The financing process runs like clockwork to us here at Direct Capital, after all, we are in the financing trenches all day every day. But we understand that to people on the outside of the financing world, the process might not be second nature. In fact, quite the opposite. That’s why we are putting together a series of blog posts over the next few weeks to cover the ins and outs of the equipment financing process.
Part one: The plan
Approaching a lender for equipment financing is (hopefully) something you don’t do just on a whim without giving it some thought. You know you need a new piece of equipment for your business, and you know you can’t afford it on your own. But, before you go walking into the first bank or lender’s office you see, there are few things to think about:
Know what you need and why you need it. Simply walking into the lender’s office and saying “I need four trucks” likely won’t get you very far. Why do you need those four trucks? Has your bakery business picked up so much in the last several months that you can’t handle all of the deliveries with a single truck? Do you need to replace your current fleet of delivery trucks because they are ten years old and constantly breaking down? The key here is the reason. It may be obvious to you, but your lender is going to want to know this.
Consider your time frame. If you have to make that massive amount of deliveries in your single truck tomorrow, you’re going to need financing a lot sooner than if you’re just looking to upgrade your fleet. It’s important to have an idea going into the financing process of how soon you’re going to need the equipment. That way, your lender will know from day one if they are going to have to move mountains to speed up the process for you – in many cases, they will.
Be prepared to talk about your goals. Any lender you talk to is going to want to know how the new piece of equipment is beneficial to your business. In other words, you shouldn’t be buying four new delivery trucks just because you love the look of the new Fords. You will need to be prepared to talk about your business’s goals and align how the equipment purchase will help you get there.
Stay tuned for our next blog post on the next step of the process – the application.