5 Tips for Equipment Financing
It can take a lot of money to get your construction company to move forward and tackle bigger projects. You may be willing to put in the time and energy to get to the next level, but the funding to purchase heavy equipment and new machinery may not be there. Without getting the money needed to cover these purchases, your construction company could stall and success becomes obsolete. Equipment financing is a way to improve your company’s chance of growth. Consider these five areas before turning to alternative funding options.
1. The Financial Health of the Business
Before you can seek out funding for equipment purchases, you need to know the financials of your business. You should know your credit score, the debt to income ratio for the company, the total value in acquired assets, available collateral, cash flow, and the net operating capital for the business. Lenders will need this information before extending an offer.
2. The Difference Between Lending Options
There are several forms of equipment financing, each with their own pros and cons. Do your homework in evaluating what one financier may be offering over another. Advertisements may say one thing but find out the details before signing on the dotted line.
3. The Impact of the Purchase
Though your company may desperately need the equipment to take on a new job, financing your plan with the wrong lender can take a toll on your budget and business plan. Don’t settle for the first offer that seems to meet your need. It doesn’t mean that it is the best deal or carry the most long-term benefit for the company.
4. The Reputation of the Lender
To narrow down your financing options, consult with other business owners. It is easy to find reviews and testimonies posted online or on the company’s website, but try to find people to talk to directly. Consider calling a construction company in another market region to ask for advice on what elements to look for or avoid in a financing company.
5. The Rates or Fees of the Financing
Once you’ve narrowed down who to work with, make sure you fully understand the total cost of the financing plan. Knowing the rates and how it affects the monthly payment has a direct impact on your budget and operating expenses.
Never go into an equipment financing transaction blind. Always do your research and exhaust all options before settling on a lender.
