Diverse specializations have become increasingly important in our modern world. While deep industry knowledge is an undeniable benefit to your existing clients, it limits the scope of who you and your organization can work with and what it can achieve. By diversifying their products, brokers can widen their scope and help more businesses access the capital they need to grow.

It all comes down to variety, but risk management is also a noteworthy concern. Working outside of your specialty means taking on an entirely new audience that’s different from what you’re comfortable with. And in most cases, diversifying in-house products is more of an undertaking than organizations are willing to take on.

The risk of a bad investment and the learning curve of a new industry are often enough to outweigh the benefits of diversification, but the world is changing. As masters of the craft, equipment brokers and lenders should establish relationships with other lending institutions that offer a wider range of solutions to maintain their positions and better serve the relationships we’ve already formed.

Cash Flow in Construction

A broker worked with a business owner to finance a wheel loader, only to find out the business didn’t have the cash flow to support hiring and training a new employee to operate the equipment. The owner spoke with the broker about their challenge and mentioned how helpful a product like a revolving line of credit could be, but the broker could only offer them the one specialized solution they no longer needed – not the one that would help them moving forward.

The broker spoke with a colleague and discovered a connection that could provide their client with a line of credit. They made the introductions, helped each side come to an agreement, and, before long, the client walked away with the financing solution they needed to manage cash flow and start using their new equipment.

The construction industry has multiple capital needs, and providing only one specialized solution will only serve a fraction of them. Diversification is essential in these scenarios because, without a connection, the broker in the story above wouldn’t have been able to extend a solution to their client, and the business owner would have had to search for the financing they needed on their own or operate at less than full capacity.

Getting Creative with Alternate Solutions

Another broker had a client in the transportation industry that wanted to add a new refrigerated trailer for a new contract, where they would transport temperature-sensitive materials. They applied for equipment financing through the broker, but the client declined because their time in business was right below the lender’s cutoff. Still, it was a strong business, with steady and well-founded cash flow.

The client had some cash, around 30 percent of the ~60,000 price tag on the trailer, but not enough to complete the purchase without creating a liquidity problem. Seeing the opportunity on the table for the client, the broker leveraged their network and found a lender to qualify the client and provide an alternative solution that would yield the funds needed to purchase the equipment.

It wasn’t equipment financing. Instead, it was a line of credit that would provide the funds and flexibility to purchase the asset and manage the cost over time.

Rather than rely on the client’s credit score, the secondary lender leveraged the business’s cash flow to open a $50,000 revolving line of credit – something that the broker’s equipment financing lender couldn’t. Not only did this provide the client with the funds they needed to make their purchase, but it also gave the client a powerful resource that will help them with future capital needs.

It’s all about the client and offering more financing products only gives them more options to choose from. They might need working capital, payroll funds, or the resources to acquire an entirely new business, all of which involve solutions outside of the world of equipment financing.

Equipment financing serves its purpose comprehensively, but it’s not what every business needs to get to that next level. And, in today’s fast-paced business environment, it’s almost essential that lenders offer alternative solutions to retain and aid their borrowers. If they don’t, someone else will, and it’s more important than ever to stay ahead of the curve and win business whenever possible in today’s market than ever before.