Top Reasons Equipment Financing Is Rejected:
- Not paying current business vendors on-time.
- Recent revenue declines without sufficient asset or cash flow offsets.
- Limited capacity to provide personal guarantees, especially in cash-tight situations.
- Year-end losses unrelated to tax strategies.
- Stressed personal credit affecting potential personal guarantees.
- Underwriter's lack of understanding or comparables for the equipment asset, addressable by an expert opinion of value.
Typical Documentation Required for Equipment Financing:
- Three years of business tax returns.
- 2-3 years of GAAP balance sheets and income statements.
- Interim statements for the current fiscal year.
- Bank and lender statements.
- Possibly personal financial statements and supporting documents.
- Expert opinion of value for the subject equipment.
Tips for Borrowers Seeking Equipment Financing:
- Understand Your Financials: Know your business's financial health, including cash flow, revenue, and existing debts. Consider personal credit implications.
- Shop Around: Compare rates, terms, and fees from different lenders.
- Prepare a Strong Application: Gather required documentation such as financial statements, tax returns, and equipment appraisals.
- Consider a Down Payment: Offering a down payment can improve approval chances and terms.
- Factor in Additional Costs: Include closing costs, origination fees, and other loan expenses.
- Build a Relationship with Lenders: Open communication aids in navigating the process smoothly.
- Expect a Longer Approval Process: Market conditions may extend approval timelines.
- Stay Informed: Keep up with industry trends to make informed financing decisions.
- Prepare for a Personal Guarantee: Understand potential requirements for personal financial guarantees from business owners.