FAQ Page

FAQ Page2023-08-22T09:36:48-04:00

Frequently Asked Questions

What is a credit score?2023-07-31T16:17:18-04:00

A credit score is a numerical number (300 to 850) based on an analysis of a person’s credit files to represent the creditworthiness of the person. A credit score is primarily based on a credit report information typically sourced from credit bureaus like Experian, Equifax or Transunion. Companies, such as banks, credit card companies, mobile phone companies, insurance companies and landlords report to these credit bureau companies with your pay records.

What do the credit scores mean?2023-07-31T16:15:50-04:00

The most commonly used credit scoring algorithm in the U.S. is produced by the Fair Isaac Corporation (FICO). FICO scores range from 300 to 850; the higher the score, the better.

Every lender sets its own standards for what constitutes a “good” FICO score. But, in general, FICO scores fall along the following lines:

300-629: Bad credit

630-689: Average/fair credit

690-719: Good credit

720 and up: Excellent credit

Is a Lease Contract better than a Finance Contract?2023-07-31T16:21:15-04:00

No. In reality, a Lease Contract with a $1.00 buyout and a Finance Contract are the same cost- wise other than an additional $1.00 at the end of the term in a Lease Contract. The term “Lease” is used so there is no confusion on who actually owns the equipment. With a Lease, the leasing company owns the machine and is leasing the equipment to the customer “Lessee.” If there is a default (non-payment), the lender can quickly prove to the landlord or others that they own the machine and they have the right to remove the equipment from the property. With a Finance Contract, the financing company has a lien on the equipment and some situations Courts may have to get involved to settle the dispute.

Should I try to always get the lowest rate?2023-07-31T16:19:43-04:00

Not necessarily. Why put all your eggs in one basket? What if your lender’s policies change? Why place all your liens to one bank? Having a broad mix of relationships with potential investors and lenders is a prudent business practice.

Seek out lenders who specialize in your industry. Generally it’s far easier to get financing when you don’t have to walk a bank officer through every aspect of your business. Bank officers tend to have a high turnover rate; therefore you might need to explain to new bankers each year so they understand how your business operates.

Bank consolidations and modified government regulations may affect lending patterns which may be adverse to your business in the future. Review all closing costs. Banks often hide loan costs with teaser rates.

Is the credit score the only deciding factor?2023-07-31T16:17:57-04:00

No. Your FICO score gives the lender a good idea of how you run your personal finances but they also look at other reporting agencies that the public is not privy to. Some examples are Paynet and Paydex. Most of our transactions are approved by just a simple credit application where the information is put into their system and based on FICO, Paynet and Paydex, the approval is given. This typically takes less than 24 hours.

Who gets to keep the depreciation and Section 179 depreciation?2023-07-31T16:24:27-04:00

In an Operating Lease, the lender uses the depreciation and Section 179 depreciation.

In a Non-Operating Lease ($1.00 Buyout), the end user of the equipment uses the depreciation and Section 179 depreciation.

What is an Operating Lease?2023-07-31T16:20:39-04:00

An Operating Lease is where the documents do not specify an exact purchase option at the end of the term. For example, at the end of the term, the equipment could be bought for a Fair Market Value determined by the finance company or return the equipment back to the finance company. These types of leases will have a lower monthly payment than a lease with a 10% of the purchase price or $1.00 buyout at the end of the term.

Typically at the end of the term, options for the Lessee would be do one of the following:

    • Return the equipment back to the Leasing Company (known as an Operating Lease)
    • Purchase the equipment for Fair Market Value determined by the leasing company (also known as an Operating Lease)
    • Purchase the equipment for a percentage, typically 10% of the selling price
    • Purchase the equipment for $1.00In today’s environment the majority of the leases are “Purchase the equipment for $1.00.”
Why would someone want an Operating Lease?2023-07-31T16:27:02-04:00

To have a lower payment and/or do not want the equipment at the end of the Lease. Examples of this would be equipment that advances in technology as the years go by (computer equipment, faster Laser cutting speeds with the new and latest technology). Another advantage is the benefit of an operating lease is that the liability is not listed on a balance sheet. Future borrowing ability is not diminished by having the lease show up as a liability.

Does my credit score get lowered when I apply for a Lease/Finance?2023-07-31T16:16:34-04:00

If one credit inquiry is made on you yearly, your credit score typically does not get affected. However, if you try to shop for the best deal through multiple direct lenders, your credit score will be lowered because each direct lender is running a credit check which lowers your credit score.

What is a Lease?2023-07-31T16:20:09-04:00

The term “Lease” has had different meanings through the years. A “Lease” typically means that at the end of term you have to purchase or return the equipment.

Why use Working Ox Capital, LLC instead of a direct lender?2023-07-31T16:28:16-04:00

Working Ox Capital, LLC shops the market to find the lowest lender. Working Ox gives more options rather than putting all your eggs in one basket. A direct lender can only get you approved for their company.

Are there major concerns you should have going through your bank?2023-07-31T16:19:11-04:00

Yes. Under most loan documents, the bank cross defaults and cross collateralizes the banking relationship. This means that if the customer defaults under one loan, the bank might use collateral in the equipment to satisfy other obligations.

Banks will typically file a Uniform Commercial Code (UCC) on all equipment, inventory, cash operating account, accounts receivables, etc. Working Ox lenders will only file a UCC only on the equipment that is being financed. Once a bank is paid off and if the UCC is not cancelled, you will still have a blanket lien on all assets. This happens often and causes a problem when you are applying for another loan which gets delayed until the original UCC lien is removed.

Banks require yearly reporting of company financial statements, tax returns, personal tax returns and personal financial statements which is burdensome. Once our transaction is signed, there is NO yearly reporting or yearly renewal fees if payments are current–it is that simple.

Are there Advantages of going with your local bank?2023-07-31T16:18:25-04:00

Sometimes. Most businesses have a working Line of Credit (LOC) with their bank to help with purchasing materials for shops or to help in the time delay on collecting their receivables. Once the Line of Credit is in place, it is very easy to just draw on the LOC and write checks for the purchase of the equipment. Lines of Credit typically carry a lower interest rate because the bank has a blanket lien on all of the company’s assets (Account Receivables, Inventory, Cash, etc.). Using the LOC can also give you the option of paying down the loan when your cash reserves increase.

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