Equipment Finance

Finance Your Equipment Purchase

Activities such as construction, stockpiling, mining, tiling, digging etc., cannot be ruled out in society. Hence, equipment such as backhoe loaders, telehandlers, wheel loaders, compactors and excavators are inevitable. In essence, companies do understand the importance of technological tools and equipment for defining business success.

However, it would have been more interesting if the equipment were cheaper. It would be more common on the roads or sites like cars, but alas! The reverse is the case. Equipment is costly and is majorly owned by construction companies and Governments. In most extreme cases, it is rented even by the government.

Invariably, financing became a great and inevitable option to consider. Equipment financing is, therefore, how companies seek capitals or borrow loans to purchase or maintain their tools and equipment. Usually, most companies’ driving force is gaining profit, which may be affected if instruments are bought directly from the company’s purse. The process provides you with the money for the purchase with or without collateral and as a loan to be repaid in instalments.

Apart from raising funds for acquiring a luxury type of equipment, it serves other benefits, which are

Sufficient Capital

Tools and equipment form a considerable part of a company's budget. Hence, if it is financed by another source other than the primary source, then the budgetary capital can be sufficient for the company's subsequent running.

Availability of Modern Assets

The main motive behind buying equipment is for ease, convenience and increase in productivity. Hence, financing helps you eliminate obsolete tools and acquire new equipment for a new business upgrade.

Ease of Repayments

Equipment financing is established with a purpose which it will always seek to serAsLike a mortgage loan, the goal it aims to perform is to assist firms with tools and equipment integral to their expansion or for their job functions without rigid applications.

Promotion of Economic Activities

Through the financing of companies, the aid boosts economic growth and development.

It Enhances Timely Assets Replacement

Companies may need to dispose of their short-term assets from time to time, and the only means of replacing them might be financing.
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Requirements for Equipment Financing

Although the motive for this type of financing is to help firms raise capital for acquiring requisite assets, it is not available to all kinds of businesses. Any business that utilises physical equipment can use equipment financing, but fulfilling such financing requirements is another issue. This factor is because it involves a huge amount of money which is advanced with a certain level of assurance, usually in the form of collateral or guarantee. Also, the credit rating of such a company is investigated and depending on the type of financing institutions; the company may not be deemed fit for a loan.

Hence, the usual requirements for a loan are a good credit rating history, a reliable source of repayment, a legal agreement that depicts the parties’ intention and their consent. However, other requirements may be dictated by the financing institution, as the case may be.

Forms of Equipment Financing

Companies may set out to acquire loans for purchasing equipment or, in other cases, choose the alternative, which is leasing. Hence, there are two forms of financing, which are leasing and loans.

Leasing

Leasing is not uncommon among firms, especially those that need to trade equipment more often than not or those who do not have the capital to pay a loan deposit. Equipment leasing may include the costs of shipping and installation.

It involves financing because you are borrowing to rent the equipment and not buy it. The proprietary rights, that is, ownership title, still resides in the leasing company (lessor). You only have possessory rights in the chattel.

The leasing methods may vary from companies to companies, and all leasing is based on the parties’ mutual agreements. Some leasing agreements provide an option to purchase the equipment at the end of the contract. The advantage of leasing over outright purchase is that it involves lower repayments, although it may be more than the purchase price in the long run. Another disadvantage is that they may attract a more significant interest rate. 

There are two types of leases which are operating and capital. The significant difference between the two is that a capital lease is a loan alternative and used for long-term equipment, while the former – operating lease refers to rentals and used for short-term use. 

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Loans

As earlier pointed out, another means of financing is through outright purchase of the equipment through a loan. In this case, the equipment to be purchased serves as the collateral, and any default in payment may lead to repossession of the chattel (purchased equipment). It is the wisest option for companies that need equipment for long-term use. It is preferred over rentals because since they may have to buy it as a core working tool, rentals incur more expenses and may cause loss.

However, this financing option is not without its demerits. Most financing institutions demand a huge amount as a deposit and agree only to finance a percentage of the purchase price, usually 80% or 90%. 

Furthermore, the amount of money repaid exceeds the purchase price borrowed because of the interest rates it may attract. Hence, if you borrow $20,000 to purchase equipment outrightly and you are required to deposit $5,000 for the loan to be advanced at a 7% interest rate with an origination fee of 4% and to be repaid in 36 monthly instalments. In the end, your total cost of borrowing will be $22,232, and the total cost of equipment will be $27 332. 

Therefore, the cost increases with the interest rate and repayment period. The longer the repayment term, the higher the interest paid on loan.

Financing methods may otherwise be grouped into hire purchase, leasing, mortgage etc.

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Equipment Financing Repayment Calculator

Our calculation allows for loan repayment predictions. That is, you can determine the total cost of financing a piece of equipment ahead of taking such loans. The parameters needed include the loan amount, interest rate, balloon payment, if any, origination fee or rate, and repayment term.

The calculator is straightforward to use. You can start by clicking on the calculator icon and filling out all the parameters, after which you can select calculate. All information is kept confidential, or you may operate as anonymous. Also, the calculator is very efficient and accurate. 

Factors That Determine Your Financing Options

All companies like to weigh their financing options before selecting a particular one, and their demands define the considerations. You may need to ask yourself the following questions to determine whether leasing or a loan is best for your orders.

Can you pay at least a 10%-20% deposit?

Often, a loan requires payment of at least 10% or 20% of the purchase price. If you cannot afford this much, then leasing is the most suitable option for an alternative.

How much can you afford as a monthly payment?

It is one reason lenders inquire into your credit rating or source of income to ascertain your repayment capability. If your company is still relatively small and cannot afford to pay a considerable amount each month, leasing is the right option. Leasing requires smaller repayments.

Is the equipment for short-term use or long-term use?

If you decide to choose leasing for a piece of long-term equipment, it will cost you more and may lead you to losses. Hence, outright purchase through loans is the best option for long-term use equipment.

What is the lifespan of the equipment?

If the equipment is such that it becomes obsolete or wear out quickly, leasing will be a great option. In such cases, you do not have to bother about disposal.

Metrocat Financing services

Metrocat is not an Australian based brokerage service-provider. However, we seek out third-party financial institutions to secure the best form of financing for your demands and specifications. Whether leasing or loan, short-term or long-term, they are connected to a wide range of credit facilities and, thus, they can secure the best deal for you.

Apart from seeking financing companies, they help you go through contracts and do not leave you hanging on the whole process until the chattel’s delivery is made to you. These services, therefore, provide convenience and comfort with the best deals results. More so, our brokerage services are very affordable.

FAQs

Do you charge any finance rates?

No, we do not charge any rate apart from the commission paid for our brokerage services. All payments made apart from that belong to the lending institutions.

Do you finance any equipment?

We deal majorly with Cat equipment and, therefore, seek financing options that tailor to such demands.

Do you provide any leases?

We operate two major types of leases: operating and capital leases, which have been explained above.

What type of equipment financing do you offer?

We can help you secure any financing based on your demands. However, it is majorly divided into leasing and loan purchase.

Are there limitations to your financing services?

No. We assist you in all processes until the equipment is delivered.