Today’s market is saturated with capital equipment investment dollars from lenders that may not have expertise in the specific sectors in which they’re lending. And while the access to capital is a boon from a low interest rate perspective, the lack of industry expertise and understanding of a business can result in onerous lending terms when the market retreats. These are some of the observations presented by Eric Miller, Group Head and Managing Director of CIT Capital Equipment Finance, a division of CIT Group Inc. (NYSE: CIT) in “Capital Equipment Finance: The Lifeblood of Growth,” the latest piece of market intelligence in the CIT Executive Insights video series.

“Due to today’s positive market conditions, a wide variety of lenders can offer low rates without necessarily offering deep experience lending within a business’ particular industry,” said Miller. “This lack of expertise can cause friction when a sector goes through a natural cycle. A lender may try to impose harsh terms, underscoring a lack of knowledge about the industry and the business’ ability to operate in a natural downturn, which ultimately put the business at risk.”

Miller highlights several considerations middle market businesses seeking capital finance partners should consider:

• Search for lenders that have industry expertise – Corporate borrowers should construct bids that will attract lenders with a depth of experience in their respective sectors. It’s much easier to deal with a lender that understands your business and its natural cycles.

• Place a premium on tailored solutions – A lender should thoroughly understand the company’s business model, industry situation and the lifecycle of the specific equipment. By understanding the above, a lender can create a more tailored solution that can better withstand bumps in the road.

• Think past the short term – The lender that offers you a low interest rate today may not be suitable when the market turns. New deal terms may put stress on liquidity, ultimately jeopardizing a business’ strength.

CIT thought leadership content can be found at View from the Middle and our CIT Point of View blog.