Banks vs Online Lenders and Brokers – South Platte Sentinel
A good banking relationship is a good thing to have as a farmer, business owner or municipality. But who to turn to if your bank is unwilling or unable to offer you a suitable program your business needs?
Banks offer a variety of financing solutions for businesses – long or short term loans, lines of credit (with security) and credit cards. Banks typically only lend 50-65% of the cost of the equipment, then they “cross-guarantee” or put “all-inclusive language” in the terms! Banks are slow to respond and require a ton of paperwork! Once you have submitted all your documents, it can take 2-3 months for a bank to approve the loan. The advantages of a bank are that you can have face-to-face meetings and their rates are usually lower.
Online lenders tend to specialize in one or two types of business loan products, such as merchant cash advances, equipment financing, term loans, lines of credit, or invoice financing. . Rates are a little higher than a bank, but a good broker could have access to up to 250 different types of lenders. Find a broker who belongs to an organization that requires a code of ethics and who should be able to offer you one or all of the following programs:
1. Working capital loans and unsecured lines of credit
2. Financing and leasing of new and used equipment – tractors up to 30 years old, combines up to 20 years old and all other equipment up to 10 years old. This is 100% finance or lease plus, as shipping and installation can be included with approved credit (WAC). The equipment can come from a dealer, an auction or a private party. It’s always better to be “pre-approved” and shop like a cash customer! With our programs, it’s possible to approve an application for up to $150,000 on an application in as little as 4 hours and fund in 2-3 days – that means no tax returns or financial statements are required (WAC).
3. Commercial real estate
4. Inventory, purchase order and accounts receivable financing
5. Municipal financing and leasing for cities, counties and school districts.
6. Consumer Finance for A-D Credits. According to Forbes, if you sell to consumers and don’t offer a finance/lease program, you lose 40% of your sales! Consumer financing programs should be made available for services ranging from auto parts/mechanical bills to funeral expenses to elective surgeries or dental procedures. Some approvals are done in seconds!
How to choose between a bank and an online lender or broker:
A. What are your financing needs? If you need a large sum of money, a bank is probably the best option for you.
B. What is your credit rating? If your score is not above 675 or 700, an online lender or broker might be a better fit for you.
C. What are your business finances like? Banks want to see strong cash flow with profitability. Online lenders or brokers are more lenient.
D. What is your schedule? If you can wait a few months, a bank’s lower rates may work better for you. How much more business are you losing while waiting? If you need capital in a few days to cover initial costs or to take advantage of an attractive opportunity, an online lender or broker will get you the money faster!
If you have any questions regarding any of these programs, please call to discuss!
Bill Mapes can be reached at [email protected] or 316-253-7464.