The True Cost of Equipment Financing

Equipment financing and leasing has been a popular option for small business owners in recent years. This is because this arrangement simply allows you to get the equipment you need to keep your business running without taking out a loan or spending your cash on a system that might soon be obsolete. There are plenty of reasons why this type of financing is a good move, but it’s crucial to know the true cost that this arrangement will have on your business in the long run.

Fake Costs

There are many companies that attempt to swindle you into doing business with them by presenting you with a fake cost calculator on their website. Many of these calculators present much lower monthly payments than you’ll actually be offered simply because they don’t use your credit score as a factor. Your credit is a crucial issue when it comes to equipment financing, as it allows the company in question to determine whether or not you’ll be able to pay. Therefore, if you have a low score, you could end up paying double the amount you were quoted at the beginning of the process, which could leave you in some serious financial trouble.

Why They’re Expensive

When many people see the true cost of equipment financing, they may decide that it’s not the route for them. However, it’s always better to understand why rates are so high, so you can discuss the issue further and determine whether or not it will actually be a benefit for you in the coming years. Simply put, there are many businesses that finance their equipment and then default on their payments. Reclaiming large pieces of equipment is costly for the lending company, and this, on top of the defaulted payments, puts them in a bit of a financial bind. Therefore, they must charge enough on subsequent financing operations to cover this hole the company has already received while turning a profit. At the end of the day, it’s the only way to keep their business moving.

At the end of the day, it might seem like financing your equipment purchase costs more, but there are many, many benefits you can expect when you decide to take this route that make the expense and effort well worth it. Speaking with a professional at your equipment financing company can help you learn more about the arrangement as it relates to your business specifically, and help you decide whether or not it’s the right route for you to take.


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