There are many FAQs of equipment financing that many business owners have. Some of them will be answered here.
Equipment financing is a very broad field and somewhat complex to some business owners. Educating yourself on some of the ins and outs of financing business equipment could be the key to whether you will get a return on equity (ROE) or a return on assets (ROA). It also prevents you from getting scammed by various unscrupulous leasing companies in the industry. If you are not sure about a certain financing option, it is always wise to consult with a professional in that particular field to avoid getting into deals that you might regret later. LeaseQ is pleased to provide answers to some of the FAQs of equipment leasing and financing.
Are There Different Types Of Equipment Financing Companies Available?
There are three basic categories of equipment financing companies available. The first type is large finance companies. Such types of companies work well with equipment worth more than $100, 000 and have offices in different cities. The second type is bank owned. This is where companies use their own system of selection to determine who is eligible for credit. They deal with transactions bigger than $1million and they are very selective on what kind of equipment financing they approve. The third type of equipment finance company is the broker and independent type. They prefer to handle deals worth less than $100, 000 and can sell entirely or partially their finance agreements to other companies.
What Should I Look For In An Equipment Financing Company?
Other than the pricing information, there are a lot of things that you should look for in a leasing company. Do your research and find out if the company has a good track record of providing quality services. Poor quality services are not only frustrating but they also slow down your business. Request for referrals from satisfied customers who can vouch for the company’s quality of goods and services. More importantly, learn about the company’s policies and if they are willing to work with you to come up with a unique leasing plan that is suitable for your business.
Can Your Credit Score Affect Leasing Rates?
Yes it can. Bad credit scores attract higher leasing rates. Some of the things that can lead to a bad credit score include late payments, having several cards open all at once, having high balances on your cards, and only making minimum payments. Leasing companies such as LeaseQ, however, only do a soft credit pull so this will not have a huge impact on your credit score.
Are There Companies In The USA That Opt For Equipment Financing?
Yes. According to the Foundation survey, financing equipment acquisitions is very attractive now that interest rates are very low. Items that are popularly leased include technology goods, office equipment, restaurant equipment, medical equipment and many more.
How Long Does It Take To Get Approved For Equipment Financing?
Applying for a conventional business loan from a financial institution can take a longer process as compared to applying for an equipment lease from a leasing company. Applying for a lease is a very simple process. All you have to do is fill out a form supplied by your equipment leasing company. Ensure that you have necessary documents such as bank statements and accounts, etc. It takes approximately no more than two weeks for your loan application to be approved but in most cases it is usually within 24 hours.
Can You Terminate A Lease Early?
Yes. Most lease agreements allow lessees to terminate their leases early if they do not need the equipment anymore or need to upgrade to fancier equipment. The terms and conditions of terminating a lease early largely depends on the contract that you sign. Some agreements have a pre-payment penalty while others allow lessees to pay off their leases early.
Which One Is Better? An Operating Lease Or A Capital Lease?
When you sign up for a capital lease, you get tax deprecation because the equipment is considered an asset on your balance sheet. It is similar to a loan and comes with certain risks such as obsolescence of ownership. Capital leases can be as long as five years. Operating leases on the other hand are much more popular among small businesses because they do not tie up funds. Moreover, they are usually short-term, three years or less. The equipment is considered a monthly expense instead of a depreciable asset.
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