Equipment finance or leasing is a method of financing a capital purchase, such as a vehicle or a new factory line. In equipment financing, an organization will pay for equipment in instalments over time rather than upfront. Equipment financing might be beneficial if you’re starting your own business and need to purchase costly but non-critical equipment on which you can’t get traditional bank loans. There are two different types of equipment leasing: operating lease and capital lease. A typical operating lease provides for monthly payments throughout its term with no balloon payment at maturity. On the other hand, a capital lease requires that you make one large final payment at maturity that includes both principal and interest for both that year and all prior years.
When it comes to financing equipment, it’s all about who you know. A good broker knows lots of different banks and financial institutions, which means he or she can match your needs with just one phone call.
You don’t have to deal with tons of paperwork or run around town trying to secure funding when you use a broker. You tell your broker what type of equipment you want and where you plan on installing it, and he or she will go out and find competitive quotes for you from multiple lending sources. This process saves time—especially for companies that plan on financing several pieces of equipment within a short amount of time—as well as helps keep lenders honest by giving them competition when they’re trying to secure your business.
Equipment finance experts specialize in working with you to determine what type of equipment financing will work best for your company. They can help you understand more about commercial equipment financing, which lenders are most likely interested in providing you with an equipment loan, and how each lender’s terms may differ. The brokers want to do everything possible to help you get financing—and that means giving you advice based on our extensive experience working with equipment financiers every day.
By having multiple providers in place, you’re less likely to be forced into using one specific provider when you might have an alternative.
- Negotiations: equipment finance brokers sit in between suppliers and customers, meaning they can negotiate better deals on behalf of their clients.
- Accessibility: different suppliers offer different financial products. A broker will be able to compare these products for you so that you can get access to the right financial product available on your market.
Spreading The Debt
You can buy a new piece of equipment for your business, but instead of financing it all on your own, you can use a loan from a bank to pay for it. This will spread your debt out over a number of years and make it easier to handle. The bank will want you to pay more interest on that money because they’re lending to you, but they’ll also be willing to offer you better terms overall because they can place that debt elsewhere. In some cases, banks may only be interested in giving you certain types of loans—particularly if your company is newer or smaller—but if you have options available from an equipment finance broker, it’s worth having them look into those as well.
Having a relationship with your bank or credit union is important, but having a third party advocate for you is invaluable when dealing with complicated financing options. Your equipment finance servicewill likely come up against other larger financial commitments in your company’s portfolio, so having an experienced team at your back can be crucial to get all sides of your deal on board.
The Changing Market
Going through lenders used to be a relatively easy process. Now, however, it’s becoming much more complicated than before. With so many different lending options for businesses, equipment financing is much more difficult than it was years ago. A reputable equipment finance broker can help take some of that pain away for you by giving you multiple options to choose from and ensuring all your paperwork is filed correctly. The result? You get exactly what you need in order to grow your business properly.