10 Equipment Financing Questions & Answers

Whether you’re a seasoned professional in equipment financing or just dipping your toes into this financial realm, you likely have a myriad of questions. Instead of embarking on an arduous search across the internet, allow us to provide expert answers to these frequently asked questions about equipment financing.

Q: What distinguishes financing from leasing?

A: Financing and leasing share similarities but diverge significantly in structure. While both avenues enable you to break down equipment costs into manageable increments, ownership status differs. With financing, you retain ownership throughout and after the term, while leasing entails paying for equipment usage while the lender technically owns it. However, most leases feature a lease-to-own option, granting ownership post-lease. Each option boasts its own advantages, and consulting with a financing expert can help determine the best fit for your company.

Q: Is perfect credit a prerequisite?

A: Absolutely not! Securing financing with less-than-perfect credit is feasible with understanding lenders. While traditional institutions may prioritize pristine credit scores, specialized lenders comprehend that perfection is rare. They’re more inclined to work with varying credit profiles, spanning from A to D grades. The key lies in finding a lender attuned to your industry and realistic about credit expectations.

Q: How challenging is it to finance used equipment?

A: The suitability of a lender greatly influences the ease of financing used equipment. While some lenders shy away from used equipment, others readily assist in acquiring the necessary assets. To streamline the financing process for used equipment, seek items in good working condition, poised to retain value over time. Despite potential delays in securing financing for used equipment, the benefits—such as reduced depreciation and cost savings—are worth the investment.

Q: What is the typical lease duration?

A: Lease terms generally span from 24 to 60 months, contingent upon various factors like desired monthly payments and equipment cost. A consultant collaborates with you to identify the optimal plan, though most leases extend for at least 36 months. Some lenders, like First Capital, offer flexibility, enabling elongated terms up to 72 months or truncated durations to 24 months, catering to diverse financial preferences.

Q: What constitutes flexible financing?

A: Flexible financing deviates from conventional fixed-payment structures, offering alternatives tailored to individual needs. Options include deferred payments, allowing a grace period at the lease’s onset, skip plans permitting skipped payments intermittently, and step-up payment plans that commence with lower installments, gradually escalating over time. Each scheme offers distinct advantages, and a seasoned financing consultant can help navigate the intricacies.

Q: Is paying cash always advisable?

A: Contrary to the adage, “Cash is King,” utilizing financing over cash payments presents numerous advantages. Financing equipment facilitates steady, manageable payments, preserving cash flow—a pivotal asset for businesses. Moreover, financed equipment begins generating revenue before the entire cost is paid off, essentially paying for itself. Financing unlocks the potential for compound interest, optimizing returns on investment over time.

Q: Is a bank the sole financing option?

A: No, banks are just one among numerous financing avenues. Specialized equipment financing firms, armed with industry-specific expertise, often offer superior funding solutions tailored to unique business requirements.

Q: How challenging is it to secure financing as a startup?

A: While securing financing as a startup poses challenges, it’s entirely feasible with the right lender. Startups may leverage personal credit history or accept slightly higher interest rates but can access financing tailored to their needs.

Q: What happens at lease conclusion?

A: Lease termination entails various options contingent upon the agreed-upon terms. With financing, ownership transfers to you post-term, as you’ve fulfilled payment obligations. Conversely, leasing typically involves an end-of-lease payment, granting ownership upon settlement. This payment varies, ranging from nominal fees to a percentage of the equipment’s value, ensuring flexibility at lease culmination.

Q: How do I start the financing process?

A: Initiate the financing journey by identifying an ideal lender and submitting an application, typically available online for expedited processing. Once submitted, a financing consultant will engage with you to discuss customized financing solutions. Following a few simple steps, your new equipment will be ready for deployment, empowering your business to thrive.

Schedule a call with us today and we will walk you through it!