Financing Equipment Outside the Bank

Financing equipment outside the bank might be the best thing a business can do.

Many businesses may feel that their banking relationship is becoming increasingly complicated. Banks are under more and more pressure to comply with higher and higher standards of regulatory compliance and risk measurements. As the bank’s business model evolves and tightens, it directly affects your business potential. Financial decisions take longer, and it may seem like the partnership is more about their limitations than your business potential and opportunity. It’s not the banker’s fault, but if you need to secure equipment to fuel growth, you need decisions and options to support that growth opportunity.

Remember when our grandparents told us the old line about not putting all our eggs in one basket? There’s something to that when it comes to how you borrow money for your business these days. Using the bank for all your equipment needs diminishes how much money they can lend to you for working capital. And working capital is really what banks do best. Most bankers don’t understand the ins and outs of equipment very well anyway.

A diversification strategy might be the best option for you. What if you could maximize your access to capital while potentially improving your working capital relationship and securing equipment financing that better fits your equipment needs? You can.

Every lender has a somewhat mysterious “exposure” limit—a maximum amount of money they will lend you even if you have a strong credit score and always pay on time. The problem for many equipment-intensive business owners is that you typically learn of the exposure limit after you’ve crossed it. A diversification strategy allows you to preserve access to credit among lenders and minimize this exposure problem.

Another important point is that equipment debt can eat into your bank’s ability to provide working capital. With this exposure limit essentially being the maximum amount, a bank can lend, every equipment loan or lease eats into access to working capital and vice versa. Access to working capital is a considerable concern for early-stage, high-growth, and turnaround companies. But if you leverage working capital lenders – like banks – to help you with working capital and leverage an experienced equipment lender to help you with equipment, you diversify and maximize your access to capital.

Also, leveraging an experienced equipment lender has other advantages. Equipment lenders who know commercial equipment can offer higher loan-to-value financing (as much as 100%), longer terms, better cash flow options, residual-based leasing, and more — ensuring you get the most ROI from the equipment. Most banks really don’t have the expertise with commercial equipment to offer these flexibilities. At NFS Leasing, we manage diversification strategies like this for equipment-intensive, early-stage, high-growth and turnaround companies every day while overcoming the limitations of traditional lending. If you need a story lender to dig a little deeper and find real solutions, let’s talk.

A diversification strategy might be the best option for your business.