The 8 Key Factors to Consider before Working with an Equipment Finance Company
Companies need equipment to operate. Remember, you make money by using equipment, not necessarily by owning it.
Aside from internally generated cash flow or credit lines, companies seeking to acquire equipment must investigate their choices to finance the equipment needed. These options could not come at a better time, yet finding the right finance company for your needs is no easy task. Envision Capital Group offers a variety of financing options for the construction and heavy equipment industries.
For the small and mid-sized construction company, regardless of current economic and market trends, leasing equipment may offer substantial benefits while alleviating risks. Yet above all, it’s imperative to keep in mind that deciding how you finance should be the result of careful planning based upon many factors.
There are several variables to consider while searching for a finance option that best matches your company’s needs including practicality, cost-effectiveness, type and use of equipment, the length of time the equipment is needed, your tax situation, cash flow and long-term capital and credit demands related to future growth. In addition, examining the ways in which financing equipment benefits a company’s bottom line and business operations can help provide reasons to finance construction equipment.
The 8 key factors to consider before working with an equipment finance company:
- Flexible Financial Solutions: the types of financing solutions equipment finance companies offer, especially leases, should be flexible and tailored to specific accounting, tax, or cash flow needs. They run the gamut from fair-market value (FMV) lease transactions and capped FMV leases, to full payout loans.
- Communication: client communication is paramount and the equipment finance company you work with should be communicating with you consistently. Transparency should also be an automatic.
- Document Preparation: understanding what you are signing is one of the most important aspects of equipment financing. Ask questions, review the contract page by page, and if needed contact an attorney. Any reputable finance company will welcome these practices.
- Setting Realistic Rate Quotes and Terms: your rate and your term are the most important aspect to your equipment lease. Get your rate and term in writing!
- Transparency: across all industries, transparency has never been more important to a successful business model. Withholding or cleverly reshaping information is no longer a viable option. In order to build loyalty, companies need to first build trust.
- Integrity: in the contemporary business world, integrity is one of the most sought-after qualities. Your equipment finance company must exemplify this quality at all times. I know its sounds obvious, yet make sure you feel good about working with your finance company of choice. Look to their online reviews. Get references. Due your due diligence.
- Deal Killers: with any financial transaction there are hurdles. Some you can overcome and some you cannot. Your equipment finance company should be be proactive about potential deal killers. A few examples: credit conditions, program guidelines, equipment specs.
- Equipment Obsolescence Risk: technology changes and innovations develop rapidly. The equipment you purchased two years ago is potentially already outdated. Financing or leasing provides a hedge against equipment obsolescence through options to either purchase the equipment, trade it in for new equipment, or return it outright at the end of the lease term. Taking advantage of options to avoid obsolescence is critical to maintaining a competitive edge.
Understanding these eight factors is key when making any equipment financing decision. Finding a full-service equipment financing company who can help you address these issues and answer your questions will ensure you get the right equipment at the best possible terms for your business.
Recognizing how the benefits of equipment financing apply to your business can enable you to acquire the construction equipment you need for your company without hamstringing your budget or your company’s future.