Taking the BS out of equipment finance

Michael Ryan at Finlease breaks down some common myths around equipment finance, and how a skilled broker can help separate the fact from the fiction.

With over 30 years of experience financing both vehicles and equipment for a diverse range of clients in many industries, Finlease has the expertise to debunk some common misconceptions about equipment financing.

Let’s talk interest rates

If you’re a solid company with good trading results, the interest rates available at present ranges from 7.5-8 per cent, depending on the asset and term. If you’re paying more than this, it may be a case of what your provider would like to charge you, as opposed to what is actually available in the market.

Although interest rates have essentially doubled in the past six months, the effect on the actual monthly payment for equipment and vehicle finance has been much less than for home loans.

Cross-checking the quoted rate

We’ve seen circumstances where the interest rate quoted is not actually reflected in the monthly payment. The problem here is that unless you have a finance calculator to work it out, you’re none the wiser. There are plenty of online calculators where you can check – including one on the Finlease website.

Take heed – unless you actually check, there’s really no way of knowing, so it’s worth spending five minutes online to ensure you’re getting what you have been told.

Myth: Banks don’t finance used or private sale machines

There are plenty of competitive financiers who will finance used machines at good interest rates. Often, there are significant savings to be made by going down this track.

Yes, there are extra steps in the finance process, including an inspection of the asset, but these are easily arranged. Care needs to be taken to ensure that the asset being purchased is not currently either under finance or under a GSA (fixed and floating charge). This is easily checked through a company search on the vendor.

Myth: Banks always require financials

That may be the case with your bank, but there’s plenty of other competitive financiers out there who will finance vehicles and equipment at good rates without the need for financials.

Where assets are being upgraded, there are ‘no financials’ policies that can finance replacement equipment up to $500,000.

Broker vs bank

We’ve heard plenty of times people saying: “I use my bank because brokers are more expensive”. This is simply not the case and easily tested by obtaining finance quotes so you can compare the monthly finance costs. Larger broking firms place large volumes to market ($900 million per annum in our case), driving substantial discounts.

Any decent broker should be looking for a 20-year relationship and will act in a manner to ensure that. Brokers should have plenty of feedback from clients on independent review websites, such as Product Review and Google.

Money is a raw material, no different to fuel. It must be accessed 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 your business.

At Finlease, we pride ourselves on taking the BS out of equipment finance to ensure you talk to an expert who has your best interests front of mind.

 

For more information, contact Michael Ryan – [email protected]