Equipment finance tips

4 Important things to know before financing equipment.

Smart equipment financing decisions are empowered with access to the right information and knowing key lender data points. Make sure you have access to the right business intelligence and needed context to drive your financing objectives.


Smart equipment financing decisions are empowered by access to the right information and knowing key lender data points. As a small business champion, we preach the gospel of open, transparent, client-first lending. We ensure clients have access to the right business intelligence and needed context to drive their financing objectives.

Here are 4 important things to know before financing equipment.

What type of equipment do you need?

This very basic question involves real analysis. What is your budget? How much will the equipment cost? What is the projected return on your investment vs the cost of the loan? What is the life span of the equipment and how often will it need to be replaced? Knowing these answers allow you to make an informed strategic business decision.

How is your business and personal credit?

Sounds basic, but many business owners begin shopping without understanding their risk profile. We always say, you need to play the piano with both hands. That means having a copy of your tri-merged credit report handy ( Equifax, Transunion , and Experian). Then understanding lenders look beyond your FICO score. They look at the number of tradelines on your credit report, the age of those tradelines, your credit utilization, recent late payments, and comparable credit (on other types of business loans). In addition, get a copy of your Paynet or Experian business credit and look at your rating. Lenders will look at your personal and business credit. Be prepared!

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Should you buy or lease?

Many businesses overlook equipment leasing and immediately think of financing. How long will you use the equipment, how long will it last, does it hold value, and is there any benefit to owning outright as opposed to replacing and securing new equipment after a certain number of years? Technology changes rapidly with constant innovations. Every case is unique so do your homework.

 

Evaluate external factors affecting equipment prices

Business owners know: the only thing permanent is change. The unforeseen and unexpected underpin our new reality. As we have seen in today’s business climate, external factors can alter the landscape. Think about supply chain disruptions in 2021. This can artificially inflate prices only to correct at some later date. Be careful not to overpay and find yourself with negative equity. Patience can be a strong ally. Keep up to date on global economic trends.

 

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