• Capital Equipment Finance

    CIT Capital Equipment Finance provides equipment loans and leases for transactions ranging in size from $3 million to $100 million and more. We offer flexible terms of up to eight years, with advance rates tailored to the equipment and credit strength of the borrower. 

    Products & Services

    • New and used equipment loans and leases
    • Equipment refinancing arrangements
    • Sale-leaseback transactions
    • Senior term debt financing
    • Lease lines of credit for equipment capital expenditures
    • Cash flow loan structures
    • Asset-based revolving lines of credit

    Key Areas of Focus

    • Aerospace & Defense
    • Automotive
    • Construction 
    • Distribution 
    • Food, Beverage and Agriculture 
    • General Manufacturing 
    • Healthcare and Medical 
    • Island Marine
    • Machine tools 
    • Materials handling 
    • Media and Entertainment 
    • Metals 
    • Mining 
    • Packaging 
    • Plastics 
    • Printing 
    • Pulp & paper 
    • Supermarkets/convenience stores 
    • Textiles 
    • Trade & service 
    • Trucking & logistics 
    • Utilities
  • Capital Equipment Finance Advantages

    • Equipment acquisition financing or leasing allows companies to take possession of equipment quickly, while preserving working capital for other strategic purposes
    • With a secured loan, companies can take advantage of the equity in their existing equipment, or use newly-purchased equipment as collateral
    • A revolving line of credit enables companies to improve their cash flow and restructure their debt according to their current and future requirements
    • Certain lease structures can improve cash flow for companies by reducing their initial investment and monthly payments
    • Several structures help companies divest obsolescence risk, and provide flexibility to match equipment needs with business cycles
    • Businesses can match terms of funding with useful life of equipment
    • Companies have the option to choose either fixed or floating rates
    • Equipment financing can result in varied accounting and tax benefits
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    So you need financing for your restaurants? Just like packing for a trip, you need some standard items - things to keep in mind before you pick up that phone. Beyond the broad economic conditions, multiple factors weigh into the lender's credit decision. Here are seven to consider:

    Restaurant Franchise - thumbnail 1. Sector Trends

    Which of the main restaurant categories - full service, quick service, fast casual, and snack - are in growth mode and which are in decline? Is the Franchisor responding to, driving, or missing market changes and demands? There are always winners and losers. Although sector shifts don't happen overnight, most lenders take an extended view regarding portfolio performance, which extends years or even decades and must be cognizant of broad trends. Other considerations such as labor laws, supply-side input costs, demographics, household income trends, and interest rates will factor into a lender's overall assessment of the sector.

    2. The Brand

    How is the system performing based on key metrics such as Same Store Sales, average unit volumes, COGS & Labor expenses and operating margins, and expected unit-level EBITDA? Is the concept performing above or below industry averages? Is the P&L insulated or susceptible to material input or COGS changes? How does the franchisee's performance over the past three years stack up against these benchmarks? 

    3. Attrition

    There are two categories: orderly and disorderly. The former represents a controlled closure for strategic or financial reasons while the latter indicates an unintended closure caused by poor performance. Store closings in a system aren't always bad - they may be tied to a naturally expiring lease or relocation across the street to better suit traffic patterns. But unplanned closures are a definite red flag.

    4. Lease and Restaurant Franchise Agreements

    If the borrower's lease on the premises or restaurant franchise agreement expires without options prior to expiry of loan term, a lender will struggle to offer financing. For suppliers with short A/R lifecycles this is not a significant concern since their terms often run only 30 days in contrast to the five to 10 year term for a loan. Does the borrower own their dirt or rent third party? What is the rent factor and appropriate cap rate if the borrower is looking for real property financing as well? A lessee paying above-market rents has less capital leftover to make their debt payments and all fixed charges get factored into their debt servicing covenants.

    5. Ownership Profile and History  

    Is the proposed borrower a financial buyer with operating partners or an existing owner/operator? What is the purpose of the restaurant financing? Does the borrower have sufficient "skin in the game" and operating infrastructure to perform successfully? Is the partner growth oriented or content running a static business?  What are the borrower's short and long term objectives?

    6. Asset Quality 

    Are the restaurants in good locations? How long ago were they renovated and do they represent the standard for the system?  How will required renovations impact the valuation of the enterprise?

    7. P&L Adjustments 

    Every transaction has variables that impact the unit-level EBITDA. For example, a borrower with 10 existing stores may have sufficient corporate office infrastructure to absorb a five store acquisition without adding additional G&A expense thereby amortizing their cost base over a greater number of stores and enhancing the unit economics. Alternatively, a franchisee may be looking at a revised FMV lease structure at expiry of term that impacts his free cash flow negatively.

    Concurrent with analyzing these factors and criteria, lenders prefer long-term partners with growth potential. For CIT, in our decades-long experience supporting restaurant franchisees, we have found that a smaller number of lasting relationships works best for us as well as the clients. When we know a franchisee's business inside and out, it positions us as a trusted advisor to guide them in selecting the most appropriate finance products and structures to assist them in maximizing their performance. Any franchisee who requires restaurant financing should consider carefully not just the terms of a first transaction with a lender, but whether that lender is sincerely invested in their future.

    Get the Tip Sheet: 7 Must-Haves for Restaurant Franchisees Seeking Financing.

    Visit cit.com/franchise to learn more about the restaurant franchise financing solutions offered by CIT.

    To read the full article, go to the Knowledge Center on cit.com. If you enjoyed this blog post, please consider sharing it with your social media networks and invite them to register for our blog alerts.