Tips Before Getting Equipment Financing

Tips Before Getting Equipment Financing

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To get your business off the ground with all the right tools, it’s often necessary to seek out equipment financing. Equipment financing means you have ownership over your new equipment immediately, which is necessary for many businesses.

However, financing can be a confusing and overwhelming process, and when you’re a business that’s just starting out, you may be unsure of how to seek help. Even if you are a well-established business, you may decide that you would rather put your money towards new operations or opportunities, and instead seek out financing for equipment to avoid outright expenses. This is particularly great if you need to hire a fleet of delivery vehicles, for example, but aren’t able to pay for it all at once.

By taking on board the following tips, however, you can come one step closer to gaining equipment financing and getting the tools you need for your business to succeed.

  1. First thing’s first: find a reliable, experienced financial broker to provide the equipment financing. It’s important to choose a broker who has experience in equipment loans, as that way you can rest assured that they will completely understand the needs of businesses like yours. Brokers who specialise in equipment financing are also likely to have relationships with equipment suppliers and manufacturers, possibly landing you a better deal.
  2. Keep it as liquid as possible. As your business is just starting out, there is still a lot of room for growth and change. Because of this, make sure your loan is liquid and flexible, so that you still have spending money for operating costs. A consultation with a reliable broker will help you arrange this, and factor in taxes, equipment depreciation and the like.
  3. Don’t worry about the down payment. Most finance companies will provide a low or no down payment financing option, so don’t worry about having equity to start off: put that money towards growing your business.
  4. Work out how long it will take for the equipment to pay for itself. For a loan to be worth taking out, the equipment needs to bring significant usefulness or profit to your business. If the numbers don’t add up, that piece of equipment, or a loan for that equipment, may not be worth it.
  5. Know your budget. Have solid numbers in mind for how big of a loan you can afford to pay off, and how much you are expecting to make as your business grows. If the available loan works with your budget, go for it. It’s also smart to use an online loan repayment calculator to really break down the numbers.

    If buying the equipment outright doesn’t make financial sense, consider hiring it as needed.

  6. Make taxes work for you. Check the Australian Taxation Office’s website just in case there are any purchases you can claim as a tax write-off or tax breaks that apply to you. 
  7. Have your papers in order. By proving to the financial broker that you really can repay the loan amount, present appropriate and convincing paperwork such as recent financial statements and tax returns. Proving your credibility will get you a better deal. Also try collecting estimates from different companies before making a decision, as different financing companies can provide different numbers just like tradies may provide different quotes for the same job.
  8. Read the fine print. Make sure that the term of the contract matches up with the equipment lifecycle. For example, it doesn’t make sense to sign a five-year lease if the equipment will only serve you for three years before being outdated.

Equipment financing can really get your business of the ground, allowing you to work with the necessary tools while investing your money in growth opportunities. However, putting everything on a loan isn’t advisable: consider whether the item is something you can hire instead, or whether the equipment will still serve you well after the loan period is up.

If, after having considered the above steps and spoken to a trustworthy accountant, you still feel as if equipment financing is appropriate for you, make sure to research into reliable financial brokers that have handy connections in your local area.

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