With over 30 years of experience financing equipment for a diverse range of clients in many capital intensive industries, I thought it might be helpful to take the BS out of the equipment finance stories I have heard over the years.
If you are a solid company with good trading results, the interest rates available at present range from 6.50% to 7.50%. This is depending on the asset and term. If you are paying more than this, then it may be a case of what your provider would LIKE to charge you more than what is actually available to you in the market. In the past 6 months, doubled interest rates have had a lesser impact on monthly payments for equipment and vehicle finance compared to home loans. To read more on this, read our interest rates blog post below.
Unfortunately, sometimes the interest rate quoted to the client does not accurately reflect the monthly payment in certain market circumstances. The problem here is that unless you have a finance calculator to work it out, you are often none the wiser. There are plenty of “online” calculators where you can check, including one on the Finlease website.
Take heed, unless you personally check it, there’s truly no way of knowing, so it’s worth investing five minutes online to ensure you’re receiving accurate information.
It’s not true that there aren’t any financiers who will finance used machines, including private sales. In fact, there are plenty of competitive financiers who will finance used machines at good interest rates. Oftentimes, you can make significant savings by going down this track.
Yes, you need to take extra steps in the finance process, including arranging an inspection of the asset, but these are easily arranged. Care does need to be taken however to ensure that the asset being purchased is not currently either under finance or caught up under a GSA (formally known as a fixed and floating charge), but this is easily checked through a company search on the vendor.
That may be the case with your bank, but there are a swag of other competitive financiers out there who will finance vehicles and equipment at good interest rates without the need for financials, provided the company has been going for 2 to 3 years and has a clean credit history. Where assets are being upgraded, there are no financials policies that can finance replacement equipment up to $500,000.
Obtaining finance quotes allows easy testing to compare monthly finance costs, proving that this is not true.
Larger broking firms place large volumes to market ($700 million p/a in our case) and this drives substantial discounts.
Any decent broker will be looking for a 20 year relationship and will act in a manner to ensure the continuation of that relationship. These brokers should also have plenty of feedback from the clients on independent review websites, such as Product Review, Google Review or True Local.
Money is a raw material no different to fuel. You must access it in the easiest, cheapest manner, backed by good service. In a world where margins are tight, it’s more about the leftover than the turnover, so it’s essential to keep all costs under control, including finance costs.
A good equipment finance broker will gladly help give you clarity around the options available to you as a business. At Finlease, we pride ourselves on taking the BS out of equipment finance so ensure you talk to an expert who has your best interests front of mind.
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