finance entry level jobs

“I pay for everything in cash, I never finance anything” or “I’ve never had to take out a loan, I don’t believe in it”. Every so often, I encounter this type of feedback from a business owner. The attitude usually goes along with a strong, hands-on work ethic for an owner which has built their business from the ground up. They have worked long hours, suffered through the ups and downs and sacrificed family time and vacations to make their business survive. Their belief is, if they cannot pay for something with cash then they do not need it.

I respect the energy and devotion but I also take note that the strategy seems to apply to small, family owned businesses with a small number of employees which have remained flat in their growth and have stopped expanding years ago. Expansion and reaching new markets are not typically part of their business plan and they are happy with a fixed income often servicing the same clientele they have for years.

The downside of never financing anything is the limited amount of expansion which can occur. In essence, they cannot grow beyond what is in their bank account at any moment in time. For example, a small business with $100,000 of capital desires to purchase a new $40,000 machine which will speed up production or bring them into a new market or simply replace an old machine; if they decide to pay cash that will leave them with $60,000 in cash reserves. If they encounter an emergency which requires $30,000 then that will leave them with little cash cushion in their account. They have also limited themselves in the case if another opportunity should surface at the same time they would not be able to take advantage of it like paying early for inventory to get a good discount.

The other negative of never borrowing is that your business will not have any established comparable credit so in the case when you do decide to finance anything, the likelihood of getting approved is marginal. A lender will not be able to assess your ability to pay back debt since you have never had any. Some business owners feel it should be viewed positively that you have never had to borrow but in the finance world it is not a positive. No credit history equals no loan.

The mantra in financing is ‘it is easier to finance equipment than it is money’ which is primarily true. Yes, you can get low cost capital from your bank if you have an established credit line but that line will have a limit. It is not a good move to use your credit line to finance an asset or equipment because that line should be used as either a last emergency resort or for short term borrowing. Finance rates are now in the 4-6% which can be stretched out to 5 years and sometimes longer. Many times, when expanding in a careful and planned manner, the finance payment will be less than the added revenue of your new equipment. This is true of energy and cost efficient industrial machines, solar systems and LED lighting.

Financing equipment for your business offers you the opportunity to expand, create more profit and reach new markets and clients. For those that want to know the benefits of never financing anything it is this; you will never owe anybody anything, no monthly payments, no interest and no chance of borrowing more than you can pay back but in that perceived safety there is also some risk and missed opportunity.

“We would be out of business without vendor financing” according to the president of a distributor of commercial strength and cardio equipment. Almost 65 percent of this company’s revenues are generated utilizing a vendor financing program implemented over ten years ago. Vendor financing programs provide manufacturers, distributors and dealers from a wide variety of industries the capability to offer customers a convenient way to acquire their products at the point of sale. A few of the key benefits vendor financing provides include:

· Improved vendor cash flow through pre-funding, or financing of the down payment, and reduced receivables through collection of the balance upon delivery of the product

· Improved margins and higher sales by focusing the customer on monthly payments instead of price reductions

· A faster selling cycle – fewer worries about whether your customer has the money in its capital budget or if they can (or will try to) find financing on their own

· Transfer of the financing risk to a third party through non-recourse programs

· The ability to open up new markets including selling your products outside the United States With programs that can provide financing in amounts as little as $5 thousand, vendor financing can be implemented to cover most asset types and a variety of customer credit profiles including start-ups and early stage companies. For amounts up to $100 thousand (and higher), many financings can be approved in as little as four hours after your customer completes a one page application. For larger transactions, approvals can be obtained as quickly as two business days following the submission of financial statements and tax returns. Lease terms can extend to 84 months for equipment with long useful lives sold to qualifying credits. According to a southeastern manufacturer of equipment, the flexibility, creativity and extraordinary support it enjoys through its vendor financing program provides it with a competitive advantage. Its vice president of sales firmly believes that choosing the right programs and leasing company can be the difference in winning a sales competition.

A few questions to ask in selecting the best leasing company for your business include:

· Flexibility – Can the financier fund my A, B & C credits? Can soft costs be included in the financing amount? Will all credits be financed without recourse to the vendor?

· Minimums and maximums – How small and how large of a deal can the financier fund? Any limitations on how much credit it can extend to any given buyer? Any overall minimum or maximum volume requirements to create a program for your company?

· Creativity – How many different programs structures and end user offerings can the financier provide? Will the financier create unique programs to meet the special needs of certain customers?