Six Tips for Machinery Financing

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Whether you are a part of a construction company, manufacturer, or machinist, the purchase and use of equipment and machinery is absolutely essential for daily work and overall growth. Dependable and efficient machinery is a significant cog in the wheel, so issues accessing equipment due to lack of funding can pose a real threat to business stability. Thanks to equipment financing options, however, there are a number of ways you can purchase the infrastructure you need quickly and efficiently. Here are 6 tips on how to maximize your success when looking for machinery or equipment financing.

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1. Decide how much financing you require.

First and foremost, it is important to determine the kind of machinery you will require. Not only is this important for funding applications, it will help you gauge how soon you will begin seeing profits and when the machine will be obsolete or outdated.

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2. Know the difference between equipment financing and equipment leasing.

An equipment lease allows you to “rent” the needed equipment for as long of a period as you need. In some cases, purchase of the equipment is possible following the leasing term. In some cases, the machinery may be outdated by the end of the lease so replacing the machinery with a new lease may make the most sense. This option does not require any down payment, and is accessible to lower credit scores.

On the other hand, an equipment loan allows a business owner to borrow funds which are then used to purchase machinery. This borrowed amount must be paid back in an established time frame, in addition to an additional amount dependent on the interest rate and agreement term.

Financing is also tax-deductible. These are the two most common financing options for people looking to purchase equipment, so you should know how to distinguish which fits your needs.

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3. Match your equipment lifespan with your financing period.

A general rule of thumb is to have your financing agreement meet or extend the lifespan of your equipment. This helps with managing cash flow and it ensures you have a consistent tax deduction and depreciation to offset revenue.

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4. Be aware of the time-sensitivity of your purchasing needs.

How quickly does machinery need to be purchased for your intended project? This should play a factor when deciding which financing option to employ, as each comes with a specific speed of approval and funding. Typically, going through a bank will require a waiting period between approval and funding access.

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5. Research the financing service most suitable for your needs.

With the information above in mind, you can make an accurate judgement of which option would be best for your equipment needs.

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6. Be prepared to support your request.

You must have a clear goal for the equipment you plan on purchasing. By being able to properly forecast the financial impact of your financed equipment, you are more trustworthy to lenders.

Conclusion

Though all businesses have differing growth strategies and development goals, one thing remains constant - the use of machinery and equipment. In many ways, efficient use of machinery is just as vital to the health of a company as are its employees. Often times, it is not feasible for a company to buy all their equipment using current assets, and thanks to equipment financing options, this is not an issue.

Finance Department

Rick Sellman

[email protected]

Phone: 310-895-7718

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