Tips to Finding the Right Equipment Financing Companies When Looking to Finance Used Equipment

As you look at different options to get the equipment you need to either expand or keep up with the competition, you may look into leasing used equipment. If you can operate used equipment, this may be a great option for you since it is much cheaper and you do not pay for the expensive first few years. Financing used equipment is a little different than financing new equipment and as you look into equipment financing companies there are several things you should be aware of.

First of all make sure that the equipment financing company actually offers used equipment loans. Due to the increased paperwork and effort in financing used equipment, inventory and dealing with agents and older equipment, many financing companies do not offer used equipment loans. Look for a company that not only does loans on used equipment but sells equipment from their inventory. This could help on lease terms and financing options if they want to get rid of some of their inventory.

Make sure the company isn’t too rigid on their loan terms and don’t have too many restrictions. Some companies have strict rules on the financing used equipment. They may only make loans on equipment that is 5 years old or newer, less than 100,000 miles or limit the terms to 36 months or less. You business or needs may not fit into the companies criteria. If they can’t meet your needs there are companies that can. Each company is different and may be in different financial situations. You are trying to build a relationship with the finance company and they should be able to meet your needs.

Choose an equipment financing company that doesn’t use a third party appraisal. This is especially true for loans under 150,000. The company should be familiar enough with the equipment that they would not need to get a third party appraisal and more importantly have you pay for the appraisal. You should be able to effectively convey to the condition of the equipment so that the appraisal isn’t necessary.

How Asset-Based Loans From Commercial Finance Companies Differ From Traditional Bank Loans

When it comes to the different types of business loans available in the marketplace, owners and entrepreneurs can be forgiven if they sometimes get a little confused. Borrowing money for your company isn’t as simple as just walking into a bank and saying you need a small business loan.

What will be the purpose of the loan? How and when will the loan be repaid? And what kind of collateral can be pledged to support the loan? These are just a few of the questions that lenders will ask in order to determine the potential creditworthiness of a business and the best type of loan for its situation.

Different types of business financing are offered by different lenders and structured to meet different financing needs. Understanding the main types of business loans will go a long way toward helping you decide the best place you should start your search for financing.

Banks vs. Asset-Based Lenders

A bank is usually the first place business owners go when they need to borrow money. After all, that’s mainly what banks do – loan money and provide other financial products and services like checking and savings accounts and merchant and treasury management services.

But not all businesses will qualify for a bank loan or line of credit. In particular, banks are hesitant to lend to new start-up companies that don’t have a history of profitability, to companies that are experiencing rapid growth, and to companies that may have experienced a loss in the recent past. Where can businesses like these turn to get the financing they need? There are several options, including borrowing money from family members and friends, selling equity to venture capitalists, obtaining mezzanine financing, or obtaining an asset-based loan.

Borrowing from family and friends is usually fraught with potential problems and complications, and has the potential to significantly damage close friendships and relationships. And the raising of venture capital or mezzanine financing can be time-consuming and expensive. Also, both of these options involve giving up equity in your company and perhaps even a controlling interest. Sometimes this equity can be substantial, which can end up being very costly in the long run.

Asset-based lending (or ABL), however, is often an attractive financing alternative for companies that don’t qualify for a traditional bank loan or line of credit. To understand why, you need to understand the main differences between bank loans and ABL – their different structures and the different ways banks and asset-based lenders look at business lending.

Cash Flow vs. Balance Sheet Lending

Banks lend money based on cash flow, looking primarily at a business’ income statement to determine if it can generate sufficient cash flow in the future to service the debt. In this way, banks lend primarily based on what a business has done financially in the past, using this to gauge what it can realistically be expected to do in the future. It’s what we call “looking in the rearview mirror.”

In contrast, commercial finance asset-based lenders look at a business’ balance sheet and assets – primarily, its accounts receivable and inventory. They lend money based on the liquidity of the inventory and quality of the receivables, carefully evaluating the profile of the company’s debtors and their respective concentration levels. ABL lenders will also look to the future to see what the potential impact is to accounts receivable from projected sales. We call this “looking out the windshield.”

An example helps illustrate the difference: Suppose ABC Company has just landed a $12 million contract that will pay out in equal installments over the next year, resulting in $1 million of revenue per month. It will take 12 months for the full contract amount to show up on the company’s income statement and for a bank to recognize it as cash flow available to service debt. However, an asset-based lender would view this as receivables sitting on the balance sheet and consider lending against them, depending on the creditworthiness of the debtor company.

In this scenario, a bank might lend on the margin generated from the contract. At a 10 percent margin, for example, a bank lending at 3x margin might loan the business $300,000. Because it looks at the trailing cash flow stream, an asset-based lender could potentially loan the business much more money – perhaps up to 80 percent of the receivables, or $800,000.

The other main difference between bank loans and ABL is how banks and commercial finance asset-based lenders view the business’ assets. Banks usually only lend to businesses that can pledge hard assets as collateral – mainly real estate and equipment – hence, banks are sometimes referred to as “dirt lenders.” They prefer these assets because they are easier to control, monitor and identify. Commercial finance asset-based lenders, on the other hand, specialize in lending against assets with high velocity like inventory and accounts receivable. They are able to do so because they have the systems, knowledge, credit appetite and controls in place to monitor these assets.

Apples and Oranges

As you can see, traditional bank lending and asset-based lending are really two different animals that are structured, underwritten and priced in totally different ways. Therefore, comparing banks and asset-based lenders is kind of like comparing apples and oranges.

Unfortunately, many business owners (and even some bankers) don’t understand these key differences between bank loans and ABL. They try to compare them on an apples-to-apples basis, and wonder especially why ABL is so much “more expensive” than bank loans. The cost of ABL is higher than the cost of a bank loan due to the higher degree of risk involved in ABL and the fact that asset-based lenders have invested heavily in the systems and expertise required to monitor accounts receivable and manage collateral.

For businesses that do not qualify for a traditional bank loan, the relevant comparison isn’t between ABL and a bank loan. Rather, it’s between ABL and one of the other financing options – friends and family, venture capital or mezzanine financing. Or, it might be between ABL and foregoing the opportunity.

For example, suppose XYZ Company has an opportunity for a $3 million sale, but it needs to borrow $1 million in order to fulfill the contract. The margin on the contract is 30 percent, resulting in a $900,000 profit. The company doesn’t qualify for a bank line of credit in this amount, but it can obtain an asset-based loan at a total cost of $200,000.

However, the owner tells his sales manager that he thinks the ABL is too expensive. “Expensive compared to what?” the sales manager asks him. “We can’t get a bank loan, so the alternative to ABL is not landing the contract. Are you saying it’s not worth paying $200,000 in order to earn $900,000?” In this instance, saying “no” to ABL would effectively cost the business $700,000 in profit.

Look at ABL in a Different Light

If you have shied away from pursuing an asset-based loan from a commercial finance company in the past because you thought it was too expensive, it’s time to look at ABL in a different light. If you can obtain a traditional bank loan or line of credit, then you should probably go ahead and get it. But if you can’t, make sure you compare ABL to your true alternatives.

When viewed in this light, an asset-based loan often becomes a very smart and cost-effective financing option.

Is The Wrong Type of Equipment Finance Company Bad For (Business) Health?

They are all the same, aren’t they? Absolutely, positively… not! We are of course talking about the equipment finance company industry in Canada and how your selection of the right partner can determine which advantages and disadvantages you can enjoy… or suffer with. We prefer positive advantages that your business can benefit with, not Canadian business financing decisions that you will suffer via the wrong choice of a lease partner for your specific needs.

Ok, so what in the heck are we talking about? Essentially there are four types of asset finance partners in the equipment leasing industry in Canada. And you thought that a lease finance company was a lease finance company!

The first type of partner is the ‘captive’ – no you are not the captive! The term refers simply to finance companies that are owned and literally situated within various manufacturing firms. When clients ask us about lease finance options and they mention specific equipment we are always reminding them to ensure they determine if the manufacturer captive finance firm offers asset financing. If they do we can assure you it is probably the best financial terms you will be able to come up with, as well as a better chance for overall approval re rate, structure and other general terms. Why is that?

It’s to do with motivation – the captive finance firm is motivated to finance and promote the sale of products using financial options such as leasing to get the products out to the marketplace. Want to know a secret that should surprise most business owners and financial managers? It’s simply that captive finance firms in a competing industry will finance their competitor’s products, often at better rates, terms and structures. That is simply because the financial transaction will probably give the competing mfr a foothold into your business to promote and sell their own products. So don’t think that a great firm such as IBM CREDIT CORP. is the only firm that will finance your products you purchase through them. Others will also!

The second main group of asset finance firms in Canada is our chartered banks – Two major banks have leasing arms that are very significant, others employ lease finance to varying degrees. Our real only comment here is that the credit bar is high and more often than not you have to be a customer of the bank to enjoy the great lease and finance structures they offer.

The third main category of the Canadian equipment leasing company market is actually the largest and most robust. It also requires the maximum amount of knowledge and navigation by Canadian business owners and financial managers. This is the Independent lease finance market, where there are tens of firms that offer lease financing based on various criteria of asset size, credit quality, geographical preference, industry specialization, etc, etc, etc.

You have a great choice with our category 3 partners, the independent finance companies. You can spend tens or hundreds of hours determining their credit criteria, additional collateral they require, the size of deals they do, the different lease structures they offer, or… alternatively.. use our final category for lease provider, the independent lease finance advisor who are knowledgeable intermediaries who know the market, have a strong reputation with lease providers, and can match the advantages you seek in an equipment finance transaction to the right provider. Subtle nuances in your overall lease structure, depending on the size of your transaction, can save you thousands of dollars and untold grief at the end of the term of your lease.

So that’s your Canadian lease market overview. Speak to a trusted, credible and experienced Canadian business financing advisor who can successful guide you through the asset finance maze.

Lawsuit Financing Companies

Attorneys, law firms, lawyers, beneficiaries or clients usually form lawsuit-financing companies. Lawsuit financing companies can also provide appeal finance, firm finance, custom finance or estate finance.

Many lawyers and attorneys create lawsuit financing companies based on their experience and the types of cases they encounter the most. Attorneys and lawyers with expertise in personal injury lawsuits or patent lawsuits help by providing cash advances and support in their fields.

Lawsuit financing companies provide many financing options. With a significant monthly fee, a few lawsuit financing companies may help to settle the case faster. Though a large variety of options are available, the plaintiff has to discuss with the attorney which option is best suited to him.

The lawsuit financing company and the plaintiff can make an agreement of the amount of share the lawsuit financers would obtain after the settlement or the verdict is known. This is called “flat fee”. Apart from the flat fees, the plaintiff has to pay a minimum fee every month, called “recurring fees”, to the lawsuit financing company. This recurring fee can be as low as 2.9% in the case of a few lawsuit financing companies, or could be as high as 15% with other companies.

It is the financing company’s decision as to how much to pay as the cash advance. Lawsuit financing companies pay from $1000 to about a million dollars depending on the case.

Every lawsuit financing company would have a team of lawyers to assess the strength of the case. The key is to avoid funding frivolous complaints. Thus the financing companies will scrutinize the complaint and decide the chances of success of the case.

Lawsuit financing companies do not term their cash advances as loans but as investments. The applicant has to repay after the verdict. Usually the monetary settlement that is obtained after the settlement by the court is larger than the company’s advance. The lawsuit financing company should be paid the principal and the predetermined share of the monetary verdict.

Many lawsuit financing companies can be approached through the Internet. Companies like legalcashnow.com, legalfundingnetwork.com and lawsuitcash.com are available on the Internet. Websites like these are flooded with information and instructions regarding lawsuit financing.

Lawsuit Financing [http://www.WetPluto.com/Commercial-Lawsuit-F

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