Why You Should Consider Financing Your Equipment with an Independent Lender

When it comes to purchasing equipment, many companies usually don’t have the available funds to pay cash, or they don’t want to use their cash to purchase equipment. So, they rely on equipment financing to get the machinery they need.

There are many financing providers out there - banks, credit unions, captive lenders (equipment dealers or manufacturers that offer financing services), online lenders, and independent equipment finance companies. And all of these can help you obtain the equipment you need to run and grow your business.

But why should you consider using an independent equipment financing company versus another type of lender? And specifically, why should you choose Commercial Credit Group (CCG) as your independent lender?

Brand Agnostic

Most independent equipment lenders, CCG included, will finance many types and brands of equipment within their specific industries, meaning you can finance multiple types and/or brands in the same transaction. Captive lenders typically will only finance the equipment they manufacture or sell. If you are purchasing a wheel loader and need a low-boy trailer to haul it, you would need to use two captive lenders for financing, because you’d most likely be purchasing through two dealerships. An independent equipment finance company could finance both pieces, possibly on the same loan.

Equipment or Industry Specialization

CCG and other equipment finance companies specialize in only a few industries, allowing them to gain a deeper understanding of the industries they serve, the equipment used, and the customer's financing needs. This specialization results in faster approvals, higher approval rates, and more flexible terms than a finance provider or bank that serves a broader range of customers.

Faster Approvals

The industry and equipment specialization means that the sales, credit, and underwriting teams have intimate knowledge of the equipment, its uses, and value. This knowledge means they can perform valuations faster and with less research, thus enabling them to render credit decisions and approvals faster.

Higher Approval Rates

Credit approvals are dependent upon many factors, including the value of the collateral (in the case of an equipment loan, the equipment is the collateral), cash flow of the company, and character of the borrower. In the case of most banks, they also consider other factors, often referred to as the 5 Cs of credit, such as capacity (debt-to-income ratio), and conditions (purpose of the loan) and often structure covenants around these ratios.

When it comes to approving loans for equipment, banks often don't understand the equipment or business needs for specific equipment, so they are less likely to approve an equipment loan. And even if they approved the loan they take a significant amount of time to process the approval and fund the transaction. CCG will help you evaluate your needs and structure your loan application to increase the prospect of a quick approval.

Flexible Terms and Finance Structure

Banks, credit unions and online lenders tend to have fairly rigid payment structures and payment terms. An equipment loan is a term loan and payment terms are amortized over the life of the loan, providing you with the same payment amount each month for the duration of the loan.

However, many industries experience seasonality or cyclicality, meaning that they have periods of good cash flow as well as some extended down cycles. For example, a road paving company in the northeastern region of the U.S. can experience significant business lulls in the winter months because of the freezing conditions. Similarly, a logging company in the southeast may experience weeks or months of rainy weather and be unable to get into the forest due to ground conditions.

These types of seasonality have a detrimental effect on cash flow and can make it very difficult to meet ongoing loan payment obligations. A lender that specializes in these industries understands the business and can often structure payment plans that match the ebbs and flows of the business cycle. These flexible structures can include seasonal skip payments, or interest-only payments, during the lean cash flow months.

Additionally, understanding equipment values and lifecycles can provide loans based on the equipment's lifespan and expected depreciation. This helps to ensure that the borrower builds equity in the equipment and doesn't end up having a loan balance greater than the value of the machinery.

No Banking Covenants to Maintain

Most banks and credit unions tie their equipment loans to the overall banking relationship of a company, which can affect a company’s ability to stay in compliance with the banking covenants. These covenants can include debt-to-equity ratio; interest coverage ratio; cash flow, and earnings before interest and taxes (EBIT). These covenants reduce the risk of the lender, allowing them to call the loan, or demand full payment of the loan if any of the covenants are breached. In most instances, CCG will not require the standard bank type covenants allowing you more flexibility to run your business.

Provides a Secondary Financial Partner

Every company has a banking partner for cash management, and debit or credit cards. If you use your bank as your equipment financing company, you are putting all your eggs in one basket, so to speak. Should there ever come a day when your bank decides it wants to limit exposure to your industry (regardless of the customer’s financial condition or performance) or limit the amount they are willing to lend to you, having your equipment loans through that entity will make it more difficult to switch banks. Additionally, having an additional finance partner helps you mitigate risk and provides you with a secondary source for working capital, and most important, optionality.

Dedicated Customer Support

Unlike online lenders, CCG has a sales team that actually gets out in the field and meet directly with our customers. Additionally, we have credit and customer service people to whom you direct questions and reach by phone without having to be placed in a call bank queue.

This allows you to build a relationship, with your sales representative, and with your customer service rep. Having a strong relationship with this team provides many benefits, including someone to talk with if you have any problems or issues with your loan, find yourself having trouble making payments or you need additional financing quickly.

Additional Financing Options

In addition to providing basic purchase loans for new and used equipment, a full-service independent lender will also provide leasing options, working capital loans, equipment refinancing, and debt consolidation. CCG can do this because we have a full understanding of the industries we serve and have the equipment knowledge to effectively and efficiently evaluate the equipment being financed.

For example, you could purchase a piece of heavy machinery and finance it for 48 months. Two years into the loan you might experience a decline in business or a cash need.. To save money, you could sell the equipment to save on the monthly payments, but you still need the equipment for the existing work you have. Refinancing would extend the terms of the loan but reduce the monthly payments which could get you through the business decline but keep you positioned for future business opportunities.

Lenders that don't understand the nuances of the industry, and the value of the equipment would prefer that you sell the machine and pay off the loan. A true financial partner could help to refinance the equipment and keep you as a long-term customer.

Industry Dedication – In it for the Long Haul

As noted earlier, independent equipment finance lenders tend to specialize in only a few industries. This means that they are committed to those industries and are set up to weather the business cycles of the industries. Banks and online lenders tend to move into industries as economic conditions improve and move out of industries as economic conditions decline. And even if the banks don’t fully exit an industry, they do tend to tighten their lending standards in times of business declines, making it more difficult to get a loan approved.

Choose Commercial Credit Group as Your Equipment Financing Partner

Companies that operate in the transportation, construction, waste, and manufacturing industries know how volatile these industries and their associated economic and business swings are, and that is simply part of doing business. But to take advantage of opportunities in a downswing, businesses need access to capital and flexible financing. By partnering with CCG, a lender that specifically serves your industry, you are more likely to have that access, regardless of the economic conditions.

To be truly dedicated to an industry, your financing partner should service your loan for the life of the loan. CCG holds and services all of its loans for their life, meaning we don't sell the loans after the paperwork has been signed and the deal has been funded. This provides you with consistency and support for the whole term of your loan - be that for 24 months or 84 months. In the long run, it provides you with greater flexibility as your lender has a long-term relationship with, and view of your loan and your business.

Commercial Credit Group is dedicated to the construction, manufacturing, transportation, and waste industries, and has been for 20 years. Our staff has the industry and equipment knowledge to provide the best equipment financing options for businesses of any size. We are flexible, nimble, and committed to providing best-in-class customer service and to helping our customers grow their businesses.

Let us be your financial partner for all your equipment financing needs.

This table simply provides a visual representation of the information stated above.