Today we're going to hear from 'The Lease Guy' at Crest Capitol and all about bank business loan restrictions, and how harmful they can be to your business operations and financial flexibility.

Clauses like blanket liens, compensating balances, and annual requalification are common and written into almost every bank business loan. They may or may not be clearly discussed, and it’s up to the borrower to understand exactly what they are getting into.

This brings up a simple question: “Can I avoid these?”

The answer is not as simple (but it can be – you’ll understand in a minute).

If you are insistent on using the bank, there may be no way to avoid them. I would always recommend you ask about these and insist the bank discloses them in plain English. Your loan officer might be a little surprised when you mention blanket liens, but they don’t know you read The Lease Guy so we’ll forgive them.

You can ask for these clauses to be dropped, but I wouldn’t get my hopes up. I suppose for the bank’s very best long-term, high-revenue customers they might, but even then the chances are slim. You see, these clauses are part of the bank’s normal operations – they mitigate risk on loans greatly, and this risk mitigation is one reason the bank usually offers the lowest rate.

A better, and much simpler, way to avoid these clauses is to use a business lender / equipment financing partner that doesn’t use them. Like Crest Capital – we do not use any of these clauses. The only lien you’ll see from us is the standard lien on the piece(s) of equipment we are financing, and that’s it – the rest of your assets are just that: YOUR ASSETS. We also don’t care about compensating balances, and once we say “yes”, that’s that – we leave you alone afterwards.

Because we don’t use these draconian clauses, our rates will be a point or so higher in most cases. So you have to ask yourself, how much is a point or so of interest worth to you? To us, it’s a no brainer. In fact, to most astute businesspeople, once these clauses are pointed out and dissected, the choice is pretty easy.

Forgive the obvious plug, but it is what it is. These restrictions are real, they hurt, and we don’t use them. Simple as that.