Equipment financing is a process which can be extremely advantageous to owners of small businesses, because without necessary equipment, it may be much more difficult or even impossible, to actually run your business. When you are investigating equipment financing, it will also be to your advantage to read the fine print and find out what that financing is actually costing you. Here’s what you need to know about equipment financing.
Credit Score is a Huge Factor
While you may be able to secure equipment financing even with a very low credit score, it’s probably going to cost you considerably more than it would cost a business owner with good credit. It’s no exaggeration to say that in some cases, applicants with a low credit score will actually pay double the price that a good credit applicant would have to pay. Make sure you know what your actual payments are going to be, before you sign up for any kind of equipment leasing.
Why Rates are Sometimes High in Equipment Leasing
Lease rates have to be high enough to cover any losses which a lender might sustain by business owners who default on their leasing loans. Of course, the lender still has to make a profit after absorbing those losses, so that affects the leasing rates for new customers. It’s not easy to reclaim equipment from a business owner who can’t make payments, and attempt to resell it to another businessperson.
First of all, there has to be a need for that particular type of equipment, and it has to be in salable condition. It’s not nearly as easy as repossessing an automobile which someone can’t make the payments on, because that can always be resold to someone else. These factors all combine to make it somewhat difficult for a lender to stay profitable, and that means they have to pass on their costs to you, the business owner. A word to the wise – make sure you know what you’re signing up for when you arrange for equipment leasing.
Looking to Finance Some Equipment for Your Small Business?
If so, we may be able to provide financial assistance. Contact us at POM Capital & Finding Services today, so we can discuss some options which you may be eligible for.