Borrowing Money vs. Equity

With the rise of popular television shows such as “Shark Tank” and “The Profit,” many new business owners are attracted to the idea of exchanging equity in their businesses in order to raise capital. This funding option is now commonplace – at least on TV – so it’s often a first thought in an entrepreneur’s mind when the need for capital arises.

But there is another option: borrowing money. Instead of giving up equity, some companies opt to borrow money, which has a few key advantages over giving up equity.

For starters, debt is typically less expensive than giving up equity in the long run because equity costs you a piece of your business.

“Think about it like this: when starting out, your small business needs inventory and equipment and to make payroll. Investors are going to help you with capital, but you’re sacrificing future profits indefinitely to fill a short to mid-term need,” writes Eyal Lifshitz on Entrepreneur. “With debt, you incur interest costs, but it is temporary and capped. Once you pay it back, your equity remains intact.”

Second, debt can be cheaper than your opportunity costs because you can profit from debt and open up new growth channels. The question, Lifshitz says, is this: “Is the return from this investment higher than the cost of the debt available to me?” Whenever the return is higher, the debt is worth it.

Third, paying interest on debt reduces your tax burden. The cost of interest actually reduces your taxable profit, which ultimately reduces your tax expense. The net result is that you’re paying lower effective interest than normal.

Finally, debt encourages discipline, particularly in the formative and growth years of a company, because it creates an environment of thriftiness throughout the business that could ultimately put the company on track for better margins.

Crestmark has broad experience in providing working capital solutions to growing businesses. If you are exploring options for your business, give us a call today to speak with a lending expert!

Why should I lease construction and forklift equipment?

Whether your next project involves constructing a building or moving a mountain, you don’t want to start down the path of new equipment by making your budget into a mole hill.

Crestmark Equipment Finance allows construction and building companies to acquire the necessary equipment for upcoming projects and update outdated equipment to conform to safety requirements through fixed monthly payment financing programs. Qualified equipment includes: bulldozers; backhoe and other loaders; compactors; excavators; graders; dump trucks; diesel generators; cranes; forklifts and any type of machinery.

Why should you consider lease financing for your construction equipment needs?

Up-To-Date Equipment: Newer construction equipment does not need as much repair or upgrades as older equipment plus it conforms to the latest safety enhancements and improves operator comfort.

• Cost-Efficient: Construction equipment holds a high cost for the newest models. Through financing, a low down payment only is required and you can generate cash flow by utilizing the equipment vs. a large upfront budget cost. Through financing, you only pay for a portion of the truck vs. the entire truck with fixed monthly payments.
• Maintenance: Based on the lifecycle of construction equipment, most owners tend to retain the equipment longer than its useful life (10-20 years), but spend more on maintenance to keep their fleet operational. Newer equipment typically is easier to maintain and doesn’t require as much maintenance as a 10 or 20-year old machine.
• Easy Upgrade vs. Resale: The construction equipment industry has become very competitive including the resale of used machinery. By leasing your construction equipment, you select the term (2 to 5 years) and have the option of purchasing and owning the equipment, returning the equipment or upgrading to new equipment at lease end. If purchased, you must spend the time and resources to sell the equipment. Through financing, your business can upgrade your entire fleet – and easily add on more equipment throughout the lease term as business escalates.
• Vendor Neutrality: As Crestmark Equipment Finance has stated in previous blogs, we accommodate many business owners by having the ability to bundle multiple types of equipment from different vendors into one fixed monthly lease payment. You can select the construction equipment from multiple different vendors – Crestmark Equipment Finance will combine everything into one invoice/payment per month.

Don’t build your budget from an old foundation of equipment when lease financing gives you the flexibility to upgrade to new equipment without getting caught with obsolete equipment. To learn more about our construction lease financing program, please contact Crestmark Equipment Finance or call 888.999.8050.

Tips on The Lending Process for Female-Owned Businesses

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If you’re a woman in the process of starting a new business, you’re in good company. The number of businesses owned by women in the U.S. is growing. In 2014, there were over nine million women-owned businesses, employing over seven million people and generating over 1.4 trillion dollars. For inspiration, check out this list of top women entrepreneurs.

This is great news, because it means women have the opportunity to pursue their dreams, support their families, and contribute to the positive growth of our economy – all on their own terms. If you’re in the process of getting started with a business of your own – whether you’re just bouncing ideas around or you have a firm business plan drafted – here are some quick tips on how to finance your new business.

Financing options and lending partners

It’s important to think through what kind of financing you’re going to need, both now and in the future as your business grows. Sometimes starting a business doesn’t require much money, and people can afford to finance it themselves.

But often, more money is needed to get off the ground and running. If you’ve thought it through and know you’re going to need a loan, consider what types of financing exist. A few examples include:

• Asset-based lending
• Account receivable lending
• Business Line of Credit
• Term Loans
• Factoring
• Traditional bank financing

The Small Business Administration (SBA) also provides some excellent resources to help women launch businesses, grow their existing business, and compete in the global marketplace.

Before meeting with potential lenders, have the following prepared:

– Business Plan: Having a firm grasp on what your company goals are, and precisely how you’ll reach them is critically important. Your business plan should outline these details, and will provide potential lenders with a thorough understanding of how you intend to run your business. Most importantly, preparing a good business plan provides you with an opportunity to demonstrate your professionalism, attention to detail, and ability to plan – all of which are important to potential lenders.

– Financial Documents: Once you’re moving forward and meeting with a potential lender for a loan, start prepping. Make sure all of your financial information is organized correctly and efficiently. Having the proper reports will help your lender understand your plans for the funding, how you plan to grow, and how you will eventually pay the loan back.
For more on what documents you will need and questions you might be asked, check out this previous post on our blog.

– Answers to FAQ’s: Be ready for questions the lender might ask you. From “Does the business control its inventory?” to “What is the future of the industry,” – have the answers ready. In order to prepare for this, share your business plan with a few colleagues and find out what questions they have. Chances are, they will be some of the same questions that a lender will be curious about as well.

We work with women to fund small-to-medium sized businesses and are experts in this area. If you have questions, or would like more personal advice on how to finance your business, give us a call today!

Why should I lease automotive repair equipment?

As vehicles continue to evolve with smarter technology and wireless capabilities, Crestmark Equipment Finance has helped multiple smaller automotive repair shops and larger dealership maintain consistent service levels by providing competitive, fixed payment financing for their needed equipment.

What type of automotive equipment can Crestmark Equipment Finance lease? All types including: diagnostic equipment, car lifts and floor jacks, wheel balancers, brake lathes, tire changers, battery chargers, paint booths and qualifying technology and equipment.

Why should an automotive dealership, body shop or automotive shop owner think about leasing their automotive repair equipment vs. paying cash?

• Low Upfront Cost & Fixed Monthly Payments: Crestmark Equipment Finance requires a small security deposit to acquire the equipment plus you benefit from fixed monthly payments throughout your selected 24-60 month lease term. Most shop owners do not want to invest a large upfront sum to upgrade equipment.
• Equipment Pays For Itself: Financing your equipment upgrades allows your shop/dealership to generate income (using new equipment) and earmark those profits toward the fixed monthly lease payment. For example, if your lease payment is $400 per month, how many alignments do I need to make on this new equipment to reach that number?
• Vendor Neutrality: Crestmark Equipment Finance remains “vendor neutral” in the equipment leasing industry, which means an automotive repair business owner can select multiple types of equipment and combined them into one fixed monthly lease payment. For example, a shop might need to upgrade diagnostic equipment and lifts, but the owner also could finance new POS or IT systems on the same lease. YOU select the equipment; Crestmark Equipment Finance creates flexible financing options for you to own or upgrade the equipment at lease end.
• Keep Pace With Your Customers: With each new automotive model year, the complexity of today’s vehicle systems become more enhanced, which means upgraded technology and diagnostic systems for proper maintenance of the vehicles. Throughout a lease, you can roll in equipment or software upgrades to match the current diagnostic systems to ensure proper maintenance/repair of your customers’ vehicles.
• Preserve Bank/Credit Lines: Leasing provides off-balance sheet financing for your business including potential tax benefits. By financing your equipment, you can use bank/credit lines for other business-related expenses (i.e., hiring workers, building expansion, etc.).

As a Crestmark Equipment Finance leasing client, you select the proper equipment to drive the success at your facility through low upfront cost, fixed monthly payments during your selected term, and the ability to purchase, upgrade or continue leasing the equipment at lease end.

If you are looking to finance automotive equipment for your business, please contact Crestmark Equipment Finance or call 888.999.8050. 

Why should I lease security and life safety equipment?

In continuation of our blog series, Crestmark Equipment Finance discusses the advantages of leasing commercial security and life safety equipment including security systems, access control, fire and safety systems, and other technology designed to keep your properties and employees safe.

Based on budget, a lot of businesses are pigeonholed into acquiring a security or life safety system which might not adequately provide the protection their building or property needs. With today’s advancements in security technology, your business must take into consideration options for systems, cameras and flexibility to ensure a safe environment.

• Avoid Technology Obsolescence: Currently, the security industry is dominated by technology and virtual security platforms where smart camera can detect the difference between a potential intruder or a non-threatening animal setting off the alarm system. Cameras, access controls and security systems are able to be monitored and even turned on/off through smart phones or computers. By purchasing your security equipment, you are locked into those cameras and systems until an upgrade is needed; by leasing your security system, your business can evaluate after 2 to 5 years to see if your system protects your property or needs an upgrade. Leasing allows you to try out your system and avoid outdated protection.
• Tech Refresh Options: With financing your security systems, you may opt for a Fair Market Value buyout option which provides opportunity to upgrade during the lease term to newer equipment at a designated point in your lease. Why upgrade? Newer systems are usually easier and more affordable to maintain vs. older equipment/systems/software.
• Upgrades: A lease is more flexible in upgrading your equipment throughout the designated lease term. Through your selected manufacturer, you can add more security equipment to your current lease at a fraction of the cost of paying cash.
• Protect Your Budget & Property: Many businesses and municipalities have a limited budget allocated to security, access controls or life safety systems. Through leasing’s fixed monthly payments, you can acquire the system to keep your building or property safe with taking shortcuts due to paying cash upfront. Fixed monthly payments help you budget for the equipment based on your selected lease term instead of not getting the proper system to keep your employees safe.

Remember, Crestmark Equipment Finance offers competitive financing programs for security and life safety equipment that not only protects your properties, but these fixed monthly payments also are designed to protect your budget.

To receive a leasing quote for your security or life safety system needs, please contact Crestmark Equipment Finance or call 888.999.8050.

Why should I lease healthcare and medical equipment?

In continuation of our blog series, Crestmark Equipment Finance discusses the advantages of leasing medical equipment and why hospitals, healthcare facilities, doctor and dentist offices, and other medical-related businesses should consider financing versus a credit line or bank loan.

According to the American Hospital Association, 5,686 hospitals are registered in the United States with 2,904 qualifying as non-government Not-For-Profit Community Hospitals and 1,010 qualifying as state and local government community hospitals. All of these medical facilities also are seeking ways to properly treat their patients with the latest medical equipment and technology without a large, upfront cost to their already tight budgets.

• Municipalities: Hospitals, healthcare facilities and other treatment centers may qualify as a municipality which allows their business to get specialized municipal rates, tax advantages and delayed billing so their payments occur in the next fiscal year budget.
• Collateral: The financed equipment serves as the collateral for the lease transaction. In a bank loan, acquired equipment may be structured under a blanket lien which could lock up additional assets or credit lines. Remember, a lease also provides the option to roll maintenance, software, training and installation costs (“soft costs”) into your lease payment.
• Less upfront payment: Purchasing high-tech medical equipment means a large cash outlay in advance. Utilizing a credit line could involve high monthly interest charges. Applying for a bank loan could involve a 20% down payment (or higher) plus it ties up your hospital’s credit for other needed services (employees, etc.). Leasing requires one payment in advance and payments are fixed throughout the lease term.
• Flexibility: Leasing gives your hospital options to own the equipment, extend the lease or even purchase the equipment through your selected lease term. Crestmark Equipment Finance also has designed specialized programs for hospitals and healthcare facilities to acquire equipment on an “as needed” basis and roll the costs into one fixed payment at the end of a designated period.
• Multiple Equipment Types: Crestmark Equipment Finance remains as a vendor-neutral commercial lease financing provider, which means our leasing experts can bundle multiple types of equipment from different medical equipment manufacturers into one fixed monthly lease payment. You simply select the vendors and equipment; Crestmark Equipment Finance will work with them to ensure proper installation before your lease commences.

Like most types of qualifying equipment, hospitals and qualified healthcare facilities also can leverage the tax benefits of leased equipment, avoid obsolete technology and develop an end of lease option which fits their facility and budget.

To receive a leasing quote for your medical equipment, please contact Crestmark Equipment Finance or call 888.999.8050.

Why should I lease IT hardware, software and equipment?

In this series of upcoming blogs, Crestmark Equipment Finance will share the many reasons why seven out of 10 businesses choose to finance their equipment through leasing versus paying cash, placing on a credit card or opting for a bank loan.

This week, Crestmark Equipment Finance discusses the advantages of leasing IT equipment including hardware, software and licensing, printers, servers, and networking equipment. Why should my business lease IT equipment?

• Leasing provides 100% financing for all equipment, software, training, maintenance and installation. Crestmark Equipment Finance also can provide 100% software financing for businesses, which most lending institutions will not extend financing to customers due to software not being a “tangible” asset against the loan.
• End of Lease Options: Most hardware (PCs, tablets, laptops) has a useful lifecycle of 2 to 5 years based on the ever-changing pace of today’s technology. Through leasing, your business has the option to purchase the hardware at lease end, update to new equipment, continue to lease the hardware, or return the equipment.
o If you purchase hardware, you are stuck with the equipment; leasing provides a way to give the hardware a “trial” run throughout the term. If you are unhappy with the product (or technology has left a gap in your production), you can simply return the equipment and upgrade to new hardware.
o Avoid obsolete equipment: Crestmark Equipment Finance will transition your systems from the former equipment to the new equipment and through its complete end of lease line of services, take the old equipment for certified destruction to comply with government standards.
• Flexibility: Most Crestmark Equipment Finance commercial customers require multiple types of hardware and software from different manufacturers/vendors. You select the equipment from one or multiple manufacturers and we will provide financing terms for the hardware, software and other services (installation, training, etc.).
• Fixed Monthly Payment: Unlike other financing options, your monthly payment is fixed throughout the term you select – it will not fluctuate based on market conditions or interest rates. You lock in the monthly payment when you accept the equipment.

Crestmark Equipment Finance has helped businesses, large and small, retain a technologically updated environment through financing their IT systems, software and requirements. We also have specialized financing programs to minimize leasing paperwork and track leased assets online through our proprietary asset management portal, assetCONNECT®.

To receive a leasing quote for your IT equipment needs, please contact Crestmark Equipment Finance or call 888.999.8050.

Small Business Lending Questions and Answers

Business-Questions-Answers

Here are some common questions that small business owners ask when preparing to find financing for their company:

Q: What documents will I need when applying for the loan?

A: Different lenders and types of financing may require slightly different documentation, but you’ll find the list is largely the same. According to the U.S. Small Business Administration, here’s a rundown of what you’ll need to have available when you apply for the loan..

– Personal background information, including previous addresses, former names, any criminal record, and educational background.

– Resumes, particularly if the loan is to help start a new business.

– Business plan, which all loan programs require alongside the application. This should include projected financial statements.

– Personal credit report, which you should obtain from all three major consumer credit rating agencies prior to submitting the application. Any inaccuracies or problems on your credit report will affect loan approval, so correct any inaccuracies before you apply.

– Income tax returns, as far back as three years.

– Financial statements, particularly for business owners with more than a 20% stake in the business.

– Bank statements, typically as far back as one year.

– Collateral, which varies greatly depending on the lender. Loans with greater risk factors may require significant collateral. Solid business plans and financial statements can show a business to be lower risk and can help alleviate the need for any collateral at all. Regardless, be prepared with documentation of collateral that you can offer.

– Legal documents, such as business licenses and registrations, articles of incorporation, contract copies, franchise agreements, and commercial leases.

Q: What questions will a lender ask me?

A: Again, this varies depending on the lender, but, according to the SBA, the following are some standard questions for which you should be prepared,.

– Why are you applying for this loan?

– How will you use the loan proceeds?

– What assets do you need to purchase, and who are your suppliers?

– What business debt do you have, and who are your creditors?

– Who makes up your management team?

Q: What questions should I have for my potential lender?

A:

– What specific requirements does the bank have when applying for a loan, such as minimum credit score or cash flow?

– What are the rates and costs associated with this loan?

– Is the bank prepared to address my needs?

– What risks are there with regard to loan repayment? And how can these risks be managed?

– If I die, how will the loan be repaid? Will it affect my family?

– Does the loan have a prepayment penalty?

When you are looking for alternative financing for your business, and have questions, contact one of the Crestmark lending experts at 888-999-8050!

Class Is In Session – Employees to Benefit from Crestmark University

Crestmark launched an employee education initiative with a nationwide Pep Rally on January 7 that was kicked off by Crestmark Chairman/CEO Dave Tull. All Crestmark employees (including TIP Capital) were enrolled into Crestmark University, an online dynamic learning portal.

Crestmark University

Through this training platform, all Crestmark employees will have access to a library of more than 10,000 professional training videos and courses, including 300+ targeted videos on Crestmark’s policies and procedures. Courses are assigned throughout the year to employees and managers based on their roles and responsibilities within the company.

Some Crestmark University course examples include: Microsoft Office training in Word, Excel, and PowerPoint; compliance; business etiquette; supervision; teamwork; project and time management; and a full assortment of educational videos geared toward maintaining an effective and positive work environment.

“Crestmark University gives our employees the opportunity to learn more about their jobs as well as the jobs of others, and will lead to a broader understanding of how things work,” said Scot Lund, First Vice President, Director of Program Management, who leads the Crestmark University platform. “Over the next several years, we will be creating and adding to our internally prepared educational material. In addition to helping with training, recruiting, and retaining employees; this will set us apart from other lenders in our market, and we feel a more educated staff will further benefit our clients.”

The Benefits and Challenges of International Expansion

Many successful businesses in the U.S. turn their eyes overseas for new markets in which to grow their company, their client base and their finances. Some companies even take advantage of so-called “tax inversion” loopholes by merging with other companies and then moving their headquarters outside the U.S. in order to reduce their taxes.

Regardless of the method taken, businesses that traditionally deal solely in the U.S. can often faces challenges and hurdles when trying to expand abroad. The cultural differences alone can cause problems for some companies. But if you’re thinking of growing your business and expanding into different countries, be on the lookout for the following potential pitfalls and follow these tips to avoid them.

OverviewNight time

1) Know your audience.

You could make a presentation to a client in the U.S., and that client could love what you’ve done and consider it a rousing success. But when you make that same presentation to an international client, it falls flat.

In this case, the problem is likely not with the presentation itself, but with the delivery. Be sure to edit your presentations and pitches to fit the local market to which you are presenting (Japan, China, Germany, etc.). You may need to adjust the content or format or even revamp the entire pitch if it does not fit the target audience.

Be sure to maximize your time, as well. American audiences typically prefer quicker pitches, while European clients likely want to absorb a presentation for longer than an hour.

Finally, one helpful tactic is to design a website for each market, rather than create a blanket international site for all overseas markets. This shows attention to detail to each market and would allow for easier communication to specific nations.

2) Emphasize your history.

You’re presenting your company and your product to a new market, but you aren’t completely starting from scratch. There are certainly financial, cultural and trend differences between the U.S. and international markets, but you should still be sure to emphasize the successes you have had domestically.

After all, you’ve reached the point of considering international expansion, so why hide from the success that brought you there in the first place? Just be sure to tailor your product or service to your new target audience.

3) Understand cultural differences in business relations.

Each market will have different cultural quirks that might go unnoticed but could hamper your efforts to expand abroad. For example, American businesses commonly give positive feedback on presentations, but that feedback might not amount to much in terms of making a deal. European clients, though, prefer to make presenters earn their praise, so take a statement of affirmation from a European businessman to heart.

4) Plan ahead.

International expansion can help grow your business, but it also requires funds to bring it to fruition. Legal fees, acquisition costs, marketing, advertising and new salaries are a few of the expenses necessary to spread your business abroad. Be sure to have enough money set aside to take care of these fees, and set limits for your business so that you have some left over to give yourself a head start once you debut internationally. This will allow you hit the ground running rather than having to work to regain the money you sank into the expansion.

International business expansion is a difficult process, but one that pays off if done properly. Be sure to prepare and execute properly in order to reap all the benefits possible.