Many of you may feel your banking relationship is increasingly complicated. Bankers are under more and more pressure to comply with higher and higher standards of regulatory compliance and risk measurement. As their tightening business model evolves, it’s affecting your life too. Decisions take longer and it may seem like this new world is more about their limitations than your opportunity. It’s not the banker’s fault, but if you need to acquire a big package of equipment to fuel growth, you need what you need.
Remember when our grandparents told us the old line about not putting all of our eggs in one basket? There’s something to that when it comes to how you borrow money for your business these days. Using the bank for all of your equipment needs limits how much money they can loan you for working capital. And working capital is what those guys do best. Most bankers really don’t understand the equipment very well anyway.
A diversification strategy may be the best option for you. What if you could maximize your access to capital while potentially improving your working capital relationship and securing equipment financing that better fits your equipment needs? You can. Diversification of your sources of capital can enable you to achieve these things and more.
Every lender has a somewhat mysterious “exposure” limit – a maximum amount of money they can lend you even if you are a great credit that always pays on time. The problem for many equipment-intensive businesses is that you only find the line after you’ve crossed it. Diversification allows you to preserve access to credit among lenders and minimize this exposure problem.
Another important point is that equipment debt can eat into your bank’s ability to provide working capital. With this exposure limit essentially being a maximum amount a bank can lend, every equipment loan eats into access to working capital and vice versa. By leveraging working capital lenders – banks – to help you with working capital and an experienced equipment lender to help you with equipment, you maximize your access to capital.
Leveraging your equipment lender has other advantages. People who know commercial equipment have the ability to offer higher loan-to-value financing (as much as 100%), longer terms, better cash flow options, residual-based leasing and more to ensure you get the most ROI from equipment. Most banks really don’t have the expertise with commercial equipment to offer these flexibilities.
At LEAF, we manage diversification strategies like this for equipment-intensive companies every day. And we keep things simple with flexible finance options to meet the needs of your business. Let’s talk.
