Alternative Lender or Bank…or Both?

By: Jeffrey S. Armstrong :: February 13, 2019

Access to capital is the engine that drives the business economy. Without capital, entrepreneurs and owners are simply unable to acquire or grow their companies. Most businesses have a solid relationship with a bank. When they are looking for equipment financing, their instinct is to turn to banks for financing when they have previously worked with a particular bank personally or professionally. But at times, a customer’s needs don’t fit into a bank’s business model, credit guidelines or preferred transaction size. Bankers are forced to say “no” to valued or prospective clients, something they hate to do. When this happens, customers are left without financing and are more tempted to turn to competing banks. On top of that, a declined credit application strains relationships and can even cause a customer to question a long-standing banking relationship altogether.

Enter the alternative lender

Alternative lending, also commonly referred to as specialty financing, is defined by the Small Business Association (SBA) as “financing from external sources other than banks or stock and bond markets.” These non-bank lenders, such as CapX, focus on developing strong asset expertise and an array of products and structures suited for a client’s specific needs. This can provide a clear value-add when you’re looking for capital.

A business owner’s main goal is simple: to get the best equipment financing possible by whatever means necessary. But if they have challenged credit, need flexible financing options or are “tapped out” at their bank, they may have a difficult time finding funding for their mission-critical equipment.

Most companies cite speed as the reason they turn to an alternative lender. In CapX’s case, armed with data-driven insights, we make lending decisions much faster than traditional lenders. In many cases, businesses receive approvals in a matter of days, rather than the weeks or months it takes for large, commercial banks to act on loan requests. Another case is flexibility. A company’s path to growth may not fall in a straight line, and as a non-bank lender, we simply have more flexibility to provide innovative and less rigid solutions. Lastly, because we have over 20 years of equipment financing expertise, we can also offer consultative solutions tailored to the unique needs of each client. 

Working together

If the company’s bank has a solid relationship with a non-traditional lender, they are more likely to get financing one way or another. When their banker refers them to an outside company, they still are able to get the equipment they require and maintain ties to their preferred banker – without disrupting their bank relationship. After all, an equipment lessor is not engaged in traditional bank services like depository, treasury management, etc. – they are strictly experts in equipment financing.

Building strong relationships with both a bank and an alternative lender can offer both immediate and long-term benefits and is a sound investment in the businesses’ future.

To learn more about CapX’s bank partner equipment finance program, contact Jeff Armstrong at 312.893.7404 or jarmstrong@capxpartners.com

Jeff joined CapX Partners in July 2018 and is responsible for managing the firm's Capital Markets desk as well as the Bank Markets channel.

Jeff has a B.A. in Economics from Indiana University and earned his M.B.A. from DePaul University's Kellstadt Graduate School of Business while working full time in commercial banking. Jeff started his career in 1993 at American National Bank & Trust Co. of Chicago (later JPMorgan Chase Bank's middle market group) and after 6 years joined Old...