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Financing options in troubling times

If you’ve been paying attention to the evening news, chances are you believe that the economy is a wreck and banks are hoarding their money. Mostly, that’s because bad news sells, and lately, the bad news business has been particularly good. So if you’re wondering about the odds of finding a loan for capital improvements to your business, read on.

Truth be told, all is not lost. The fact is that for credit-worthy customers, the likelihood of obtaining financing for equipment purchases is quite high. Money is available from various banks and finance institutions. Loan requests for equipment and other company improvements have a distinct advantage over loans for discretionary items like boats and private jets. The goods to be purchased are referred to as “Revenue Producing Equipment,” and in short, the equipment that you purchase with the loan will make you money. That additional revenue can then be used to pay back your note, and lowers the risk to any lender that you’ll default. Lending you money to buy equipment for your business simply makes sense.

At the risk of being redundant I want to emphasize that there is plenty of money available for equipment loans. Some banks and lenders (apparently the more newsworthy ones) have chosen to be stingy with their funds, but my recent experience has been that money is still flowing. But just because the money is available doesn’t necessarily mean that your request will be approved. There are several things that you should be prepared to do to help assure that your dream project will become a reality.

Provide complete information. When filling out a loan application provide as much information as you can. Depending on the amount you request, you may be asked to provide tax returns and financial statements. Don’t try to shortcut the system – providing complete information increases the odds of approval in your favor. The more a lender knows about you the more comfortable they will be doing business with you.

Justify your purchase. Be prepared to explain what the equipment you want is, what it does and how it will improve your bottom line. If you can, submit product literature and equipment specifications along with your application. Again, the more information the better.

Don’t get discouraged. If you apply to your local bank and are rejected, don’t give up hope. In the best of times, banks tend to look at things from a worst-case scenario: how will they dispose of that equipment if they have to take it back? In difficult times, local banks may choose to limit their lending to collateral that is familiar to them. You have other options available. Apply to an equipment finance professional – preferably one that is familiar with your industry. A good equipment finance professional will work hard to listen to your reasons for making the purchase and share your enthusiasm for the project.

Now, assuming you’ve been approved for your equipment purchase, there is one more very crucial step that you must take: tell your accountant. Your accountant knows best how to treat your new purchase to save you tax liability.

One important thing to note is that the financial recovery package that was approved by Congress this fall included portions of the RISE (Recycling Investment Saves Energy) Act. Full details have not yet been released but the program will be in effect for several years. It allows for a 50 percent accelerated depreciation on recently purchased recycling equipment. Being able to write off half of your purchase in the first year can save you thousands of dollars in taxes. More on this will follow in future columns as the details become available.

Remember, there is no shortage of available money for equipment loans. When the news comes on tonight, sit down and read a book instead.


DADE Capital Corp. Visit DADECapital.com