Will New Banking Regulations Affect Your Business?
Kevin F Clune, CLP
With the imposition of Dodd-Frank, a consumer protection law passed by congress in 2010 intended to reduce risk in the U.S. financial system, business owners may experience some changes in their access to capital from their bank. A February 2014 article in the Washington Post titled, “Four years into Dodd –Frank, local banks say this is the year they’ll feel the most impact”. The article discussed the new measures that are beginning to be enforced.
Bert Ely, a banking industry consultant in Alexandria, VA was quoted in the Washington Post article saying, “There are indications that regulatory guidelines could eventually spill over into business lending. Some examiners are starting to look at small-business lending as a variant of consumer lending.”
The leasing industry owes its existence to the fact that financing equipment with a lease may in some cases be preferable to using traditional bank lines of credit. Could this new law drive more businesses to consider a lease as an alternative source of capital? Even those who have shied away from equipment leasing, may want to reconsider. Unlike banks, the leasing industry is largely unregulated and can have many advantages.
1) Extremely quick approval time means faster equipment delivery.
2) Far less paperwork means more time for business sales.
3) Potential tax advantages not available with a bank loan can mean lower taxes.
4) Preservation of bank credit lines means more cash available for daily operations.
5) Easy equipment upgrades with a lease means having cutting edge technology.
Equipment dealers may also need to adjust to these changes in the banking industry and either establish or resume their relationships with a leasing company. This will enable them to easily offer a monthly lease payment option with every sales quote. With this information, their customer will have more opportunities to say “yes” to an equipment acquisition, resulting in increased sales.
The only caveat in this advice to both lessees and the equipment dealers is to partner with an independent, reputable, and well established leasing company that is responsive to your needs. We at Clune & Company would welcome the opportunity to compete for your business and prove that leasing may be a viable alternative to bank lines of credit.
Mr. Ely concluded with a comment, “The general approach (for banks) has been to be cautious. Even though Dodd-Frank has been around for four years, it’s only now starting to take off.”
Are you prepared?
Kevin F. Clune, CLP
Clune & Company
