If you have shopped online for business financing recently, you have probably seen the request early in the process: upload your last three to six months of bank statements. Some lenders ask you to connect your bank account directly instead. Either way, the statements come before the quote.
So it is fair to ask whether you need them to finance a piece of equipment. Often you do not. This post explains why some lenders lean on statements so heavily, why equipment financing usually works differently, and what we ask for instead.
Why so many lenders ask for bank statements
The lenders that ask for statements first are usually offering short-term working capital: business cash advances, revenue-based loans and similar products. For those, the bank statement is the deal. The lender looks at:
- Average monthly deposits, as a stand-in for revenue
- Average daily balance, to see how much cushion the business keeps
- Overdrafts and returned items, as warning signs
- Existing daily or weekly debits from other lenders
That makes sense for a product with nothing behind it but the business’s cash flow. There is no machine to repossess and no asset to sell, so the lender’s whole decision rests on money moving through the account. It is also why many of those products are repaid daily or weekly, straight from the same account.
Why equipment financing is different
Equipment financing pays for one specific thing, and that thing is the collateral. If a business stops paying, the lender has a machine with a resale value behind the agreement. That changes what the lender needs to know.
Instead of reading every deposit, an equipment lender can focus on:
- Credit, both the owners’ and the business’s
- Time in business, especially under current ownership
- The equipment, what it is, what it costs and how well it holds its value
- Payment history on similar debt, such as earlier equipment loans or leases
For smaller and mid-sized transactions, that is often enough to decide without a stack of statements.
Side by side
The two kinds of financing can look alike from the outside, especially online, where both promise a fast answer. Underneath they are built differently:
| Statement-based working capital | Equipment financing | |
|---|---|---|
| What it pays for | General business expenses | A specific piece of equipment |
| What secures it | Future revenue or sales | The equipment itself |
| What the lender reads first | Three to six months of bank statements | Credit, time in business and the equipment |
| How it is repaid | Often daily or weekly debits | Fixed payments over a fixed term, typically monthly |
| Typical term | Months | 18 to 60 months with us |
| What you hold at the end | Nothing beyond the cash you used | The equipment, or the option to buy, return or extend |
Neither is wrong in itself. A business that needs cash for payroll or inventory next week is solving a different problem from one that needs a new truck. The trouble starts when a working capital product is used to buy equipment, because the short repayment and frequent debits are built for cash that comes back quickly, not for a machine that pays for itself over years.
What a bank reference tells us, and what it does not
It is worth being clear about the difference between a bank reference and a set of statements, because it is the main reason the Application Only process is lighter.
A bank reference confirms that the business has an account, how long it has been open and its general standing. It does not show us who your customers are, what you pay your staff, which suppliers you use or what you spent last Tuesday. Statements show all of that, line by line, and once they are uploaded you have little control over where they go.
For the decision we are making, which is whether a business with this credit, this history and this equipment can carry this payment, the reference and the credit file are usually enough.
How it works at American Capital Group
Our Application Only program covers equipment from $10,000 to $150,000 on our one-page application. There are no financial statements, no business plan and no projections. The application asks for:
- Your business name and address
- A bank reference
- The ownership breakdown
- A general equipment list and its cost
A bank reference is not the same as handing over statements. It lets us confirm the account exists, how long it has been open and its general standing. For larger Application Only deals, from $75,000 to $150,000, the criteria include an average bank balance and how long the account has been open, and the bank reference is how that is checked. The full criteria are published on our no financials required page, so you can see where you stand before you apply.
We also use a soft credit pull that does not affect your credit score. Here is how that works.
When you might be asked for more
Application Only covers most of what we finance, but not everything. You may be asked for more in a few situations:
- Larger transactions. Above $150,000 we look at a fuller package, which usually means financial statements.
- Start-ups. Our startup program has no minimum time in business, so the owner’s own position does more of the work. We ask for a personal financial statement, a brief business summary and, on amounts above $15,000, two years of personal tax returns.
- Something needs clarifying. If an item on the application raises a question, a specialist may ask about it. That is a conversation, not a new application.
Questions to ask before you upload anything
Bank statements show a lot: your customers, your suppliers, your payroll, your balances. Before you send them to anyone, it is worth asking:
- Do you need statements for a transaction this size? Some lenders ask for them by default even when the decision does not depend on them.
- Who sees them, and how long do you keep them?
- Is this an equipment financing agreement, or a cash advance or working capital loan? The paperwork can look similar, and the repayment can be very different.
- How often will payments come out, and how? Monthly payments on a fixed schedule are very different from daily debits.
- Is there a hard credit pull, and when?
A lender that answers these plainly is usually one that will be plain about the rest of the deal.
A note for Southern California businesses
Los Angeles and Orange County have no shortage of lenders advertising fast approvals in exchange for an upload of your recent statements. For working capital, that can be the right tool. For a piece of equipment, it is often more paperwork than the decision needs, and the product on the other end may not be built for financing equipment at all.
American Capital Group has financed equipment for small and mid-sized businesses since 1995, from our office in Laguna Hills. Most of what we do starts with one page.
Ready when you are
If you are financing equipment between $10,000 and $150,000 and would rather not send six months of statements to get a quote, start with the one-page application or request a free quote. Not sure whether you fit? The minimum criteria are on our no financials required page, and if you are close on one line, apply anyway and tell us which one.
Questions first? Call (949) 822-3017.
This post is general information, not financial or legal advice.
Frequently asked questions
Do I need bank statements to get equipment financing?
Not always. Many equipment finance companies can approve smaller transactions on an application alone. At American Capital Group, the Application Only program covers equipment from $10,000 to $150,000 on a one-page application with a bank reference, and no financial statements, business plan or projections.
Why do some lenders ask for three to six months of bank statements?
Lenders that make short-term working capital loans or cash advances usually decide on the deposits flowing through your account, so the statements are the main thing they underwrite. Equipment financing is secured by the equipment itself, so an equipment lender can often rely more on credit, time in business and the equipment.
What is a bank reference?
A bank reference is the name of your business bank and your account details, so the lender can confirm the account exists, how long it has been open and its general standing. It tells a lender far less about your business than handing over months of statements.
When would an equipment lender ask for bank statements or financials?
Usually on larger transactions, on younger businesses, or when something on the application needs clarifying. At American Capital Group, deals above the $150,000 Application Only limit take a fuller package, and start-ups provide a personal financial statement and, above $15,000, two years of personal tax returns.
Is equipment financing the same as a merchant cash advance?
No. Equipment financing pays for a specific piece of equipment, which serves as collateral, with fixed payments over a fixed term, typically monthly. A merchant cash advance is an advance against future sales, usually repaid daily or weekly from your account.