How long does it take from the time an application is submitted for financing or leasing until final approval is made?
The process for approval and the length of time it takes varies greatly from company to company. But we at Advantage Funding have established internal mechanisms to speed that process and can turn around most transactions within 24 hours, delivering funding to a customer within 48 hours. Requests under $250,000 do not require financials.
After final approval, how long before I can take delivery of the equipment?
Delivery of Equipment is predicated on funding. Funding after final approval occurs after you receive a package of documents based on the approval and return the completed package to your lender. The completed package includes:
- the contract set, signed by the customer
- a bill of sale
- a copy of the title from the dealer
- a copy of the insurance binder displaying total coverages and insured names, and
- any additional documents requested by the lender, such as driver’s license (copy) and proof of residence.
Funding generally occurs 24-48 hours after we receive your completed package. Please don’t hesitate to contact your lending representative if you have questions about the best way to submit and/or fund a package.
Is it better to lease or buy?
When deciding whether to buy or lease a particular piece of equipment, it’s helpful to determine the approximate net cost of the asset. Be sure to factor in tax breaks and resale value when making this calculation.
Leasing allows your company to make payments in smaller installments, as opposed to making one significantly higher payment for the same equipment if you were to pay cash. Leasing can also provide business tax deductions, such as those under IRS Section 179. Ownership and tax breaks can make leasing appealing, but high initial costs may prevent leasing from being the best option. Talk to us at Advantage Funding to determine whether a lease, loan or outright purchase would best suit your company.
What types of leases are available?
The most common leases are Fair Market Value (FMV) leases, $101 buyout leases and $1 buyout leases. Businesses that choose FMV leases often obtain equipment that quickly depreciates in value. Dollar buyouts and $101 buyouts, on the other hand, are ideal for those who plan to keep their equipment at the end of the lease term. Advantage Funding offers a variety of financing solutions. Our professionals will work with you to understand your situation and present the best solution, based on your needs.
How can an operator prepare his company to be more attractive for the approval process?
If a customer knows what he or she needs in a credit package, our credit department can turn around an application in as little as one hour. If your document package is incomplete, however, it can sit on a desk for days and weeks without movement.
Understanding your lender’s requirements is crucial. The biggest factor in the decision to lend to small businesses at many finance companies is the owner’s personal credit rating. Many lenders require a personal credit score in the mid-600s.
To boost your personal credit score, be sure to pay personal bills on time, keep a low ratio of debt to available credit on personal credit cards and credit lines, and make sure any balances remain under 30% of your limit on credit cards. Note: In addition to checking the personal credit score of primary owners, lenders will often check the personal credit of any investor or business partner with more than a 20% stake in the business.
Are there programs in place to help customers with extremely slow periods in the year?
Yes. Some industries experience predictable, irregular cash flows and/or seasonal slowdowns. School bus companies, for example, operate very little during the summer. For such businesses, leases can be structured to skip payments during slow-downs, with payments resuming at the resumption of productive equipment use. Advantage Funding specializes in the transportation industry and has the expertise to facilitate such products. Please ask us or another reputable institution specializing in the equipment you need to lease about flexible payment programs.
What can I do to improve my credit score?
Credit scores are similar to a driving record: They take into account years of past behavior as well as present actions. In addition to making the right moves, you also have to be consistent to earn a good credit score.
- Pay your bills on time. Delinquent payments and collections can have a major negative impact on a credit score.
- Keep balances low on credit cards and other revolving credit.
- Apply for and open new credit accounts only as needed.
- Pay off debt instead of moving it from one credit card or finance plan to another.
I have a Federal Tax lien. What affect will that have on a decision to finance or lease to my business?
Any state or federal tax lien that is not paid or in active repayment will negatively impact your credit approval. A lender fears that the IRS will seize your bank accounts and/or property to collect on the tax lien, rendering you unable to meet your financial obligations. Consult with a tax professional and negotiate with the appropriate taxing authority before you apply for additional credit. Without some type of resolution to your tax problem, you’ll waste your time applying for more credit.
I am a Sole Proprietor, but I have a Federal Tax ID number for my business and keep my business and personal accounts separate. If I have bad credit on my personal accounts but am in good standing on my business accounts, will this affect a financing decision?
Yes. Small- and medium-size businesses are typically characterized by the owner’s personal credit. Individuals with sound businesses typically carry strong personal credit. Situations occur in life and in business and lending companies understand, but these situations must be explained at the beginning of the application process. All business owners at these levels will sign personally for their companies. These owners may maintain separate personal and business bank accounts and view their businesses as separate entities, but when it comes to applying for financing, they and their business are seen as one. The personal credit record will indeed affect the business loan process.
What happens if I can’t make my payments on time?
If for any reason your company experiences a cash flow issue, you must immediately contact your financial institution and keep it updated on the situation. No one knows your business like you do, so only you can know when your cash flow will improve.
Lenders are willing to work with business owners who are forthcoming, and we have many tools to help. The worst thing you can do is to stop communicating with your lender. This will always result in dire consequences.
How do you qualify to finance or lease commercial equipment with nothing down?
This is a credit and collateral question, and the answer varies for each customer. A typical down payment for a lease or loan at Advantage Funding is 10% on most commercial equipment in the Limousine/Livery marketplace. Due to credit scores or the nature of their businesses, some customers will be required to put down more. Others may be allowed to put down less, and those with AA credit ratings may qualify for 100% financing. But putting nothing down comes with responsibilities–mainly that you use the equipment throughout the financing period to the end of the financing term. The reason: the equipment will be “upside down” (you will owe more than the equipment is worth) for most of the term, and you’ll have difficulty getting out of the financing agreement early unless you’re willing to pay for the “mis-equity” on the vehicle, which can be $10,000 or more. For this reason, only the most secure and stable credits and companies qualify for 100% financing.
Do vehicle leases for commercial transportation have mileage caps? If you go over these caps, how much is it typically per mile?
Many commercial leases are structured with $1 or $101 residuals. These are considered capital leases or finance leases, and there is no mileage penalty because you own the vehicle at the end of the lease.
What happens if in the middle of a lease I decide I no longer need a particular vehicle? Can I simply turn it in since I am technically renting on a month-to-month basis? Will this affect my credit?
You cannot break a lease in the middle of the term without a penalty, and penalties can be steep. Usually, the early termination of a lease will require you to make the remaining payments as a penalty. If you simply return the vehicle, the leasing company will likely report a voluntary surrender to the credit bureau.
If you need to get out of a lease early, contact your leasing company and ask if you can negotiate a settlement. At Advantage Funding, most good clients with good pay histories won’t have a problem–especially if they are acquiring another piece of equipment. This type of transaction is called a “payoff and replace.”