"So About My Credit...."

We get those nervous phone calls.  Uncertain tones.  “So….I need a few trucks…..umm...but...the credit thing…..” Most vehicle leasing companies are really in two or three businesses at once.  We’re in the truck business.  We know about trucks, and the equipment that needs installed on them so that you can do your work.  We know about managing fleets, how to keep them on the road in the cheapest way possible, with the most uptime.But something else we know a lot about is vehicle financing.  And the dirty little secret is that leasing companies will often find a way to finance trucks when banks can’t.

I’m not talking about bad credit, but just things that don’t fit bank rules.  We often see this if a business is growing rapidly or if they are acquiring another business.  Same goes for someone who just purchased an existing business.  Technically, that’s a brand new business.  Hard to finance.  But leasing companies often do. Banks recognize the unique role of a leasing company, and often refer business to us.  Bankers are mostly good people who want to say yes, and who also have to live with a whole lot of rules.  Leasing companies have more flexibility.  For one thing, banks generally have to base their decisions on what has already happened.  They decide if you could afford it last year, not right now.  And sometimes you need trucks for what hasn’t happened yet.  You have a customer, or a project, that is going to generate significant cash.  But you can’t fulfill the contract or take on the extra business without equipment.  It is a classic chicken-and-egg problem. Sometimes a leasing company (and probably a smaller local outfit….the big guys have nearly as many rules as banks do)  is able to look at projected future cash flow from the operation of the trucks, and take that into consideration in their credit decision.   Sometimes, we are able to listen to the entire story (not just what was on last year’s financial statement) put the current situation into context, and get comfortable with a risk that that a bank just can’t.I’ve got a friend who owns another leasing company who says that some of his business amounts to “venture capital leasing”, because he is making a real bet on the future of a newer (and therefore risky) businesses.  I’d imagine most leasing companies find themselves in that same situation from time to time.  We are partnering with customers and betting on their success, continually.

Jack Cross

President - Commerce Lease Group