Each week, we’ll interview one of our experienced Finance Officers for a brief question and answer session about something interesting from the week, along with tips and tricks to make your finance process easier, and their unique perspective on the industries and customers we work with.
This week, we caught up with Maria Ehlers in our Portland office who talks about the importance of being upfront with any and all credit issues, and how it can often times end up being a boon to the commercial lending process.
Q: Thanks for speaking with me today, Maria! As you know, we’ve been talking with a lot of our finance officers over here about customers that may have been a bit more unique during the commercial lending process – did you have an example in mind?
A: Yeah, I had one that seemed overall like a really good customer, but once we got down into some details, we ran into a couple different obstacles, but in the end, it ended up working really well for them.
Q: Cool, so what were the things that you started to notice during the process that started to cause those problems?
A: In the beginning, the customer looked really strong on her PreQualification form that people fill out to get started with us at American. The form indicated that she had been an established business for 4 years, that she was a homeowner, had a 650 credit score, and her cash flows were really great. But, when I pulled her credit, I started to look at some details, and there was a bankruptcy that she had not disclosed that was right on that 7 year mark, which is the time frame when a lot of credit officers put less stock in something like that. She had about $160,000 in student loans, which was kind of a lot! We found out that her homeownership wasn’t showing on her credit, and that the Secretary of State showed that she was only a start-up. So, we kind of ran into these things that, when you look at the overall picture, she still had a 650 credit score, and she had like one auto loan, and those things still matched up with the PreQual, but the other little details were things that are things that you wouldn’t really want to see.
Q: Sure, so was that something that was accidental on her part, or did you have any conversations that cleared all of that up?
A: Yeah, so what ended up happening is that I just had to dig… I had to do a lot of digging in order to kind of figure out what was going on and get it pieced together. It’s really nice in our industry, since it is not necessarily just credit-based, that there is more of that story, and you have to look at the storyline to make sure it makes sense. We ended up looking more into it. With the bankruptcy, her husband had started a business right at the beginning of the recession, and things started to fall apart, and they just couldn’t catch a break. You know, that’s one of those things that you hear, and it makes sense – and as long as they rebuilt their credit and everything, we can work around that, so I got explanation for that one.
Q: What about for some of the other issues?
A: She didn’t disclose that the business had a previous owner at the 4-year mark. It was established in 2015, but she didn’t come in until 2016/2017, so I had to do a little more digging on the Secretary of State and find where the receipt was where she was put on as a member. We also had to have her husband sign on, because the homeownership was on his report, and the bankruptcy explanation she provided me, well, he was so tied into it, and he also had the auto loans that helped support her case, so we ended up having to bring him on as well. What ended up happening is that after we did the digging and found out those details that she didn’t necessarily disclose upfront, and we were able to back everything up, we were able to get her an approval that beat what we quoted her by a couple hundred dollars, and so it ended up working pretty well in her favor.
Q: Wow, that’s great! So, what industry was this for, and what was the equipment that she was looking to get?
A: She was looking to get two aluminum vans, so just little box trucks, kind of. She was in the event rental industry, so I think that also worked in their favor. That’s one of those things where for the lender, with their portfolio, you don’t really see an event rental company looking for equipment all the time, so I know that kind of worked in their favor.
Q: Now, I want to revisit something that we haven’t really had on any of the Q&As, which is previous bankruptcies, so could you talk about that? Was there a lot of pushback from the funding sources when they saw that, or was it kind of cleared up once you had that explanation?
A: Once you have the explanation, and it makes sense, and they’ve rebuilt their credit, normally the credit officers that we speak with are really forgiving. As long as the customer is willing and cooperative with us, will give us a good explanation, and are really open and honest about their situation and how they’ve grown from it, we usually find that the credit officers are really forgiving. Really, the more open they are, the easier it is for me to get around the bankruptcies that show up on occasion.
Q: So, really, a lesson for anyone in a similar situation reading this, is just that if there are problems, you want to embrace them rather than push them to the side, because it will probably be more beneficial in the long run.
A: Right! I mean, we are working in their best interest, so when they hide things from us, it doesn’t really help anyone, honestly. I’d rather know about anything that could show up upfront, so that for one, we save time – I get the explanation I need, get that extra paperwork, etc. rather than spend a day or two digging for it. If they give it to me upfront, I can find the solutions to get around it immediately, and then a lot of times it will end up that we’ll still meet the terms or beat them, they just have to be open and honest – don’t try to hide things because they’re going to come to light regardless… we’re going to find the things.
Q: I think that is something that a lot of people don’t realize and is a good example for anyone looking to get equipment financing.
A: Exactly.
Q: And you mentioned that, in the end, things went positively, and the customer was able to get the equipment?
A: Yes! She was pretty happy with the payments since we were able to lower them from what we had originally quoted, and she was able to get the equipment they were wanting.
Next week we will check in with another one of our finance officers for another Q&A session. Stay up to date and learn more from our valuable resources at www.AmericanEFS.com/The-Bottom-Line
