How to apply for commercial financing for your business

There will probably come a time when you'll need to apply for financing, whether to obtain capital or simply to set up of a commercial line of credit to prepare for a budget shortfall.

Any number of potential problems may arise during the course of business, forcing your company to seek financing options. These factors may include external market forces creating a slowdown, clients not paying invoices on time, or even a simple budgetary error. Thankfully, financing offers a means to overcome these hurdles and come out stronger and more flexible.

To capitalize on the many benefits of commercial financing, it's important to prepare yourself and your company for the application process. Approaching the application process blindly-without any research and preparation-might ultimately lead to you not obtaining the financial solution your company needs. Consider these six tips when applying for financing:


1. Organize your paperwork

No matter how much financing you ultimately need, the lender will require you have the appropriate paperwork in place. You can follow a general rule of thumb: You'll need three to five years of budget information, tax statements and any financial assessments made by a third party.

The sooner you organize this paperwork, the easier the application process will be, allowing you obtain financing more quickly.


2. Skip the bank

While institutional lenders might seem like a good financing option, a bank is often not the right channel for obtaining heavy equipment or other industry-specific tools.

A captive finance company can provide the solution your company needs along with the equipment knowledge and experience to help guide you to success. Unlike a bank, which is focused on lending money, a captive finance company works within your industry, whether it's construction, mining, agriculture or oil and gas. This insider position ensures the company knows your needs and can make informed recommendations that best suit your organization.


3. Take advantage of the flexibility

When you seek out an equipment finance solution, review the available options and speak with a representative before making your final decision. There are many different options to choose from, each with its own benefits, including:

  • Loan
  • Working capital
  • Revolving line of credit

From getting cash fast to buying new or used equipment, it's important to know what your company's needs are before you apply so you can find the right financing match. Flexibility allows you to find the perfect fit for your company's needs.


4. Pay attention to the business cycles

If your company experiences slow and busy seasons (and chances are it will), then be sure to take these business cycles into account when applying for financing. Incorporating financing options into your annual budgeting allocations can go a long way toward stretching your money during the downtimes.

Another advantage of working with a captive finance company is their understanding and accommodations for flexible payment schedules. A captive understands the cycles of your business and can recommend the right financing solutions to make payment management easier.


5. Stay up to date on technology and manage obsolescence

Managing technological obsolescence within your company ensures you're not saddled with out-of-date equipment. Failing to effectively keep your technology as current as possible gives an advantage to competitors that regularly upgrade their equipment. Implement a financing strategy that manages technological obsolescence and ensures you're working with the equipment and technology needed to propel your company to success. In many cases, a captive finance company will structure a solution to help you right-size you’re firm by offering co-terminus contracts or facilitating equipment trade-ups that allow your firm to utilize the technology necessary to remain competitive.

6. Treat the transaction like a relationship

Working with a captive finance company is much more than a simple commercial transaction. Unlike banks, which typically approach lending as nothing more than a transaction, a captive finance company will treat the exchange as a relationship. These lenders are invested in your firm's success, and do their best to find a two-sided solution that benefits everyone. A captive finance company succeeds when you succeed, so it's in their best interest to ensure you get the right growth solution for your company. With these tips in your back pocket, you can obtain the best financing solution for your company without hampering your budget or your firm's chances for success.


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construction worker in a Cat hardhat on a jobsite
construction worker in a Cat hardhat on a jobsite

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