“I FINANCE BUSINESS EQUIPMENT”

My marketing people say I don’t often enough let people know what I do. For those of you who know me you know what I do so this is a reminder. For those of you who don’t know what I do here’s a little secret. “I FINANCE BUSINESS EQUIPMENT” You say “hey a lot of people do that”. That’s true but very few spend their children’s and grand children’s inheritance to pay for what they finance. Most brokers send your financing request to a lender who puts your info into a scoring matrix which determines what they will do for you. You’re stuck in their credit box.

I like using my own money. It sometimes lets me have more freedom to step out of the box when a deal makes sense but the customer has less than stellar recent credit history. “hey isn’t that risky?”. Sure is but I have some of the lowest delinquency statistics in the industry. Why? Because people appreciate a second chance to set things straight. Often times just having that new piece of equipment will totally turn their business around. I like being the guy that helps do that. Back to the original subject that my marketing people tell me that I need to remind some and tell others what I do. So here goes:

“I FINANCE BUSINESS EQUIPMENT”

 

A Loan Officer’s Biggest Pet Peeve

As the owner of a Microloan/lease company serving startups and small businesses in the Southwest, I get to see a number of “interesting” loan applications. The quality of the business, the business owner, and the loan application proposal vary greatly between applicants, but one aspect of the loan application that is always a problem is the business financial projections. It is incredibly difficult for an entrepreneur with no accounting or finance background to complete a set of financial projections on their own, so the solution that most loan officers try to use is an excel spreadsheet template that they give to every loan applicant to complete.

So far so good right? The problem is that the template is returned, completed, but undoubtedly has some pretty strange projections.

A million in sales in year 1?
Your cost of goods sold is only 5%?
You are going to start by hiring 7 people before you have any sales?

A loan officer’s biggest pet peeve is a set of financial projections without a written narrative included. Any given set of projections will probably have dozens of assumptions, but typically business owners do not include their assumptions with their projections.

A potential lender needs to be able to review your assumptions and make their own determination as to whether or not you might be able to achieve those goals. Additionally, lenders will want to poke and prod your assumptions to see how changing something like the price of gas will impact your bottom line.

So PLEASE make sure to include a narrative of your assumptions when you create a set of financial projections.

 

I could be nuts…

I recently heard this comment from a prominent business person at a business mixer.

“Why would any business borrow money to expand when there is so much uncertainty in the economy? We don’t know what is going to happen in Europe, with Obamacare, or regulations or tax policy. You put all that together and any business would have to be nuts to want to expand,”

Seriously, I mean seriously?

I can tell you that I got into business for myself to support my family and put food on the table. I know that if I don’t continuously work towards expanding my business it will retract rapidly. That’s just the way business is in this economy. If I want to maintain the current status, I have to work twice as hard. I know that if I want to enjoy additional income I need to work more markets and fund more deals. To do that I need to constantly look to expanding and sometimes that means I need to burrow additional capital to do so.

I’ve heard all of the arguments but I can’t believe any serious business owner would just roll over and wait for something to change, especially when you don’t know if that change will be for the good. It’s a scary world out there especially if you listen to the newscasters and read all of the articles of doom and gloom, but here is my thought. Making progress involves risk, period. You can’t make it to second base with your foot on first. We all got into business expecting a risk and a gamble that things wouldn’t work out and they may not. There are many changes in the economic outlook throughout the course of any business that you have to overcome. You pour your hearts and souls into your business. It would be nuts to let someone or something else dictate if your business survives. You are in charge of your own destiny.

The pessimist complains about the wind. The optimist expects the wind to change.

A leader adjusts the sails.