How long does it take to get a business loan? Equipment finance

In this video, Elizabeth Canon discusses how long it takes to get an equipment finance business loan.

Hello everyone thank you so much for joining me today my name is elizabeth cannon and i’m the owner and founder of xena financial services a commercial finance brokerage based out of chula vista california on this channel we talk about all things commercial finance personal finance and entrepreneurship so if that sounds interesting to you feel free to hit subscribe

I’d love to see you in future videos if you’re new here welcome if you’ve been here before welcome back it’s great to see you today’s video is geared towards business owners or people inside of businesses that manage the business finances if you’re one of these people then you know that cash flow is probably something that’s on your mind constantly um you know

When are your invoices due one of these bills do when you gotta make payroll when is revenue coming in all these things you know it’s a delicate balancing act and it all is dependent on timing so a big question that we get when people call in or they have questions is you know this business loan whatever type it is how long is it going to take so i figured i would

Make a series of videos that breaks down different types of business loans and how long they take and the different factors that make them take that long so because my specialty is in equipment financing and it’s where i got my start and commercial financing i figured let’s start there how long does it take to get a business loan in equipment financing i will be

Touching on exactly what we’re looking for when underwriting equipment finance loans and i will be giving you some helpful tips closer to the end of the video so you’re going to want to make sure you stay tuned so let’s go ahead and get into the video so what do underwriters look for when decisioning an equipment finance loan well the first thing is going to be

Personal credit so they are generally looking for a reasonably established credit report and a score of 650 or better now if you have you know a lower score than that or it’s not established it doesn’t necessarily mean that there’s no hope for you you just might have to put a little bit more money down or maybe pledge some additional collateral they’re also going

To be looking for patterns of lateness so i mean it is unreasonable to think that we’re gonna go through our entire adult lives without something happening to us um whether it was an illness or a job loss or you know whatever negative thing happened to you what do you do after that time though so if you’re someone who’s just constantly been late and defaulted and

Whatever on your credit that is not going to bode well for you at all now they’re going to prefer homeownership that is a sign of stability but it’s not necessarily required and they are looking for reasonable credit usage um so that’s generally the sweet spot is 30 or less usage of your total available credit they don’t want to see cards maxed out or anything

Like that when you start seeing a credit report where everything is completely maxed out that starts kind of you know showing lenders like a pattern of desperation so they don’t generally like that they’re also looking for a healthy mix of trade lines so a good mix of revolving credit that’s going to include like credit cards and also installment loans um like

Personal loans or uh you know mortgage or car loan or student loan installment loans are generally like a fixed payment that you know is deducted on a monthly basis and also comparable debt so you know if you are looking to finance fifty thousand dollars worth of equipment but you’ve only ever managed a three hundred dollar you know credit card line you know

That’s not necessarily ideal they do want to see that you have successfully been able to manage close to the amount that you’re asking for now another thing that underwriters are going to look at is your personal background and you might not have known that i’ve had files come across my desk over the years where everything looked great you know on a surface level

But i’ve you know had them declined because they were a convicted felon so if you have a criminal history that’s probably going to be you know grounds for decline depending on what it was and you know how you can explain that other things that can come up um you know if you just entered into a bankruptcy that hasn’t hit your credit yet or an open tax lien or past

Due child support all those things they’re gonna show up in your background check that might not necessarily be on your credit yet so just be aware that um you know if it’s something that you’re addressing and you’re in the process of it you know please make sure you have that documentation on hand because they’ll probably see it and they’re going to ask about it

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So if you can quickly turn around say yeah yeah i know but here’s the proof that i’m handling it it’s going to bode much well for you if they do find something like that in your personal background so another thing they’re going to be looking at is your business credit have you done anything with your business credit have you done anything to establish it um you

Know have you financed anything else under the business like maybe another equipment loan or you know business line of credit business credit cards sba loan anything like that they’re going to be again looking for you know patterns of late payments or default or anything like that um and also they might be looking to see if there’s any you know liens that are out

There um you know just just to make sure that you know in the case something going wrong that the lender is in line with their handout to get reimbursed if something happens to the business so um if you’re not sure how to build your business credit or you have more questions about that i did do a video recently with steve super i will go ahead and link it up in

The corner for you another thing that lenders are going to be looking at a very important one is your cash flow normally as reflected on your business bank statements so they’re going to be looking at you know the the charges that are going out coming in um they’re going to make sure that they’re business related for the most part they’re going to be looking at

Your average balances generally over the last three months and you know they’ll be looking at your ending balance too you know the bottom line so they’ll be wondering how is this equipment either going to add to the bottom line in the form of more revenue or save money you know to again save revenue another thing they’re going to be looking at are your historic

And your current financials most the time this is going to be in the form of your last two years business taxes or your financial statements as prepared by your accountant or your cpa um it’s generally you know the last two years and sometimes they will ask for the interims um that’ll that’ll be like your current year’s financial statements um either up through the

Present date or at least through the last quarter that passed if you are a startup you may be asked to share your last year’s personal taxes and maybe also a personal financial statement if you’re not familiar with what a personal financial statement is it’s basically just a document that you fill out that kind of indicates your net worth and your liabilities and

Your assets so what they’re really going to be looking for on there is additional liquidity in case the business fails so you know keep in mind an underwriter’s job is to mitigate risk so they’re going to be looking to see that you have you know investment accounts stocks bonds retirement accounts something like that so if the equipment does default your business

Fails as a startup that you can still pay off and satisfy the terms of that equipment loan and last but not least equipment believe it or not but not all equipment is fundable even if you have the most beautiful credit report in the history of mankind and you are the richest person on planet earth if it’s the wrong type of equipment a lender’s probably not going

To approve that loan so some things that can affect that would be you know the age of the equipment or if it’s in ill repair the last thing they want is to enter you into a loan and then it breaks down in the first few months and then you know you’re not able to use it to generate money for your business and therefore you’re probably not going to pay the loan

Another example would be like new inventions we get these questions from time to time someone has a great new invention and they’re looking for a lender who will fund it for their customers but if a fair market value hasn’t been established it makes it very hard for a lender to be able to approve that because everything they do is like what happens in the case of

Default so if that loan defaults and you know there’s no actual market for the equipment they’re going to go in they’re going to repossess it they’re going to try to sell it somewhere and if there’s no actual market for it and they have no idea what to value it as it’s just not a risk that they’re going to take and also there’s some equipment that can’t operate

As a standalone you know piece of equipment a big question we get a lot is can we do equipment loans for like engines for commercial vehicles that are super expensive and the whole truck is fine it’s just the engine can we do an equipment loan for just the engine the answer is no we can help you get different types of financing for that but it’s not going to be

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An equipment loan because that engine cannot stand alone another type of equipment that is a little bit more difficult but not impossible are like restricted industries a big one that we do here is cannabis lastly if a lender can’t make the connection on you know the beneficial use for the business um you know and and the type of equipment that it is it’s gonna

Be a no or at the very least it’s gonna raise some questions so um an example would be if a real estate office is trying to finance a pizza oven well why you know that goes in a commercial kitchen you guys sell real estate like it doesn’t really make sense so listen we’ve seen all types of things sometimes there is a valid reason but you’re gonna have to explain

It but generally if it’s not the type of equipment that’s appropriate for that business it’s gonna send up red flags and it’s probably gonna be a decline so how long does it take you know at this point you probably want me to get to the point so i’m gonna try so basically um you know it depends on underwriting like how much does the underwriter actually have to

Look at so if this is the kind of deal that you know in our world we call it app only application only where it’s just an application and an equipment quote and they can just make a decision based on your time and business and your personal credit i mean you can have a decision in a couple of hours but if you had to submit a full financial package to an underwriter

Generally it’s going to be around 48 hours because that’s a lot of stuff they have to peel through and make sense of and i just want to note sometimes the financial package raises additional questions so an underwriter will be looking at something they have a question they come back to us and they’ll say what is this i need an explanation please have them send

Me this document so i can add it to the package that starts the clock all over again okay so just keep a note there another big factor is equipment lead time so you know there’s so many different types of equipment but um you know is this equipment something that’s pre-built it’s sitting on a showroom floor somewhere is it you know in a in a warehouse or is this

Something that’s going to need to be customized and custom built you know to your business’s standards and um you know so that the lead time will be a little bit longer on equipment like that also shipping time where is this equipment coming from and where is it going when i used to finance copiers with ge capital a part of my territory was the hawaiian islands

I knew that anytime we had a hawaii deal it would take about three months to fund because that equipment used to be shipped to hawaii by boat now if it was something local here you know in my area san diego then it could be you know the next day or maybe a little bit later in the week depending on you know when the company was available to receive that equipment

So you know if it’s coming from you know super far away or whatever just keep that in mind shipping time is a factor also does this equipment require an outside agency in any kind of way so some equipment lenders they do require that a notary signs off on their documentation some require a site inspection by a third party site inspector or if it’s a title vehicle

A lot of times they outsource the titling to a titling agency so again when it goes to an outside agency we kind of lose control of that part of the timing so just you know be sure to add in a few more days to give them time to do their part to get the equipment deal completed and then installation so there’s some equipment that you know you can just plug it in

And it’s going to work just fine or whatever you just park it in the garage however that works there’s some equipment that’s a little bit more robust so you know maybe you know when they did the site inspection before they realized it’s going to need you know a different type of power source maybe an electrician needs to come in change a type of outlet wiring you

Just never know so you know again that’s another factor that can make the equipment loan take a little bit longer so all this is to say it varies you know on the perfect deal where all the stars align and everything works out and everyone’s on their game and no one’s out sick and everything’s moving at the way it should it can just take a few business days but

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There’s times for some of the factors that i mentioned before that it can take a little bit longer i worked on a startup restaurant a few years ago that due to construction issues with the building took a year and a half to fund so there’s that as promised here are some tips to make it go faster first and foremost check your credit report please like just make sure

That you check it and it’s free of errors and you know there’s nothing that you’re not expecting popping up on that it you know sometimes blows my mind when i’m having the credit conversation with someone and they say they haven’t checked the report in years i’m just like wow very trusting of the credit agencies there but normally it indicates that there might be

Something wrong with the report and on that note if there is something wrong with your report just please let us know um like i mentioned before people are gonna hit bumps in the road okay we are not here to judge you we are here to help you so if you can make us aware of something significant that you think we should know before we get your files submitted to

A lender that will help us tremendously if we think your files one way and we submit it to lender a um you know it’s gonna stay there for a couple days they’re gonna get it back they’re gonna decision that they’re gonna decline it okay it’s gonna come back to us okay with this problem so they’re gonna tell us what the problem was and now we need to decide do we

Have another lender that will take it if so are they going to be terms that are reasonable to you um you know so again let’s just say they are now i submit it to lender b and now i wait you know their criteria is different but we just lost two days for no reason so just please just let us know it’ll it’ll be better in the end again we are not here to judge you

We are here to help make sure you have your business financials at your fingertips so you know make sure you know your business bank uh password your log on information have your uh your tax returns save your desktop some are secure so you can add them on to an email or you know if you don’t manage these things maybe you have a cfo or an accountant or whatever

Let them know that you’re going to be doing this that they can start to get the package together and if you really don’t want to be bothered just give us the name of the person we need to contact and we won’t we will ask them directly for it but at the very least i would prepare them say you’re gonna need to get my last three months business bank statements and my

Last two years tax returns at the very least have those things ready to go and i hate to tell you dear applicant but many of the times the hold up on the file is you um you know we do ask for a very certain financial package um we tell you exactly what we need there is a reason for what we need if you want to know why we need it we’re happy to tell you but don’t

Send us what you think we want to see or you think is going to impress us more like oh my best year was 2017. i’m going to send you that instead of your 2021 tax return no no like we don’t we don’t need that’s great now but send us what we asked for if you have any questions about it feel free to let us know but you know with our lenders we cannot submit a file

Until it is complete so please give us a complete package so that we can submit it timely and we can get it for you funded timely so that’s a video today guys how long does it take to get an equipment finance loan if you found some value in the video i sure would appreciate you giving it a like if you would like to book some time with me directly for a discovery

Call i will put a link to my calendar in the description below general questions feel free to call the main number anyone on the team can help you and if you want to follow me on different social medias i hang out on linkedin tick tock and read it so i will put those socials in the screen next and i really appreciate you spending some time with me today thank you

So much for watching and i’ll see you in the next one bye

Transcribed from video
How long does it take to get a business loan? Equipment finance By Elizabeth Canon