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,
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
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
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.