Application only vs a full financial package: what each one asks of you

Ask two lenders for the same machine and one may want a single page while the other wants three years of tax returns. The difference is not the equipment. It is what each lender is underwriting.

What a full financial package is

A full financial package is what a bank asks for: business tax returns, usually for two or three years, year-end financial statements, often interim statements for the current year, a debt schedule and sometimes the owners' personal returns. The bank is reviewing the entire balance sheet, so it wants to see all of it.

It is a reasonable request for a bank to make. It also takes time to assemble, time for someone to read, and it puts the whole company under review to answer a question about one piece of equipment.

What application only means

Application only means the decision is made from a signed application and the business's credit history, with no tax returns and no audited financial statements to apply. At iFinancial Group the application is one page, there is no minimum, and it covers up to $1,000,000.

The review looks at the equipment and the business running it. That is a smaller question than the whole balance sheet, which is why terms are typically back within 24 hours instead of weeks.

Why a lender can approve on one page

Equipment financing is secured by the equipment. The lender knows what the machine is, what it is worth and that it can be recovered if something goes wrong. A business's payment history on past equipment, which shows up in the equipment credit bureaus, says a great deal about how the next payment will be made. Between the two, a one-page application gives an experienced lender most of what it needs.

When a little more is needed

A business under two years old will usually need a little more than the application, simply because there is less history to look at. That gets stated up front, not discovered halfway through. The same can be true when a file comes back thin, which happens more than people expect with established companies whose past borrowing was all with a bank that does not report to the equipment bureaus.

Either way the application is still the starting point, and it is still the fastest way to find out what, if anything, a specific file needs.

How to tell which one you are dealing with

Ask the lender what it needs before it can give you terms. If the answer is returns and statements on every deal regardless of size, the lender is underwriting the balance sheet. If the answer is the application, with anything further depending on the file, the lender is underwriting the equipment and the business. Neither answer is wrong, but they lead to very different timelines.

An approval from iFinancial Group holds for up to 60 days and there is no obligation until you sign off on the terms, so finding out costs nothing but the one page.