Making the decision to get finance for your next purchase can involve a lot of thinking! You have to weigh up how you want the asset to work for your business, how you want it to be classified on your books, and maybe whether or not it’s actually a good idea!
But the thing about choosing to finance your next purchase is that it is an investment in your future, your business and it’s ability to generate income. So, while it may appear to be a costly exercise, if you need the right tools to get the job done then it can be a great strategic move to finance your equipment loan.
Why finance instead of buying outright?
Two works – cash flow. Unless you have a significantly large amount of money saved up to completely cover the purchase of your asset then you’ll almost always be better off choosing to finance your purchase.
By depleting your savings and putting a heavy drain on your cash flow, you won’t leave any money in reserve for other uses, including emergencies, which can cause some difficulty. It might also cause you to miss any unexpected opportunities that may arise.
So you should definitely consider speaking to a finance expert like those who work at Equiplend before jumping into a purchase. They will advise you on any tax requirements or advantages that are applicable to your type of business. We can also help you to find a loan that meets your budget requirements and suits your financial history.
Don’t Forget To Consider These Things When Comparing An Equipment Loan
Your interest rate is vital – get the best one available to you!
Different lenders will offer you different interest rates depending on many factors. They will always be looking at your credit score – whether you are classified as having good or bad credit. They’re also interested in whether or not you can repay the loan on time and reliably, so they’ll be looking at your financial history as well as current income and situation. This is especially important for a business as it can signify the health of the business.
Why do they care about these things? Because they are looking to gauge the degree of risk involved with lending to you. A higher degree of perceived risk will generally translate to a higher interest rate. So you can get lower interest rates loans by lowering your credit score, ensuring you have enough income to comfortably repay the loan at a likely interest rate, have stable employment if you are an employee, have no large outstanding debts, and generally make yourself seem like you’re a good candidate for a loan. The key is to be a trustworthy applicant who appears to be able to repay their loan on time and reliably.
If it’s not clear by now, the reasons you want to get a lower interest rate is that it will lower the cost of your loan over the loan term. And who doesn’t want a cheaper loan?!
The type of loan and the business you operate can give you certain tax advantages.
Consider that you will be able to manage your equipment finance differently depending on the kind of business you run. There are many different approaches, some of which we touch on in this article, so you should be careful to choose the right one for you. They include being able to claim the cost of things like the loan itself, the asset, it’s depreciation, upkeep against your taxed amount. It can also mean you can either choose to list the
If you aren’t sure, consult your licensed accountant on what they think would be best for you, and then ask an expert finance broker who knows the market and understands the options that are available. Any good finance broker will work with a number of good lenders, which broadens your options. For example – Equiplend works with almost 40 lenders, so you’re bound to get the best pick of what is available and makes the most sense for your situation.
Choose payment plans that suit you, and if you can’t find one – negotiate!
All loans come with some kind of payments for the life of the loan. You’re going to want to select a loan that fits in with your cash flow and only borrow an amount that you can afford to repay.
Consider that you might have dips or slow downs in your business and it’s cash flow throughout the loan term, so if you can find a loan that offers some flexibility then it can be a huge advantage to have options available.
Consider all costs of the loan, including fees and charges.
There is no such thing as a free lunch… Or a free loan! All loan types involve fees and charges on top of the main costs such as interest and the loan amount.
These are usually account management fees, extra repayment fees, late repayment fees, early payout fees, and anything else that might be included in the fine print.
You should always be sure to range of fees and charges that are added to the loan. This is why you should pay attention to product information and determine if your choice includes early repayment fees, establishment fees or account keeping fees. These fees may vary depending on the life of the loan.
Understand the terms and conditions.
Be sure you have thought about how long the loan lasts for and how this impacts your financial commitment. Terms usually range from 1 year to 7 years, with most loans being 2-4 years. Of course you need to choose a term that suits you. Also consider whether you are able to pay out the loan early if possible and whether there are any fees or charges for doing so.
Who is the loan with? Can you trust them to support you and work with your needs?
Be sure to research who you’re accepting a loan from – don’t just accept the first offer that comes along. Be sure to read the reviews and feedback if you can find any. Most importantly of all – remember the old saying that if it’s too good to be true then it probably is!
Choosing a well established finance broker like Equiplend can help you skirt this issue as we only work with trustworthy lenders who have a good track record of good service and positive customer feedback. The reason is that we want you to have a successful borrowing experience! Your satisfaction should always be of high priority, so don’t settle for anything less.
You should never….
Over-extend yourself and borrow more than you can afford to pay back. This can go wrong quickly so be careful.
Only purchase within your means. Choose the more affordable option. Don’t buy anything you don’t really need for your business and be careful.
Miss your repayments. This is a fast way to get a bad credit score and cost yourself money in fees.
Don’t accept the first deal that comes along. And always shop around for the best price/deal/value.
If you’re going to take out a loan make sure that the investment can generate a return – if it doesn’t help you make more money, raise your productivity or make your job justifiably easier then why cost yourself time and money getting finance? However, if the equipment loan helps you improve and develop your business then go for it!
Lastly – if you aren’t sure make sure you get some rock solid advice from someone who specialises in finance. Our best recommendation for getting the best deal is to first consult your accountant who knows and understands your business’ structure and performance. Then take this information to a finance broker like Equiplend who can help you source the best loan from a wide variety of lenders.
That’s it for now!
Let’s talk about your equipment finance – say “g’day” through the form below.