How To Spot a Great Equipment Financing Deal
If you have shopped around for financing on equipment purchasing, you may have noticed that there is a lot of variation in what lenders and dealers are offering. Depending on what industry you are in and the type of equipment you are trying to purchase, the rates for financing may seem a little out of line. In some cases, dealers or lenders may have offered you a deal that seemed almost too good to be true. Generally speaking, the high side of what you are finding is probably closer to the truth. Many dealers or lenders fudge the numbers to make it look like you are getting a great deal on equipment financing. When you sign the final paperwork, however, you discover that you owe far more than you originally thought.
To keep from getting yourself tied up in a deal you really cannot afford, make sure that the company offering the terms is giving you all the facts. Your business and personal credit rating is a factor in determining the rates you will receive. If you know you have negative credit issues, come right out and ask why the lender is offering you such a great deal. Do not be lulled into a false sense of security by what sounds good. Dig a little deeper and find out if there will be hidden costs associated with the equipment financing.
Aside from making sure you know exactly what you will be responsible for paying, you should have a clear plan about how you will profit from the equipment. Many business owners purchase equipment simply because they assume they will need it for some future job. If the business takes a turn for the worse, these careless planners can find themselves owing hundreds of thousands of dollars on equipment that is sitting idle. To avoid this highly undesirable situation, make sure that you have definite jobs lined up that will potentially earn enough to meet the equipment financing note and make you a profit.
Nothing in business is a sure thing, so it is also probably a good idea to have a backup plan. If the economy sours and your deals fall through, how will you make your payments and survive? Can you possibly use the equipment in some way that you had not originally planned? Do you have another way to generate income until your line of work picks up again? It is usually impossible to predict the future with accuracy, but by running through possible scenarios in your mind, you will usually be better prepared to meet your equipment financing obligations and keep your business going.