When talking to customers, many seem to have a common goal; pay off all their loans. In their minds this is when they achieve financial freedom and wealth. Although we would all like to be debt free it is not typically how you can maximize your profit and overall wealth. If you have access to affordable debt financing with reasonable interest rates, financing your equipment, even when you have cash on hand, is often a great way to increase your overall returns.
The key is to find the correct balance of debt for your business based on your cash flows and alternative investing opportunties. The following is a quick overview of the benefits of financing your next purchase (or taking out a loan against existing equipment) that you may not have considered.
Benefits of Financing
(1) Self Funding Equipment – Financing enables you to pay for your equipment as you use it, allowing your equipment to pay for itself.
(2) Longer Terms and More Affordable Payments – Many banks loan money only short term, usually 12 to 36 months. In financing arrangements, the term can be as long as 60 months or more. Flexible payment arrangements (seasonal or quarterly, for example) can also be made.
(3) Keep Cash In-Hand – Because of the sizable cash outlay involved in purchasing equipment, many businesses finance to conserve capital. Retain cash for less expensive purchases and emergencies.
(4) Simpler Than Bank Loans – Equipment financing companies and programs are specifically designed to simplify the lending process for equipment loans. Bottom line, they tend to understand the equipment better than your local bank.
(5) Lower Down Payment – Special programs reflect the financing needs of the equipment industry. Reduced up-front costs make this a very attractive option!
(6) Fixed Payments – Monthly payments are generally fixed for the entire term. This enables you to budget and manage capital expenditure dollars for the months or even years ahead.
(7) Include Parts in Your Financing Package – Include new and used parts (such as hammers, tips and screens for grinders) in your financing package to reduce the additional outlay of cash to get the parts you need to start making money with your next machine.
Where do I get Financing?
Many buyers are attracted to new dealers that offer financing to help them purchase a machine. While money is necessary to purchase a new or used machine, there are plenty of financing options to buyers of new and used equipment. Many buyers obtain financing through local banks and credit unions. This is often the best place to start seeking financing, but also not the last place you should look. Finding a broker and underwriter that understands your operation and equipment can help earn you a low interest rate and as a result, more profit. We work with a variety of loan brokers familiar with greenwaste recycling equipment that can help you get the financing you need.
Be aware that with used equipment (like used cars) rates are sometimes a little higher. This is because underwriters cannot be certain of the condition or value of the machine you are buying, and so require a slightly higher interest rate to compensate them for the additional risk.