Obtaining financing so that your business can buy the equipment it needs can be a great way to ensure your business is not interrupted due to broken down or outdated equipment. If you've never had to get equipment financing for your company, you may not understand all the details involved. Note a few questions to ask any lender or to consider yourself so you know you get the best deal.
1. Is the financer the primary lender?
Some financial lenders are brokers, meaning that they find other lenders and then sell or represent your account to them. A broker will do this for a set amount of points, or an added fee that is part of your loan. It's good to know if they're the primary lender, as these ones may offer the best deal since they don't need to add their broker fees to the loan. To get the best rates, start looking for primary lenders rather than brokers.
2. Note if the financing provides tax benefits
Depending on how you finance your equipment, you may be able to deduct the financing, the interest, and the depreciation of the equipment over time. This is something to discuss with your lender or with an accountant, as you want to ensure you choose a loan that offers the most benefits. Not all financing is structured the same, and tax laws vary from location to location, so be sure you've asked about potential tax benefits before choosing a financing option.
3. Ask if they offer seasonal payment options, if necessary
Some businesses are seasonal or cyclical, meaning there are downtimes and uptimes for their business throughout the year. Some financing options will allow you flexible repayment plans that take this into account. If you have a landscaping or roofing business that is slow in the wintertime, or you sell product that does very well around the holidays but which slows in sales the rest of the year, don't assume that your monthly payment amounts should always be the same. Ask about seasonal or cyclical payment options so you're not stuck paying the same amount when you have less income coming in.
4. Ask about upgrading options for new loans
You may need to upgrade your equipment before your loan is paid, so it's good to know your options for rolling over your old loan into a new one or even into a lease plan. Ask about these things ahead of time, even if you don't think you'll be upgrading for several years, so you'll know you have the option and can plan ahead as necessary.
For more information, contact a local equipment finance company.