We have all been there. We are excited to receive a business loan approval. Then we get the contracts. We see lots of fine print buried with legal phrases we think we understand. Too frequently we skim and sign- only to find later, we have made a costly mistake. When it comes to equipment financing, ALL details count . You must understand everything in the contract BEFORE you sign.
In our two part series , we will give you 8 things to look for before signing. Part I will detail the first FOUR items you must carefully review.
THE LOAN AMOUNT
It might seem simple but it’s worth emphasizing—the equipment loan amount is one of the most important things you’ll need to verify on your equipment loan agreement.
The Type of Equipment Loan
There are many types of equipment loans out there, each with varying ownership and buy-out structures. Did you agree to an equipment loan or a lease? Make sure you verify and know the differences.
The five most common forms of equipment loans that you might be taking on when you sign your equipment loan agreements:
- Finance lease/$1 buyout
- Sale/Leaseback
- True lease/operating lease
- PUT option lease
Who Owns the Equipment?
Make sure you’re clear on who will actually, legally own the equipment you’re about to finance. Do NOT assume. ASK and VERIFY!
Repayment Term Length
Make sure to review and verify the duration of the contract. If you agreed to 72 months do not accept 60 months.
Interest Rate & APR.
The interest rate indicates how much interest you’ll accumulate on your equipment loan, the APR will indicate the total annual cost of your equipment loan. Make sure you verify both and they are consistent with your previous lender discussions.