Loans For Equipment Purchase: Some Thoughts To Consider

Hi,
When a business owner makes the decision to purchase a piece of equipment, he or she needs to consider the following:
1) Is it imperative that it is new? Due to depreciation, most used equipment can be purchased at a significant discount. For certain used equipment, such as for restaurants, buying used equipment can save the purchaser as much as 50%-60%.
2) Do your homework. The Internet is a very good source when looking for new/used equipment.
3) Set up the financing for equipment prior to actually purchasing the piece of equipment. Your negotiation ability is much greater if it is a cash deal rather than relying on the dealer financing your equipment. The financial institution that has your business account should be more than willing to finance a piece of equipment.
4) If buying used equipment, inquire about transferring any or all servicing agreements or warranties on the equipment at the time of purchase.
5) If the business owner is not familiar with the type of equipment that is being purchased, check the Internet to find out whether or not the equipment maintains its value. This will also give the business owner knowledge as to what is an appropriate price for the equipment.
6) Before purchasing any piece of equipment, talk to your insurance carrier to make sure it is covered. If not, make arrangements for insurance coverage. This is especially important for equipment which carries a high degree of liability.
As always, make sure that the terms and conditions of the loan agreement are satisfactory to your needs, and that the obligation can be met on a timely basis.
Have a good weekend!
Alan

The Evolution of the Credit Department: Part 2

Hi,
The changes of staffing and structure in credit departments has been dramatic over the last thirty five years. In the past, it was a requirement for a lender to be familiar with the particular business to which they were granting credit. For example, if a lender was setting up a loan for a farmer to buy farm equipment, the lender understood the uneven income stream of each farmer and structured the credit to match it. The lender was also familiar enough with farming to differentiate between needs and wants in loan applications. It was also necessary for the lender to assess whether or not the income of the farm could service the additional debt. Today, in many instances, the credit people responsible for funding farms have no experience in farming and grant credit with a generic process rather than an individualized one. This sometimes results in farm loans that are doomed from the start which, in most cases, are doomed through no fault of the farmer. The other dynamic in a credit department is the relationship between the sales force and the credit staff. In many cases, sales people pressure credit departments to get approval for their customer's credit applications. As many sales people are paid primarily on commission and bonuses, their motivation is understandable. This sometimes results in loan approvals that are questionable at best. Tomorrow I'll talk about the balance needed between credit and sales departments for a successful company.
Until then,
Alan