Having spent 30 years financing equipment for a diverse range of long term and new clients in many capital intensive industries, I thought it would assist to take the BS out of some of the 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 4.5% to 5.25% 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.
When the payments don’t seem to reflect the interest-rate
Unfortunately there are circumstances in the market where the interest rate quoted to the client is not actually reflected in the monthly payment. 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: https://www.finlease.com.au/equipment-finance-calculator.html)
Take heed, unless you actually check it, there is really no way of knowing, so it is worth spending five minutes online to ensure you are getting what you have been told.
Banks don’t finance Used or Private Sale machines
This is simply not the case, there are plenty of competitive financiers who will happily finance used machines including private sales at good interest rates and often there are significant savings to be made by going down this track.
Yes, there are a couple of extra steps in the finance process including 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.
My bank won’t provide any further finance until they have reviewed my accounts
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.
We use our bank as 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 very large volumes to market ($500 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 which ensures 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 and 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 is essential to keep all costs under control including finance costs.