- low or negative equity
- less desirable equipment
- progress funding
- multiple vendors

When researching niche lenders, your list will include banks. In addition to offering the flexibility on collateral and structure outlined above, there are other important benefits to building a strong banking relationship.

Advantages of Banking Relationships

In today's environment, you can have all your leasing and financing needs met by a bank. A banking relationship is mutually beneficial. You gain the security of working with a nationwide lender, the benefits of a regionally diverse financing group, and capital options that are relationship based, not transaction based.

The bank benefits from meeting the needs of commercial customers. They understand that equipment finance can serve as an introductory product.

As a logical addition to a traditional product set, banks can offer a full-service of leasing and financing options.

Summary

When it comes to accessing capital, allowing a second lender to compete for your business provides additional financing options and improved terms and service. Adding a niche lender that's a bank offers regional diversity and can deliver flexibility, including expanded loan amounts, greater financing limits, and the inclusion of soft assets. Also, a second line of credit can be used for acquisitions, emergency expenses, and day-to-day operation expenses. All in all, building strong relationships with a number of lenders offers immediate benefits and is a sound investment in the future.

For information on Axos Bank's Equipment Finance program where specialists are available to discuss lending solutions to meet your equipment needs, please call 888-254-1750 today. To learn more about the other business banking solutions we offer, visit us at AxosBank.com.