With the unprecedented Covid-19 apocalypse, businesses have curtailed their spendings, and some may even go into debt. While some companies are making a resilient recovery, some are barely making their ends meet.
Purchasing equipment or tangible assets, like trucks, heavy machinery, for your business can cost you a fortune. The equipment can count as an asset on your balance sheet, and you can also claim depreciation on it when filing your taxes.
Once you have determined exactly what is needed for your business, you need to figure out how to pay for it. While purchasing is a good option, it can be an expensive venture. Thus, it is important to secure financing from reputable equipment financing companies.
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What is Equipment Financing?
Equipment financing is using a lease or monetary loan to purchase or borrow tangible assets for your business. The equipment financing aid can be used to purchase hard assets for the business, from restaurant ovens to company cars. An equipment loan offers the borrowing party the necessary capital to procure the necessary equipment and pieces of machinery. These not only allow buyers long repayment tenures but offer tax benefits to the buyer.
If you feel that the cost of the equipment is too high to purchase, leasing is a viable option.
However, the lifetime cost is usually higher than if you buy the equipment.
How to choose the right equipment financing company?
Here are some factors to consider while choosing the company that finances your equipment lease:
a)Acquaintance to the industry
The familiarity in the specific industry ensures that you can utilize the financier’s advice, tips, and recommendations. In-depth knowledge of machinery requirements, industry standards can be an important asset for expanding your businesses.
b) Digitized Operational undertakings
Digitalization has transformed the entire insurance industry. With seamless and easy operations, the leasing financers often present a digital platform to access all the information from a single channel. It is important to examine whether the equipment financing company offers visibility to transactions, tax certificates, lease repayment receipts.
c) Transparency and Credibility
Before you commence the leasing process, look out for your company’s transparency and visibility of operations. Borrowing a loan is a long-term arrangement, ensuring that the company is lucid about explicit expenses like foreclosure charges, processing fees, and other hidden costs. Moreover, make sure to scrutinize the contract before agreeing thoroughly. The financier has to fully inform the customer about the conditions before the loan is sanctioned. Established and renowned companies assure stability and security throughout the process.
How to apply for equipment financing loans?
To be eligible for sustaining an equipment financing loan, the potential borrower needs to provide financial statements, balance statements, along with three years of business tax returns along with a business credit score to the lending end. These documents will provide a lucid picture of your company’s financial health. The lender will consider industry risk, repayment history, and current cash flow.
The interest rates depend upon various factors, including creditworthiness and the value of assets being purchased. The equipment itself can be used as collateral. It is often suggested to have a quote for the respective equipment from one or more vendors so that you can choose the one that fulfills your conditions and parameters. After the loan application is sanctioned and you receive funding, you are eligible to receive the loan. Once you begin repaying the loan, which includes the total cost of the equipment in addition to the interest over a fixed period, you sustain full ownership of the equipment.
The equipment financing tenures can be lengthy; make sure you choose the right financier for this long-term business relationship. As financial experts weather the disruptions caused by the pandemic in the financial sector, this is the right time to be proactive about getting financial relief for your business.