Edward P. Kaye, president of Advantage Funding Inc. of Lake Success, N.Y., a leading financer of livery fleet vehicles, addresses the following TOP FIVE misconceptions he's heard among clients and prospective customers.
1) Since the manufacturers are struggling to sell inventory finance rates are at an all time low.
Unlike the consumer automotive market, commercial vehicle manufacturers do not have finance arms that can support 0% financing programs. Commercial vehicle manufacturers need to refer the financing portion of their sale to outside lenders (banks, independent finance companies, and leasing companies). While prime rates continue to be low, outside lenders typically charge higher rates to commercial borrowers than consumers.
2) I have excellent credit, so I will not need a downpayment to buy new equipment.
The days of 100% financing on commercial vehicles are over. Lenders have changed their buying criteria to more heavily weigh the risk of the collateral than the risk of the buyer's credit. Even if you qualified for 100% financing in the past, it is unlikely you will find a lender in today's market that will approve your loan without a down payment. Be prepared to come up with some money (10% to 20% of the sale price).
3) The media keeps reporting that the banks are not lending. How can I get a loan?
Banks and independent companies need to lend to stay in business. They are lending, just not as much as they used to and not to people who cannot pay them back. Creditworthy customers will be able to get vehicle financing.
4) I'm a start-up transportation company. I will never be able to get new vehicle financing.
It is true that you may not be able to finance new vehicles, but you will be able to take over a bank repossessed vehicle. Commercial vehicle lenders are holding record levels of repossessed inventory and they are making deals to sell and finance repos. Call them! Not only will you get a good deal, you will have the opportunity to establish a relationship with a lender that will help you grow your business for the long term.
5) I have a great long-term relationship with my existing lender. My ability to finance won't be effected by the recession.
Open your eyes. Your existing lender may not be there anymore or may have given up on commercial vehicle lending altogether. Didn't your mother ever tell you to never put all your eggs in one basket? Try to establish funding relationships with several lenders, even if some rates are better than others. Long-term relationships go a long way in this industry. In today's economy it's more important than ever to continually establish new relationships and find the best one that will have a long term perspective to this niche industry.