5 Things to Consider When Looking for Equipment Financing
Keeping equipment up-to-date or attaining new machinery can be expensive. Find out how to finance here.
Your equipment is a crucial part of your business, but keeping it up-to-date or attaining new equipment can be expensive. Build your business by financing your next new or used equipment purchase. Equipment financing companies can offer flexible financing programs that will help you attain the equipment your business needs to achieve your goals.
There are five things to consider when looking for an equipment financing solution:
- Savings benefits
- Proper research
- Maintaining good credit
- Getting finances in order
- Finding the right finance partner/lender
TAKE ADVANTAGE OF SAVINGS
Financing your next piece of equipment will help you keep up with demand without drastically increasing your business expenses. With financing, the total cost of the machine is broken down into manageable monthly payments instead of having to pay a hefty upfront fee to purchase the equipment. You’ll save on the initial overhead, start using the new equipment right away, and put that money towards other business needs.
Additionally, a new equipment purchase could offset your tax burden. Not only can you write off the equipment as a business expense, but your investment could be eligible for the Section 179 Tax Deduction. This eligibility means a business can deduct all or part of a purchase price of qualifying financed equipment. A company can deduct up to $1 million!
RESEARCH
It’s essential to be knowledgeable about any equipment you’re looking to add to your business. Do some research online to see what equipment types or brands have a good reputation in your market.
Try asking a few of your industry friends what their equipment preferences are, and they should be more than happy to share their opinions. If they say no or don’t have insight, ask an online forum or see what’s trending on equipment blogs. While you’re online, see what your competitors are up to and what trade publications have to say about cutting-edge equipment. Be sure to collect enough research to evaluate what the new investment could do for your business and if it would be the right fit.
A WORD ON GOOD CREDIT
Even if you don’t have the best credit score, don’t feel discouraged. Some equipment financing companies will work around challenged credit. First things first, check your credit score and credit history to see where you stand. You can use free online tools such as MyFico to obtain your FICO score and view your credit summary. Some lenders use your FICO score to assess your credit risk. It’s in your best interest to find a lender that reviews other factors besides credit so they can determine the real value of your business. Some elements could include business pay history, previous collateral, and yearly revenue. Learn the nitty-gritty on what the three major credit bureaus (Experian, Equifax, and Dun & Bradstreet) use to calculate your score and how you can improve it here.
Once you have determined where you stand, increase your chances by maintaining a clean track record. Ensure you regularly pay bills and loans on time, as any late payments may work against you. Take time to read your credit reports thoroughly to ensure accuracy and report any discrepancies sooner than later. Request your free credit report here.
ARE YOUR FINANCES IN ORDER?
Whether your business has past financial challenges or not, lenders are willing to create a custom financing plan. The stronger your cash flow and profitability, the more affordable your monthly payment is likely to be. One way you can improve your business’s financial standing is by recovering any outstanding fees or debts. You can do this yourself, or if you don’t have enough time, consider outsourcing your debt collection with a debt collection agency.
You should analyze all of your costs and determine which ones can be reduced or rearranged. For example, you could arrange periodic payment plans for more considerable expenses or switch insurance companies to get a better deal. Lastly, keep track of your cash flow and list all of your incoming and outgoing funds. By understanding your budget, you’ll get a better idea of where your finances lie so you can plan for incidental expenses and business emergencies.
Taking some time to improve your business’s financial standing can be worthwhile in the long run. Even companies that have seen economic challenges in the past can get help acquiring equipment to keep up with growing demand and start generating profit almost immediately.
FINDING THE RIGHT FINANCING PARTNER
When it comes to finding equipment financing that fits what you need for your business, traditional bank financing may not work if you require non-traditional funding. Instead, it would be best if you focused on finding a lending partner. This person is someone you can trust and carries expertise in the equipment you’re trying to acquire.
Finding an expert who has strong vendor relationships and expert industry knowledge will ensure that you are getting the best deal on equipment. This type of lender should be able to negotiate with the vendor on your behalf to guarantee an affordable financing rate on new or used machinery. Be sure to ask your potential lenders how familiar they are with your specific equipment and industry.
