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Don’t Have All Your Eggs in One Basket filing is a legal form that a lender files to give
The banking relationship is important notice that it has an interest in the business
when running a business, and your bank will property of a borrower. Essentially, UCC lien
likely also offer financing for equipment loans. filings allow a lender to secure their financing.
Keep in mind that while your bank is a great UCC liens are typically only filed on the assets
partner, your banker may not always have the that are being financed. It is important to clarify
best structure to offer on equipment loans and with your lender which type of lien they will be
leases. All lenders will have some exposure and filing.
concentration limits. It is important to have To PG or Not to PG
more than one lender who understands your
business. An additional lender may have less Typically, closely held businesses will be
restrictive finance structures available, includ- required to provide a personal guarantee (PG).
ing 100% financing, variable maturities and be Some lenders may be willing to forgo a personal
willing to finance assets that are unfamiliar to guarantee if the business is particularly strong
the bank, such as propane tanks, tank monitors or has a long time in business. You can also ne-
and autogas conversions. gotiate eliminating a PG, but be prepared that
the terms may change by paying a larger down
When comparing interest rates for payment or a higher interest rate. Terms reflect
equipment, be aware that equipment finance how much risk the lender is willing to take on
rates are typically higher than real estate trans- any given transaction. Does a PG affect your
actions. personal credit? No. A PG does not need to be
Keep in mind that with specialized as- shown on your personal financial statement,
sets, there is often a higher interest rate. New nor does it affect your personal credit score. It
vehicles, such as service vans and work trucks, is simply a guarantee that if the business files
will have relatively low interest rates, as these bankruptcy, you will personally agree to pay off
are assets that can be used in any industry. the obligation. This illustrates to the lender that
Specialty equipment like bobtails and transport not only are you asking them to stand behind
trailers will be slightly higher. Bulk storage facili- your business, but you will as well. A personal
ties and fueling stations may also warrant a rate guarantee shows a sense of pride of ownership.
increase as these are fixed assets.
Application-Only Vs. Full Financial Disclosure
Propane tanks and tank monitors are
also specialty items because these can be If you have at least five years in busi-
considered inventory since they will be located ness and ample borrowing history, transactions
at various customer locations throughout a from third-party lenders can often be approved
service area. on a credit application-only basis typically for
transactions under $300,000. Keep in mind that
Let’s Talk About Liens you may be able to negotiate better terms by
A blanket lien is a lien in which a lender providing full financials. Full financial disclo-
has the right to claim multiple assets — often sure is required for larger amounts and shorter
all of a business’s assets — that were used as time in business. Borrowing history is typically
collateral for a loan. Blanket liens include the reported by your lender. Make sure your lender
risk of a business losing its assets in the event is reporting your borrowing history so you can
it cannot repay an obligation to the entity filing build business credit. If you are starting a new
the lien. A uniform commercial code (UCC) lien business, lenders will want to see industry ex-
24 Alabama Propane Gas Association | September / October 2023
