Big or small, everyone has to make a financial decision. Whether you want to buy an extra patty during lunch at your favorite burger joint, or you decide to replace an old lift at your shop, it all requires money.
Paul Knowlton, an automotive service and collision repair equipment sales executive from Huntington National Bank, sat down with FenderBender to discuss what separates bankers like him from the banker down the street when it comes to financing your equipment.
Editor’s Note: Paul Knowlton's answers in this interview are not necessarily those of Huntington National Bank.
How did you get into the world of automotive equipment financing?
"I started in banking back when I was on a bank scholarship, and they put me through college," Paul Knowlton said. "I've been in banking my entire career, mostly on the lending side. About 30 years ago, I moved into the equipment finance world, where there's more niche and specialized lending."
What are some things a person needs to acquire services like yours?
Knowlton explained that they generally look for companies that have been in business for three or more years and have established some credit under the business name.
"We also consider the personal credit of the owner, looking for credit scores of 680 or higher," he said.
Why should a shop owner go through a bank that specializes in shop equipment financing versus a “regular old bank”?
"We're designed to be convenient and efficient, so what takes us hours may take days or weeks for your bank to respond to because they don't know,” Knowlton said. “We know the equipment, whether it's a measuring system or a welder, from something else on the sidewalk."
From your side, are there any major differences between working with a single shop owner or an MSO?
“There are some nuances, An MSO might be forming an entity every time it opens a new location, so it takes some industry expertise on the finance side to know how to structure those deals and get them approved [for a loan].”
He explained that it’s difficult to finance a new business in the banking world, but with the right banker and knowledge that the financial services are being done for a pre-existing and an already expanded franchise, it makes the process easier.
What are the benefits of financing equipment versus paying cash?
Leasing can offer tax benefits. For example, for a $100,000 equipment capital lease, a three-year payment plan may be $3,000 per month. But the business may still be eligible to take a tax deduction for the full amount of the purchase price under Section 179 of the U.S. Internal Revenue Code for equipment purchased or financed during the tax year.
"You're able to maximize the tax benefits while minimizing the effect on working capital. It’s the lifeblood of the business.”
That working capital is needed for paying employees, and for rent for those who don’t own the building they operate out of.
Knowlton often hears, “I always pay cash,” but he believes it's not always the right decision. “Consider whether paying cash is the best decision at the time or whether spreading out the payments is better,” he advised.
Any final thoughts or advice for shop owners?
"Maximize the number of financing options you're considering whether it's cash, SBA [Small Business Administration loan], and such, to make the best business decision."
