At one point in time, every business needs upgrading in terms of employees, equipment, fixed assets, and much more. But, not every business has enough funds to adopt more upgraded methods, so they look for financing options. Usually, there are two options: traditional debt or loan method, and equipment leasing such as Finance vs operating lease. Both these methods have pros and cons. However, equipment leasing is more beneficial, despite knowing these benefits businesses, restrict to adopting equipment leasing due to many myths and misconceptions. These myths are often unrealistic or rumors created due to fear of signing too much debt etc. We have curated a list of myths that restrict business growth and should be avoided if you want to upgrade your machinery.
Here’s a list of a few months that people often believe about equipment financing:
Few types of equipment are there for financing: When you talk about equipment financing, typically people believe it’s all about large medical devices or construction equipment or Aircraft financing, and it’s not valuable for smaller equipment such as loudspeakers, etc. But that’s not the case, the truth is you can finance almost any type of equipment. According to a survey, 79% of US companies use equipment financing, you can finance almost any type of equipment, there’s no restriction on categories.
You need to pay in cash for equipment: New equipment can be expensive and typically companies drain their bank accounts for new equipment, or they reduce their business due to lack of liquidity. But, with equipment financing you don’t need to pay in cash, it can help you grow your business with new equipment while keeping cash in hand to invest in other departments or requirements of the business. So, you can conserve your cash for emergencies, as equipment financing doesn’t require cash.
Equipment financing is expensive: One of the major misconceptions people have about equipment financing. There are two methods to fund your machinery, either loan or Finance vs operating lease. If you opt for a loan, you have to pay the extra debt, the financier will finance 80 to 90% of the loan amount for equipment, but you will have to arrange a down payment. Leasing and financing equipment is completely different, finance helps you with equipment for a certain time at rent later you have to return, or you have the chance to buy. Compared to loans, equipment leasing is not expensive and is more beneficial.
You need to have perfect credit: If people start considering perfect credit scores for financing equipment, it’s going to be difficult to get deals. Although, you need a certain credit score, for better terms, and conditions. However, businesses with challenging credit can still have equipment leasing plans if they provide a clear idea about how you are going to manage. You can use other business factors such as payment history, collateral value, trade references for equipment leasing. Lenders can get the best idea about you and your business.
Equipment financing requires complicated and messy paperwork: If you choose the right partner or financing company, equipment leasing is not a complicated process. Various Equipment leasing companies provide simplified processes and focus more on growing. Moreover, if you provide the right information and detailed information beforehand, it will help you make the financing process easier. Many companies use technology and software to automate the process that reduces paperwork and complicated terms.
Used equipment cannot be financed: many people have this misconception about not being able to finance used equipment, but that’s not the case. If you have a financing company offering finance for used equipment. Equipment you want to lease is in working condition, so you will not have difficulty financing used equipment.
Financing is not flexible: Business owners often worry about signing too much debt, or contracts with low flexibility. Moreover, this pandemic has caused so much trouble to businesses, indulging in debt will increase trouble. However, if you have good financing equipment and equipment, you can get a flexible Equipment lease agreement. You don’t have to worry, not all equipment financing is rigid.
Financing calculators offer wrong readings: Business owners believe calculations and readings providedfinancing calculators are not accurate and wrong. However, that’s not true online Equipment lease calculator is good to use and estimate your chances of equipment leasing. They might not be the same, but they are pretty much appropriate.
Final thoughts: These are some misconceptions floating around in the market for equipment financing. However, regardless of misconceptions or myths about financing, if you think new equipment can help your business grow, improve, your employees can work more efficiently, and you can develop better goods, choose equipment financing as it’s more beneficial. Overall, to make your life easy, gather all the equipment you need, necessary documents, your credit score, and find a good financing company, it will help you understand better financing options.