Sifting through the variety of material handling equipment to find the right forklift for your specific needs, applications, and work volume can be a rewarding process that leads to an improved operation. As a business owner or manager, you’ll eventually identify the right forklift that fits your business. Great! But to get that forklift into your operation, you’ll have several financing options to select from. If you aren’t paying for the equipment with cash in full, then opening a credit line for financing is your next step in getting your forklift.
In order to apply for a credit line you should prepare the information that the financial institution needs in order to provide you a credit line. Having this information prepared will help speed up the credit application process, meaning you can get to solving material handling challenges ASAP. Here is some information you should have ready:
Employer Identification Number (EIN)
Your business’s Employer Identification Number (EIN) is also known as your Federal Employer Identification Number (FEIN), or federal tax ID. EIN works like your Social Security Number (SSN) but for your business. EIN allows your business to apply for credit, and financial institutions will use your EIN to run your company’s credit history. If your business is a sole proprietorship business, the financial institution will look at your personal credit report as well.
Tax Exemption Certificate
If your business is tax exempt, you will need to provide both the forklift seller and the financial institution a tax exempt certificate that the seller and financial institution will both file in their systems. This certificate allows for sales tax to be excluded from all current and future purchases. The tax exempt certificate, depending on the state you live, may require:
- The date prepared
- The buyer’s company and address
- The seller’s company and address
- The buyer’s signature
- The expiration date
In order to get a credit line, financial institutions may require you to provide trade references in addition to the credit application. Before extending credit, sellers and financial institutions use trade references to ensure the buyer are capable of paying the debts in full. A good trade reference is a company from whom you acquire products or services and with whom you have a good financial standing. Wholesalers, accountants, and automobile leasers are all examples of potential trade references. You probably are in good financial standing with them, you likely have a long-standing relationship with them, and they are likely to count you as a reliable financial partner.
Typically, you are to provide to up three trade references with any given application. Trade references can drastically influence your company’s ability to get a credit line.
Financial institutions use your financial history to see if your business is profitable and has a positive cash flow. Usually the profitability, along with other financial ratios, will determine your business’s credit line interest rates and size of the credit line. Financial institutions use time in business to help determine whether to give you a credit line or not. The majority of companies go out-of-business within their first five years in operation and financial institutions may be hesitant to provide a sizeable line of a credit to a newer company. High profitability as well as excellent trade references can help to mitigate the risk a financial institution sees in a newer company.
While each financial institution and different financing tools like various lease types and long-term rentals will have their own requirements, the above categories of information are usually required in any financing deal. Having a good grasp on what you need before you go in search of a credit line and being prepared will help your procurement of forklifts go much easier.