What Equipment Financing Really Costs
When building a business, it can be similar to building a marriage. You want to build a business based on trust so that your clients know that they can rely on you to give them a quality product at a fair price. This can be the key to helping you meet and exceed your business goals.
Many companies that lease equipment will do what they can to never tell you the real cost of the equipment they are loaning to you. You don’t see the true cost of what the equipment cost the company until you have gone through the process and can’t get out of the deal.
If you are using online financial equipment calculators, then you are only seeing deals that approximately 10% of the customer base qualifies for. These ads show less than 4% of all deals that are made online.
The Problem with Phony Equipment Calculators:
Companies have come to understand that if you knew what financing equipment really would cost, that they would lose your business.
They want to keep the customer “in the dark” on the true cost of renting equipment for as long as possible.
Our company here at Smarter Finance USA believes that customers should know up front exactly what the costs will be of renting equipment. Instead, we believe that business owners should be able to make the smartest decisions with their finances based on actual facts.
If a piece of equipment cost $500 a month and the company can make $2500 a month by having the equipment, the business can then determine if that is an investment that makes sense for their business or not.
The Truth Is:
Even if you have a very low credit score, there are tons of different pieces of equipment that you can buy that can still at least double what the average equipment calculator will give you.
Yes, you read that right: double.
Why Are Rates For Equipment Leasing So High?
Not all equipment leasing rates are high. However, if you have poor credit or the amount of finances you have available to you are minimal then you certainly won’t be looking at “cheap money”.
It has been proven that loaning small businesses money is far from low risk.
Consider if you are driving a Honda. That’s a lower risk investment.
However, long as you have a job, you can probably make those payments quite easily. if you don’t make your payments, all they need is a tow truck to come take car away.
It doesn’t work that way when it comes to loaning equipment. If your business has hiccups, you will probably have a lot less cash flow 6 months down the road.
Equipment also loses its value very quickly after it begins being used.
The idea is that if you bought equipment, you will actually use it.
It’s harder to get your money back if you lend it to a company buying equipment. You can’t just send a tow truck after the equipment. You have to actually find the buyer who took out the loan to even attempt to get your money back.
If business has decreased for the customer, then it’s likely that you business as well that of others in the same or similar industries has gone down as well.
As a business, unless you have done your financing through a dealer who will make a large profit to make up for their risk of selling equipment to small businesses, the rates that companies lease equipment at is usually quite fair.
The key to being a successful lending company is to be able make enough to cover your default rates while still making a profit for your business.
We want to be able to give you the tools to both make money and ensure that you are loaning equipment at a fair rate to your customers. This will help you determine if the equipment loaning business makes sense for you.
We are happy to give you all of the information if you contact us for more details.