Now that you understand what goes into the credit process and an approval has been provided, the next step will be documentation. Here is a general explanation of the basic documents and what each document represents:

Promissory Note – this is your Promise to repay the loan. The Promissory note will contain all the basics of the transaction – the rate, the term, the monthly payment. It will also contain the general requirements of the loan such as how your payments are applied, keeping the asset insured, events of defaults and remedies.

Security Agreement – this document provides the information on the collateral that will be used as security for the loan or EFA along with the rights of the Lender, or Secured Party. It will contain a complete description of the collateral, the primary location of the collateral, that the collateral is being used for business purposes, that the collateral is free & clear of any liens. The agreement states that you, as the Borrower, will keep the collateral maintained and insured, properly registered and/or titled. States that the Secured Party has a right to inspect the collateral and will file financing statements on the collateral. All events of default will be delineated with all remedies.

Guaranty – if a personal or corporate guarantee is a part of the approval, a guaranty document will be included in the documentation package. This document sates that, if the Borrower does not make the payments, the guarantor is responsible to make the loan or lease payments.

Pay Proceeds or Disbursement of Funds – this document advises how the funds of the loan will be disbursed 

Equipment Finance Agreement – this document includes the amount of the advance, the term, monthly payment, agreement for lender to have a security interest in the collateral, events of defaults and remedies.

Payments in Advance vs. Payments in Arrears:  Payments in advance requires you to make payment(s) at the time of signing documents. Payments in arrears means your first payment will be do some time after the funding of the transaction, generally 30 days after funding. In some cases, the first payment can be due 45 days or more after funding.

Down payment – refers to an amount of cash/equity that the buyer is responsible to pay towards the purchase of the equipment.

Corporate Resolution and Consent of Stockholders – for a Corporate Borrower, this document outlines the officers of the Corporation and states that the Officers have the authority to execute documents on behalf of the Corporation. A similar document is used for LLCs.

Lease Agreement – this document will spell out all of the general terms of the lease such as use of the equipment, maintenance of the equipment, insurance requirements, responsibility of any taxes due, events of default and remedies, etc. Some lease agreements will include the term of the lease, monthly payments and end of lease options, while other lenders may use a separate Lease Schedule document.

TRAC LeaseTerminal Rental Adjustment Clause – combines all the benefits of leasing with an option to purchase the equipment at the end of the lease term at a pre-determined residual agreed to at the start of the lease. This lease is used for any over-the-road equipment.

Capital Lease – a lease where the Lessee assumes some of the risks of ownership of the equipment and also enjoys some of the benefits of ownership, such as carrying the equipment as an asset and also as a liability, for the lease payments, on their balance sheet. Generally a Capital lease will have a stated residual/buyout at the end of the lease term.

Operating Lease – a lease where the Lessor (owner of the equipment) transfers only the right to use the equipment to the Lessee. At the end of the lease term, the Lessee returns the equipment to the Lessor. The Lessee does not have any ownership in the equipment.

"My experience with Harry Fry & Associates was wonderful. I had spent 3 months looking for financing for a start up business with a large initial finance request. I had filled out dozens of credit applications with large and small financiers only to be told at the very end of the process they didn’t provide large start up loans. It was extremely frustrating to do all the leg work on documentation only to find out I wouldn’t have gotten the financing anyway. I had come to the end of my rope and had given up the idea of my business plan. A friend sent me Harry’s information and suggested I give it one more chance. After contacting Harry, spending quite a while on the phone with him, he asked me to submit a credit application. It was approved and he found me wonderful financing. He truly got to know me and understand what I was trying to do before I submitted the application. Finally someone willing to finance a start up business! The quality of service from Harry and his team is unmatched. Responses are immediate and the wealth of knowledge in all aspects of the finances and pitfalls are truly expert. I have had such a wonderful experience with this firm. I would highly recommend Harry Fry & Associates for anyone looking for financing. I’m truly thankful I took a chance on them and they were willing to take a chance on me."
Steve C. - Certified Arborist, Massachusetts