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Finance Services

Getting the Most Out of Equipment Financing

There are many equipment financing companies in the business world anxious to gain a new client who is looking to buy or lease machinery for construction, transportation or the office. Consumers need to be cautious and be sure they are getting the best deal for their needs and that they are working with a proven company.

One of the first things to consider is the reliability of the equipment financing organization. There will be several in the client’s location who have been in business for many years and who are well established. They should be happy to supply names of customers who will give a testimonial of their satisfaction. The company should have a comprehensive website where rates can be computed and full disclosure of the merits of leasing versus buying is discussed. And sales associates, when contacted, should be patient and helpful, answering questions fully without pressuring the client to make a decision.

Potential clients should also ask the equipment financing company if it will consider used equipment, as huge savings can be realized if pre-owned machinery is purchased. And it is also important to find out what the timeframe for approval is. Many financers can offer a one-day turnaround, making for a quick and efficient process, since if the price is good, the unit may not be available for long.

In addition to the company from which the equipment is being purchased, there are many institutions which offer equipment financing. Conventional banks usually offer the lowest available interest rates, and clients who have a good relationship with their bank and who use it regularly for doing their business as well as investments, may get a very good deal. Banks tend to be territorial, however, and may not be open to financing equipment that is going to be used to expand a business to another city. Other options for equipment financing include independent borrowers, where the interest rate may be higher, but they are often more flexible.

Whether to purchase or lease is another factor which should be contemplated before signing any agreement for equipment financing. Often a lease is very reasonable on a monthly basis, but once its term is up, the ownership does not belong to the lessee; there is a residual buyout which must be purchased. This most often applies to vehicles, but may also be in effect for other equipment. The worst case would be paying for equipment long after the need for it has passed, so buyers would be wise to examine any agreement carefully and be sure they are aware of all the terms. Leasing does allow the consumer to trade up to the latest technology easily and this is a positive reason to consider it.

Most large machinery and equipment, including construction, automobiles, semi-tractor units or airplanes, is purchased by using the services of an equipment financing service. There is a considerable capital outlay when purchasing semi-trailer units or aircraft as well as road construction pieces, and few companies can or want to pay cash. Leasing it rather than owning it is a very common practice that often makes good business sense.

Whatever option is chosen for equipment financing, it is good to have two or three agreements to consider and compare before making a final decision.