6 Tips for Equipment Financing
If your business relies on various pieces of equipment to function properly, you have to make decisions about bringing them on board. Whether you finance- purchase outright or lease, you do need to follow certain guidelines to ensure a smooth process; however, leasing has particular variables that come into play. These are some of the considerations you need to take into account when financing equipment.
1. Determine Your Lease
Before starting, examine your equipment needs. If you like to upgrade often or are not certain if particular equipment will meet your needs, apply for an operational lease. At the end of the term, you can return the equipment and start over; as a benefit, payments are tax-deductible. If you want many years of service out of your equipment, a capital lease makes sense. Under these terms, you can cost-effectively purchase equipment as the lease expires.
2. Research
As with a home purchase, you need to investigate financing options. Local banks may seem to offer an easy process, but research can uncover institutions offering better terms and rates. Be open to financers that offer value whether they are regional or national.
3. Clarify Your Business Plan
Since lenders want to know they will be repaid on time, you need to present a sound business plan. Make sure to note specifically how you will use the equipment and its value to your business.
4. Focus on Your Credit
As you examine your business plan, also go over your credit profile. You will need to discuss this with leasing institutions, especially providing explanations for credit glitches. Weak credit scores or inexplicable issues will negatively affect your ability to secure financing.
5. Streamline Leases
If possible and for peace of mind, secure a single lease for all equipment. Organizing paperwork and filling out applications only once will make the process less stressful. Also, you will appreciate dealing with only one monthly payment in the long run.
6. Stick With the Team
Creditors look at your application history. One you are working with may not be receptive if you have been turned down by others previously. To increase your odds of succeeding, in your research narrow down your list to the lender that specializes in leasing within your industry, and work with that one over the years.
Among the many decisions you make as a business owner, how you equip your company can top the list. Equipment is expensive, but you need good equipment to operate. Following a sound equipment financing process will ensure you can get the equipment you need to help your business function productively.
