Can a lender see a cleaning company’s equipment as security for the loan?

A cleaning company’s assets tend to be small machines, supplies and vehicles. A lender thinks about what they could sell if the loan failed, so general-purpose items such as vans may count for more than specialized tools. Ask which items the lender would consider and how they would judge their condition.

Prepare a list of equipment with age, condition, purchase date and whether anything is already financed. A lender will want to know if another party has a claim on the same assets. Photos and serial numbers help, and some lenders ask for an appraisal. An independent valuation can also help you in negotiating the purchase.

Expect the lender to look past equipment. The business’s cash flow and contracts usually matter more, and the lender may ask for a personal commitment from the buyer. Ask your lawyer to explain what you would be signing and what happens if payments are missed. Compare more than one lender, since they differ on what they accept. If the equipment is weak security, see whether a different structure, or a larger share from your own funds, works better. Talk to an adviser before agreeing. Ask whether insurance on the equipment will be required, and who must be named on the policy.

Key takeaways

• Expect limited credit for small, used, portable cleaning equipment.
• Prepare a list with age, condition and any existing financing on each item.
• Ask your lawyer what a lender’s claim and any personal commitment would mean.