BUSINESS Banks vs. online lenders and brokers
A good banking relationship is a great thing to have as a farmer, business owner, or municipality. But where do you turn if your bank is unwilling or unable to provide you with a program that fits your business’ needs?
Banks offer a variety of business financing solutions – long or short-term loans, lines of credit (with collateral) and credit cards. Banks typically only lend 50-65% on the cost of equipment and then they “cross-collateralize” or put “all inclusive language” in the terms! Banks are slow to respond and require a ton of paperwork! Once you have submitted all of your paperwork, it might take a bank 2-3 months to approve the loan. The positives about a bank are that you can have face-to-face meetings and their rates are typically lower.
Online lenders tend to specialize in one or two types of business loan products such as – merchant cash advances, equipment financing, term loans, lines of credit, or invoice financing. The rates are a little higher than a bank but a good Broker could have access to as many as 250 different types of lenders. Find a Broker that belongs to an organization that requires a Code of Ethics and they should be able to offer you one or all of the following programs:
1. Working capital loans and unsecured lines of credit
2. New and used equipment financing and leasing – up to 30- year- old tractors, 20- year- old combines and all other equipment up to 10 years old. This is 100%+ financing or leasing as shipping and installation can be included with approved credit (WAC). The equipment can come from a dealer, auction, or private party. It is always best to get “preapproved” and shop like a cash customer! With our programs, it is possible to approve a request up to $ 150,000 on an application only in as little as 4 hours and fund in 2 or 3 days – that means no tax returns or financial statements are necessary (WAC).
3. Commercial real estate
4. Inventory, purchase order and accounts receivable financing
5. Municipal financing and leasing for towns, cities, counties and school districts.
6. Consumer financing for A to D credits. Per Forbes, if you sell to consumers and do not offer a financing/ leasing program, then you are losing 40% of your sales! Consumer financing programs should be made available for services from auto parts/mechanic bills to funeral expenses to elective surgeries or dental procedures. Some approvals are made within seconds!
How to decide between a bank and an online lender or Broker:
A. What are your funding needs? If you need a large sum of money a bank is probably best for you.
B. What’s your credit score? If your score isn’t over 675 or 700, then an online lender or broker might be better for you.
C. What do your business financials look like? Banks want to see strong cash flow with profitability. Online lenders or brokers are more lenient.
D. What’s your timeline? If you can wait a couple of months, then the lower rates of a bank might be better for you. How much additional business are you losing by waiting? If you need capital in a matter of days to cover upfront costs or to seize an exciting opportunity, then an online lender or Broker will get you cash faster!
If you have questions concerning any of these programs, please call to discuss them!