If you’ve never heard the term equipment finance before, then the chances are that you run a business that relies on its own reserve funds to secure assets and purchase products. The term encompasses a variety of financial practices that allow companies to secure funds from a third party (a lender), buy the pieces of equipment that they may need for their business to function, and then pay back what they have borrowed over a pre-defined period of time.
There may be certain assets, such as heavy machinery, that can cost tens of thousands of dollars – and unless the company is able to purchase these goods outright, they will be presented with one of two options. So much better you know how to organise equipment financing.
How Does Equipment Finance Work?
The first will be to put money aside every month in an attempt to save enough to make the purchase. The second, and far more popular alternative would be to turn to the financial services offered by lenders and banks – many of which offer financing options for companies of all sizes. The former option can be very time consuming, not to mention the fact that the business will likely suffer as a result of not having access to the equipment that they need.
The latter option makes it a possibility to receive financial support, purchase whatever is needed and use the new resource immediately. The total cost can then be spread out over a timeframe that suits the borrower, and as the lender will be receiving a profit in the form of interest with each payment; all parties will be happy.
Is the application process easy?
Although fairly simplistic in nature, the majority of applicants will choose to hire an expert to help them with Equipment financing a to z. When approaching different lenders, it’s important to note that each one should be considered a business in its own right – and this means that their terms and rates can differ slightly between one another.
Knowing how to recognise the most affordable deals can be very beneficial, but unfortunately, this is something that only those with the proper financial expertise can do without much difficulty. The first thing to do is to obtain a range of rates and then compare them. The lowest won’t always mean the best, especially when some terms will require larger deposits and others may restrict payment deadlines.
Once a reputable lender has been decided on, then an application can be made – and this in itself can take up to two months to approve. Hiring a team of experts can help to reduce this time, because they often have direct channels of communication to lenders and can often fast-track applications if and when needed.
When the application has been received, it will be reviewed, and the loan officer will either accept or reject the applicant’s claim. In the case of rejection, a notice will be issued – with or without reasoning. If it is approved then a transfer can be set up, the borrower will be able to purchase the equipment that they need, and they will then be able to begin repaying what they owe to their lender.