As year-end approaches, many businesses are evaluating their equipment needs and exploring opportunities to make purchases before December 31, particularly to take advantage of potential tax benefits like Section 179. If you’ve been putting off financing equipment, now may be a good time to explore your options and better understand what goes into a financing decision.
There’s more to an equipment financing credit decision than a credit score. Each request is different, which means our credit team looks at several factors to understand the customer, their business, and the equipment they are looking to finance.
We asked our Senior Credit Analyst, Madison Graniewski, to walk us through what happens during the credit-review process and what customers can expect along the way.
Looking at the Full Picture
When a financing request comes in, Madison and the credit team begin by reviewing the credit application and gathering the information needed to evaluate the request. This can include commercial payment history, credit bureau reports, Secretary of State information, bank statements, and financial information when applicable.
But the review doesn’t stop with the numbers.
“Understanding the whole picture” is an important part of the process. The team also considers the customer’s payment history, industry, business, and the equipment they are looking to purchase. In some cases, additional context can help explain circumstances that aren’t immediately apparent in the financial information alone.
What Information May Be Needed?
Bank statements are requested as part of the review process. For financing requests above $100,000, the credit team may also request additional documentation, including financial statements, tax returns, and debt schedules.
Providing complete information upfront can also help the process move more efficiently.
“The more information provided upfront, the better,” Madison said. Being proactive with bank statements and financial information can help reduce additional back-and-forth during underwriting.
For example, if bank statements are requested, screenshots showing a current balance aren’t enough to complete the review. The credit team will need the complete statements, including transaction history.
More Than a Credit Score
One misconception Madison sees is that equipment financing decisions are black and white, or that reaching a certain credit score automatically results in an approval.
Instead, each transaction goes through its own underwriting process. The credit team reviews the information available to understand the complete picture and make an informed credit decision.
When additional information is needed, the credit team works with the sales team, who can then connect with the customer or vendor to gather what’s needed to continue the review.
Preparing for the Credit Process
Every financing request is different, but providing complete and accurate information upfront can help make the review process smoother. It gives the credit team the information needed to understand the business, the equipment purchase, and the story behind the request.