In life we have stages we go through. The first stage I can remember is elementary school. Obviously we have many more stages before we reach our final stage of retirement. Most of us work hard to reach that all mighty stage of retirement to live comfortable and without worries. Just like life in equipment leasing and financing we have stages in our lease process. The four stages we will discuss are the applying, credit, approval, and funding stage.
The first stage is applying for customers. In every lease and finance process the customer must apply with a simple application. The application will ask the customer for simple information such as current address, time in business, website, name or dba of company. Other information on the application is important to the bank to make there decision to approve your transaction. The following information is bank information which will provide us the proof that your company can service the lease. Other information that helps us provide an approval for your companies leasing needs is trade references. This will show us how your company pays on references that are paid in 30 days. This helps us to decide weather your company will pay us on time with lease payments being due every 30 days. The above information will only allow your company to apply for $50,000.00. Now if your company is looking for a larger amount then we would request additional information that would help provide us gross income, current income of the company. That information is found in the corporate tax returns and financials of the company. Other information that would be requested would be your company's ownerships personal tax returns. Certain banks will ask your company for 2 years tax returns both for corporate and personal.
The credit process that underwriters take in the leasing industry may be overwhelming for customers. The request for information is limitless and non stop. The credit department finds information from three sources. These sources were discussed in a previous article of mine. The four sources are pay net, Dun & Bradstreet, bank statements, and personal credit. The credit department will also ask for corporate tax returns if the principal lease amount is in excess of $75,000.00. When looking at the corporate tax returns the bank is looking for gross income that is five times the size of the equipment lease request. We would request personal tax returns from the client if the client's credit is sub par or even if the client's credit has low availability. During the process we are at the underwriter's mercy for the decision. Once all the information is reviewed the bank or underwriter will send over either a decline or if your lucky an approval.
Once the approval is received the underwriter will start working with us to create final documents. The final documents will be the documents that clients must sign and return before any equipment can be ordered or PO issued. Upon approval the client must submit any and all quotes for the equipment for approval for the equipment. The vendor that your company is working with must go through the approval process also. The vendor must submit a vendor profile which is similar to an application for a customer. The application process for the vendor is easier then the customers application process. The time that it takes from getting the approval to funding is usually two weeks because of the economic conditions we suffer in this country.
The last stage of our process is funding. The anticipation of the deal funding is so high because they can see the finish line or the light at the end of the tunnel. The underwriter's makes one last review of the information submitted before funding the transaction. The funding process is not easy, the stipulations that the bank put on the credit approval must be satisfied before any funds are released. The underwriter can also ask for unusual documents such as lease agreements for the building, electric bill, etc. Obviously we have many more steps in the funding process; we would have a ten page article if we went through all the steps.
The stages we discussed in this article are simply compared to the steps that the banks go through to make the decision to approve and fund the deal. The key to equipment leasing and financing is clients must be willing to work with the financial institute. With all the information requested and the questions that are asked. The process can be frustrating but on the bright side your company will not waste there entire savings on a depreciating piece of equipment. We hope you and your company can use find this information useful. Find your equipment needs and let the equipment work for you. Just don't make the mistake of working for the equipment by paying cash.