Should I go with the big banks for industrial equipment loans? Or should I seek out alternative lenders? These are questions you should ask yourself when looking for financing to purchase the industrial equipment you need. Each option comes with it’s own positives and negatives.
Big banks are often the most obvious initial choice to go to. They are available nationwide, they have billions in assets, and they offer more features/online tools than other alternative lenders can. However, if you are a small business, large lenders, more often than not, will hesitate to give you the money you ask for because you are seen as a higher risk. But they are usually more than willing to help you if your business is trending towards larger revenue increases. Once again, the conveniences of major banks, such as local branches and widespread ATMs, are big positives for borrowers.
On top of that, there are more self-service options through the big banks. Paying bills online, scanning checks digitally, and having your own personal banker are all advantages of big banks. Larger banks usually mean a larger reach, including global transactions and avoiding certain fees not possible through smaller banks. Through recent surveys and polls, borrowers reported more problems when working with smaller banks than with larger ones.
Large banks usually offer the most favorable interest rates and terms. But with this advantage comes higher standards that you must meet before being considered. For starters, you should have a profitable business and an excellent credit score. Sometimes you can lease equipment without a credit check, but it is highly unlikely. Large banks will more than likely have the capital to give you what you want. Smaller banks may have a tougher time giving you a large sum. One drawback to big traditional banks is that it takes longer to process a loan. Therefore, you won’t receive the money you need right away. Smaller banks and other alternative lenders typically have a very fast turnaround time, which can be great for those in a financial pinch.
Whether you choose a large or small bank, make sure your loan term matches the expected lifespan of the equipment you intend to get. A shorter term can have you struggling to make the payments. A longer term will have you still paying off equipment you are no longer using. In addition, a solid business plan, an updated personal resume, and cash flow statements are important items to have on hand regardless of your lender. Lenders want a business plan to show that you know what you are doing and what you plan to do in the future to ensure profitability. Your personal resume gives lenders insight on your character traits and how your background influences your business. Recent cash flow statements show proof to lenders that you and your business are financially sound.