Everything Businesses Should Know About Heavy Equipment Financing
Many industries require heavy equipment for testing, manufacturing and construction. However, making an outright purchase is often more than companies can handle, especially if they’re small businesses. The good news is, equipment financing can help even mom-and-pop shops get the equipment they need without putting a strain on their budgets.
However, not all equipment financing measures up. As you look at the available loans, you should keep the following tips in mind.
Compare Interest Rates
When you take on a loan, one of the most important things to look at is the interest rate. The higher the percentage, the more you’ll end up paying, so you want to compare the various rates offered by different lenders.
Several factors influence the interest rate, such as loan term length and down payment amount. If you’re unhappy with an interest rate, you may be able to negotiate for a lower offer using these factors.
Before you apply for a loan, note that it isn’t the only option for heavy equipment. Many lenders also offer a leasing option. What’s the difference? When you accept a loan, you borrow the money to purchase, then pay back the debt. During a lease, on the other hand, the lender makes the purchase, and you pay a monthly fee for the use of the equipment. When the lease ends, you may have the option to upgrade to a new model.
As you can see, the most significant difference is ownership. Through a loan, you own the equipment from the beginning. You may wonder why anyone would prefer leasing in this case, but the ability to upgrade every few years is valuable if your industry innovates at a fast pace. That way, you don’t have to worry about disposing of outdated equipment and purchasing new models.
Get Your Finances in Order
Lenders will want to look at your finances during the application process, so it’s best to know what the money situation looks like beforehand. Getting your finances in order will also allow you to determine how much you can provide as a down payment, how much you’re willing to pay monthly and other valuable information.
Though high-quality heavy equipment is expensive, it’s worth the investment. Your customers are counting on well-made products and will notice the difference if you go for a cheaper alternative. The good news is, equipment pays for itself since you can use it while making payments. So don’t hesitate when it comes to equipment financing — take the initiative and find a loan with terms in your favor.