Your business requires equipment to operate. Remember, you make money by utilizing the equipment, not by owning it.

Apart from internally generated credit lines or cash flow, if you need to purchase equipment must investigate your options to finance the equipment required. Keep in mind that how you finance should be the result of well-thought-out planning depending on many factors.

Equipment financing enables you to buy hard assets that are required to maintain your current business operations or increase capacity and therefore intensify competitive advantage and long-term profitability.

For example, a courier company may want to buy additional vehicles, whereas a restaurant may plan to buy another oven, and so on.

Finding the right equipment finance companies is no easy task. You need to consider several factors while searching for a finance option that best suits your organization’s requirements. They include affordability, practicality, the length of time the equipment is required, and the type and use of equipment, cash flow, your tax situation, and long-term capital credit demands related to future growth.

In addition, evaluating how financing equipment benefits your organization’s bottom line and operations can help you provide reasons to finance your equipment.

The Truth About Equipment Loans

Typically, the equipment you purchase with the funds serves as collateral for the loan, meaning you do not need to pledge additional assets.

Moreover, unlike equipment leasing, you can own the equipment outright over renting it from a leading company.

This is a crucial but often overlooked benefit because while the monthly payments for equipment leasing are lower than equipment financing, your total borrowing expenses will be significantly higher in the long run.

However, not all equipment finance companies have the same policies. To help you with the critical decision-making process, we list down a couple of parameters below that should help you assess a prospective lender before you sign on the dotted line. Read on.

How to Evaluate Prospective Equipment Financing Company

1 Experience

There is no substitute for experience. You may or will experience several issues during the life of your loan that will require a discussion with and potentially some amendments.

For example, your equipment investment may turn out to be more successful than you projected, and you may plan to take on additional funds to generate even more return on investment (ROI).

In such a scenario, you need an equipment financing partner with the expertise to help you make safe and intelligent decisions in your best interest and not theirs.

2 Support for Small and Mid-sized Businesses

Some equipment finance companies work with large enterprises only because of low risk and high profitability. So, if you are a small or mid-sized business, make sure your equipment financing partner is dedicated and committed to funding your business.

3 Purchasing from Vendors

Some equipment finance companies may ask you to buy equipment from their vendors. But this could often turn out to be a deal-breaker. Purchase from the vendor of your choice to have complete freedom and go for the one that satisfies your needs and not your financing partner’s.

4 Repayment Options

Do you plan to repay your loan in a year or the next two or five years? Your equipment financing partner should provide a wide variety of repayment options. They should also work with you to determine the duration that increases your financial health, including the cost of borrowing, cash flow, etc.) at minimum expense.

5 Policy on Bad Credit Equipment Financing

If you have great personal and business credit, you may not include this as a part of your due diligence. However, if you have a poor credit score, you should choose equipment financing partners looking at other criteria to determine your creditworthiness.

6 Turnaround Time

Choose an equipment finance company that understands time is of the essence. They should commit to evaluating the application within 24 hours. And once approved, they should transfer the funds to your account within seven days.

Conclusion

Understanding these six factors will help you make the right equipment financing decision. Choose an equipment financing partner who can help you address your issues and answer your questions you may have, and make you get the right equipment at the best terms for your business.