In today's economy, loggers are faced with a number of business issues to tackle every day, and one of the most basic, yet arguably most important components of a successful business is having reliable, quality equipment. However, the perception that strict lending requirements have made it nearly impossible to get credit approvals has kept people from pursuing new equipment purchases, despite an abundance of attractive financing options.
With tough economic conditions and interest rates constantly fluctuating, it can be difficult to imagine the thought of vital new equipment as an option, but the reality is that you do have options. Below are a few tips to help forestry professionals increase their chances of approval – as well as streamline the process – when looking for the best financing option for those new purchases.
The first and quite possibly most important tip is to be upfront and honest about your current credit status and business position. In order to make informed decisions, lenders must first gain an understanding of your credit standing, and they are less likely to provide assistance if they uncover unfavorable information on their own. On the other hand, don't hesitate to highlight the bright spots in your business.
A good rule of thumb is to provide as much meaningful financial information upfront as possible. The following are examples of the types of information lenders are looking for:
- Your most recent and complete balance sheet and income statement, preferably prepared by an accountant
- Recent individual and business tax returns
- Work-in-progress timber contracts, as well as future contracts that have been secured
- A copy of your business plan for the next 12-24 months, or projections over the same period
- A list of credit references, such as banks or other lenders, timber mills, landowners, or other folks you do business with on a credit basis
Once you are approved and have your machinery picked out, be sure to discuss additional financing options with your dealer. Some financing companies offer special payback options. For instance, John Deere Financial allows your contract to be structured with up to three "skip-payment" months per year. Skip payments do just that – allow you to skip payments during frost-out, mud season, or other normal downtime periods when operations come to a screeching halt, with no penalty to you or your hard-earned credit rating.
The process of purchasing new equipment may seem daunting and overwhelming at first, but understanding your financing options is a fundamental step to overcoming these challenges.