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What are the benefits of commercial equipment financing through a big bank?
A few of my colleagues and I were discussing commercial equipment financing a couple of days ago and we got into a debate about whether one should finance through a big bank, or a private specialized lender. So I'm curious what the Focus community thinks -- Say you needed to finance a brand new front-end loader, would you be better off going to a large bank for financing? Or would can you find better rates through a smaller more specialized firm. What do you think??
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2 Answers
It depends on the organization and its needs. A global organization would most likely look to a global bank as it would have financing needs in multiple locations, additionally, depth of relationships with a bank impacts product pricing -- the deeper the relationship, the more favorable the pricing. Net, its not a simple question or answer.
A good question with many possible answers. I would likely opt first for financing from the equipment vendor or a lender that works with the equipment vendor. This vendor will understand the collateral better and likely have a way established to sell the equipment if you default on the loan. Usually this kind of financing only looks to the equipment itself for collaterial, not all the assets of your firm such as a bank might ask. Additionally this kind of financing will not tie up credit lines with the company's main bank which may be much more experienced at financing accounts receivables or inventories.
If the equipment vendor has no preferred funding source, going to a bank can make sense. The rate may be lower, but keep in mind that regardless of collateral, the equipment loan may reduce the other credit the bank might be willing to extend. There are major leasing companies that might consider financing equipment such as GE Capital that would also not tie up existing credit lines.
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