3 crucial questions to ask yourself before taking out equipment finance

Last updated on November 25th, 2021 at 02:52 pm by Bill Tsouvalas

Having the right equipment is just as integral to your business as hiring the right employees. Financing equipment is not cheap, but there are a few ways in which you can finance your equipment without blowing your budget. Equipment finance can be an option when it comes to financing your business’s equipment, but how do you know you are getting the best deal? Here are 3 crucial questions to ask to get the most out of taking equipment finance.

Questions to ask before equipment finance

What type of equipment you will need?

This may seem like a no brainer, but it is vital to know what type of equipment you will need. This means making a list of every piece of equipment, no matter how minuscule it is, that will help you get the job done. Writing things can also help you get a clear picture of what is needed and how much money will be needed to finance your equipment.

This will be the opportune time to check whether you will be better off buying your equipment as new, used, or leased. Each option has its own benefits which are why it is vital to compare your options to know which one will work best for your business. Getting a second opinion in the form of a financial advisor can also come in handy when you want to make an informed decision.

Have you carefully analysed your finance options?

When looking for a savvy way to finance your equipment needs you will be grateful to find that you are spoilt for choice. However, with so much choice things can get confusing really quickly. The last thing you want is choosing a finance option that can destroy your cash flow. Speaking to a financial advisor or a broker can help you find a commercial loan that is suitable for your business.

Researching the best finance option is also important. You can compare various loan features such as the interest rate, loan term, ongoing fees, and charges to see if it will be suitable for your business’s cash flow. Finding a loan that comes with features such as a low rate can also make replacing equipment easier.

A survey by Commbank revealed that 38.6% of businesses that turned over $500 million or more stated that a low interest rate on their loan was more likely going to positively influence them on replacing their current equipment. The interest rate on your loan can make a huge difference when it comes to the bottom line of your business. Therefore, it is vital to check and compare your options before deciding.

Are you getting a financier that understands your business?

How you manage your finances has a huge influence on the success of your businesses. Choosing the wrong finance option can eventually lead to the closing of your business as this can impact your cash flow and possibly lead to a debt spiral.

According to Fundera, 20% of small businesses fail in their first year, 30% of small businesses fail in their second year and 50% of small businesses fail after five years in business with one of the contributing factors being financing. Getting a finance company that understands your profession is important. Furthermore, finding a financier that understands that your business is not the same as the next can also play a vital part in finding financing that is suitable for your budget.

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