Even More on Collateral

So Collateral affects pricing. How do we lend against it?

There are 2 circumstances where we lend against collateral. They are:

1) Use of additional collateral to back a lease for a new piece of equipment
2) Refinancing the collateral to generate cash (known as a Sale/Leaseback)

Clients can use existing collateral to back a new lease when they want to bring the risk to the funder down, and therefore the price or when the equipment is sitting there not being fully utilized. More often then not, existing collateral is used to back a new lease because the credit is weak and its the only way to get the deal done.

Refinancing existing collateral can occur when credit is weak or when its strong but in either case, usually it means there's a cash need in the business. A business that is equipment rich and cash poor. When credit is strong and there's extra collateral, then that's 2 strong C's and that equates to lower prices.

Stu
Southern Lending Solutions