What lenders want to see
Getting approval from a lender is not always straightforward. But knowing what they want to see when they’re making their decision can make the process smoother and quicker.
First and foremost, a lender is going to want to assess your creditworthiness – are you a good investment for them? They’ll want to know your ability to repay a loan based on your historical and projected future performance, and they’ll want to look at the loan-to-value ratio (LVR) – how much of the value of the asset you’re wanting to borrow. They will also want to understand your willingness and capacity to support the transaction with funds outside the business, typically, by way of personal guarantees.
Depending on the asset and the client profile, many lenders will fund to 100 percent, and we frequently have banks and finance companies do exactly that for our clients.
We recently turned around a 100 percent deal within a day. This is because the client had previously applied for funding from this financier, so they had all the background information they needed and were comfortable saying yes. All they wanted was a copy of the invoice for the machine before giving approval.
With that in mind, there are a few other things to consider around the asset itself.
Firstly, the age of the asset – some lenders are comfortable with financing older equipment, while others prefer to finance new gear.
Secondly, the make and type of asset you’re wanting finance for – they will consider the likely resale value of the asset and what the demand for it will be.
Thirdly, they will consider the industry the asset is being used in. Some industries, like forestry or construction, for example, are cyclical. Sometimes things are up, sometimes they’re down. How positive the industry is will impact their enthusiasm for the deal.
Every lender has their own unique preferences. At Finance New Zealand, we have the expertise to place your funding requirements with the appropriate finance company, ensuring you get a ‘yes’ faster.