Top Six Things to Remember in Financing Equipment Purchases

Top Six Things to Remember in Financing Equipment Purchases

(An abridge version from the August 2022 Pallet Enterprise Magazine written by Ian Liddell)

Over the years, pallet manufacturers have debated the best way to acquire business essential equipment. The pallet industry is capital equipment intensive. In order to grow your business, you need to add more equipment and/or hire more employees. Finding and hiring more employees is more challenging than it has ever been.
So, in order to grow your business, you need to find a reliable source of capital. Self-funded purchasing can limit the size and pace of your growth because it may take years to save enough to afford a new, critical piece of equipment. Significant business opportunities are often lost while you sit back and wait for the economy to rebound.
It makes sense to borrow on your business even if you have the cash to pay for new equipment. This practice establishes a good credit history that you can use later when you really need it.
Traditional equipment leasing companies have always been a viable option to provide funding for machinery purchases. Some companies have resisted this avenue because they have misunderstood the benefits.
Here are six points about how equipment financing has evolved.

#1 – Equipment finance/lease companies do not report payments to your personal credit report.

#2 – Equipment finance/lease allows you to finance significant non-equipment soft costs.

#3 – Equipment lenders can loan for larger down payments while deferring loan payments until after equipment delivery.

#4 – Equipment lenders will finance used equipment for 60 months from private parties or auction houses.

#5 – Equipment lease companies often don’t require a personal guarantee.

#6 – Equipment finance agreements have largely replaced equipment leasing on most small-ticket loans of less than $250,000.

So, with all these financing benefits in mind, let’s discuss some easy steps that small business owners can take to acquire equipment while lowering their personal financial risk.

Step # 1 – Examine Your Personal Credit Reports
The first step a business owner can take is to look closely at his or her personal credit.

The following is contact information for each reporting agency.

  • Equifax – 800-685-1111(general) or 800-525-6285 (fraud)
  • Experian – 888-397-3742 (general/fraud)
  • TransUnion – 833-395-6938 (general)

Step # 2 – Investigate Your Business Credit History
There are two main business credit reporting agencies that equipment lenders and banks use.

Dun & Bradstreet provides a Pay-dex score that is a unique dollar-weighted numerical indicator of how a company pays its bills over the past year. 

Paynet only reports the installment payment history for a business from a trusted bank or equipment lender/leasing company.

Many equipment vendors have a relationship with an equipment finance company. Often these relationships will lead to the best terms available because of the lender’s understanding of the end user’s business needs. The equipment lender can also customize solutions like payment deferrals, allowing them time to put equipment into use before making full payments.


Want more details? Visit the original article ran in “August 2022 Pallet Enterprise magazine.”$mart-Money-Tips:-Top-Six-Things-to-Remember-in-Financing-Equipment-Purchases


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