Okay, now you have all the documentation TOGETHER needed to get the necessary equipment. Financing rates and terms can vary widely depending on the lender, the type of equipment being financed, the creditworthiness of the borrower, and other factors.
Below is a general overview of equipment financing rates and terms:
Factors Influencing Equipment Financing Rates:
Interest Rates: Equipment financing typically involves either fixed or variable interest rates. Fixed rates remain constant throughout the loan term, while variable rates may fluctuate based on market conditions. We aim for fixed-rate deals for long-term predictability. We want you to continue to build good business credit, your second financial identity. We don't want you to default.
Prime Rate: Many equipment financing rates are tied to the prime rate, the standard interest rate set by banks and used as a reference point for various loans indirectly related to The Federal Funds Rate fixed by the U.S. Federal Reserve. Many banks choose to set their prime rates based partly on the target level of the federal funds rate, and LIBOR, the rate that banks charge each other for short-term loans is established by the Federal Open Market Committee. None of these rates are set by Com Fi!
Credit Score: We keep saying that a borrower's credit score greatly determines the interest rate offered. Higher credit scores usually qualify for lower interest rates, while lower credit scores may lead to higher rates. Soft credit pulls are standard practice so as not to impact credit scores. The lender that funds will do the hard credit inquiry. We have a hundred-plus lender relationships, all competitive in different sectors!
Down Payment: Some equipment financing agreements may require a down payment ranging from 0% to 20% or more of the equipment's purchase price. A larger down payment may lead to better rates, as it reduces the loan amount and perceived risk for the lender. They like "max skin in the game!" In some situations, a credit card can be used for down payment. Estimating how many monthly payments are needed for your down amount makes it easier to understand how much equipment you can get into.
Collateral: Equipment loans are secured, meaning the equipment backs the loan.
Equipment Type and Condition: The type and condition of the financed equipment can impact the rates and terms. Lenders may offer more favourable rates for new or well-maintained equipment. We can do private "around-the-corner" or" something -you-found" sales. We will send an inspector to do a "check swap" with the owner of the equipment that you need.
Business Financials: Lenders may consider the financial health of the borrower's business, including revenue, cash flow, and profitability. The basics are deals can be done with less than 1-year in business with 400’s credit, better rates come at 2-3 years in business and better credit with a 5-minute Credit Application and uploading 3 months of Bank statements. All are always required to get the process started. More documentation will be needed post-approval.
Equipment Financing Terms:
Loan Duration | Repayment Schedule: Equipment financing terms typically range from 1 to 7 years. Shorter-term loans may have higher monthly payments but lower overall interest costs. In comparison, longer-term loans may have lower monthly payments but higher overall interest costs. This comes into play when lowering your monthly expenses. Keep maintenance up or get a service warranty baked-in to your price. We want your jobs to be profitable without downtime so you keep making money. Service doesn't stop during any recession or most run right through a pandemic. We are essentials!
Residual Value: In lease agreements, the residual value is the estimated worth of the equipment at the end of the lease term. A higher residual value may result in lower monthly lease payments.
Fees and Additional Costs:
Origination Fees: Some lenders may charge an origination fee when processing the loan or lease agreement.
Documentation Fees: Lenders may charge documentation fees to cover paperwork and administrative costs.
Pre-payment Penalties: Equipment financing agreements may or may not include pre-payment penalties for paying off the loan early. We don't like pre-payment penalties.
Balloon Payments: Some equipment financing options offer lower monthly payments throughout the term, with a larger "balloon" payment due at the end of the loan term. We prefer set payments with no changes along the way. It's a safe long-term approach. Still, there are circumstances where balloon payments may be practical.
Ownership: Equipment financing can come in the form of loans or leases. Loans grant ownership of the equipment to the borrower after repaying the loan. At the same time, leases allow the borrower to use the equipment for a set period without owning it outright. In this environment, it's mostly financing.
Tax Benefits: In some cases, equipment financing may offer tax benefits, such as deductions for interest expenses or depreciation on the equipment.
We are on the "same-side," we will go to bat for you and use everything within our power to get you the necessary equipment at the best rate and monthly payment. That may include sacrificing some of our fees to help you. You must do your part and get all your documentation in so we have lower administrative costs to pass on to you at the deal's close! Who doesn't like a meaningful Zelle surprise! Don't stop saving; be cautious with personal credit; we will cover new business shortly.
It's important to note that the above general guidelines and actual rates and terms will depend on the specific lender and individual circumstances. The above is just the facts. Additionally, financial markets and lending practices may change over time based on all mentioned above.