Instrument Financing 101
A Quick Overview of One's Options in the World of Financing
As a business owner and friend to my customers, my goal is to assist churches, companies, and individuals in financing the items they need at prices and terms that work comfortably. Obviously, the best way to purchase something is to pay for it in full at the time of purchase. That is true 0% financing. Sometimes, however, need and desire are powerful motivators to seek financing and in the world of financing everything orbits around the lender's perceived impression of the borrower's ability to pay and to pay on time. Whether the borrower is a church, a business, or an individual that perception plays a powerful role in determining the rate of interest and, therefore, the amount of the monthly payment.
Personal Financing
The rate one pays for financing is directly related to one's credit history (credit score) or lack of credit history. Since we started Hammond Central in 2002 we've seen many changes in consumer financing. The FICO score has really impacted financing in a good way because now anyone can easily monitor their credit score and use the system to improve their score over time. Two of the companies we use are quite competitive in their rates and generally want to see applicants with scores of 650 or more. Not all 650s are approved, however, because these two institutions are geared to underwrite mostly to those at 680 or higher. So what about those with scores less than 650-680? Recently we began working with a company called "Terrace Finance" (a link to their application is at the end of this article). Terrace is really 4 different companies each specializing in a certain demographic or credit worthiness. Consequently, we've been able to get individuals with credit scores down as low as 580 (sometime even a bit lower) approved.
One thing you should know is that there are two kinds of credit checks or "pulls" as they are called in the industry: "Hard" Pulls and "Soft" Pulls. A "hard pull" is an actual credit check that will show on one's credit rating. The more hard pulls one has within a certain time frame the more negatively those pulls impact credit. A "soft pull" is a credit check that goes to every superficial credit worthiness source available without actually performing a genuine credit check (hard pull). The advantage of the "soft pull" is that you can shop rates and companies without it hitting your credit rating. The following three application links are to the three companies we use most often. All are "soft pull:"
Allegro Credit (now owned by Synchrony Bank). Allegro oftentimes will go with 0% down on approved credit but sometimes will ask for as much as 20% down. Their rates are competitive and we use them quite often: Allegro Application
The Piano Credit Company. The Piano Credit Company offers very competitive rates and would probably be the best to use if your credit score is 700 or above. They do require a minimum down payment of 10% but that is reflected in their favorable rates" Piano Credit Company Application
Terrace Finance. If you are only going to apply to one company, this is it. With 4 different lenders, Terrace can generally find and offer a financing solution. Instant approvals are limited to $7,500 but that will soon be moving upwards. Terrace Application
Performing Musician, Studio, or Touring Act Commercial Lease Program:
If you are a performing musician, recording studio, motion picture studio, performing ensemble/band, or touring ace/band, we can offer a special short or longer term commercial lease to underwrite equipment. We are specialists at this and invite you or your manager to contact Cliff Unruh at: (877) 432-5700. Obviously special conditions apply but we encourage you to call.
Church Financing:
One of the odd things about financing is that most "finance companies" (the ones that finance cars, furniture, and other consumer products) only loan to individuals and not to corporations and churches. A church really only has two options when it comes to financing: Get a loan from the bank or go to a "lease company" for either a commercial lease or an Equipment Financing Agreement (more on these in a moment). "Lease companies can either be an actual financial institution (bank) or they can be brokers that broker lease business to various banks. Generally speaking, the Lease Broker has more options available and can often put the church with the most appropriate lender or lessor with the best rate, based on credit worthiness. So what is the difference between a "Lease" and an "Equipment Financing Agreement?" In a lease, the equipment belongs to the lease company until the leasee pays off the lease (usually a residual amount of as little as $1 to as high as "fair market value." In an EFA (Equipment Financing Agreement), the terms are nearly identical to the $1 Buy-out lease but the leasee owns the equipment rather than the lease company.
Churches don't have "credit ratings" like individuals do but churches do have credit history. Banks and Lease companies look at the type of credit the church has had in the past. If the church has or has had a mortgage, that works very much in the favor of the church getting a really good rate. So does length of time in ministry. The older the church, the better. This doesn't mean that newer ministries cannot get financed. They often can...and at good rates, especially if the church officers themselves (at least the one signing on behalf of the church) has a good personal credit score. Oftentimes if the church doesn't have much credit history, the credit score of the signing individual can be applied to the church without there having to be a guarantor or cosigner. Other times, if there is insufficient credit history (or a bad credit history) a cosigner or guarantor is necessary. Here are links to two Lease companies' applications. These are companies we us often. Hampton Ridge Financial, is a lease broker with several banks to choose from depending on credit worthiness:
Hampton Ridge Financial Church Application
The second company is Peac Financial Solutions (formerly known as Marline Leasing. Peac has competitive rates and are quick to provide an approval.
Peac Financial Solutions Lease Application