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The Growing Urgency to Find Equipment Financing Loans

by Equipment Financing

Last month, Goldman Sachs CEO, David Solomon told Reuters he believed there is a “reasonable chance of a recession in the U.S., but it’s not certain.” His statement is in line with what others in the financial industry are predicting. Fitch Ratings reported the U.S. economy will experience a recession beginning the second-quarter of 2023, but robust U.S. consumer finances will help soften its impact.

Meanwhile, the Federal Reserve has increased interest rates five times in 2022 alone, bringing up rates three percentage points this year, the most in a single year since the 1980s. The Fed showed signs of increasing rates by another 1.25 percentage points before the end of 2022, bringing the federal funds rate to 4.25-4.5 percent.

What are business owners who know they need to finance essential business equipment to do?

“If you’re balancing risks and you get less worried about the economy slowing and more worried about inflation just staying high and getting built in to the price and wage-setting process, then you might conclude you need to move faster,” says Bill English, finance professor at the Yale School of Management, who spent 20 years at the Fed. “Lags just make the problem harder because you have to be forward-looking and judge where the economy is going to be.”

“You Need to Move Faster”

Interest rates will not drop any time soon, that’s for certain. Locking in a lower equipment financing rate now will save you money compared to financing later at a higher rate. Not only do you benefit from lower rates before the Fed raises them again, you also gain the advantage of being able to competitively positioning your company against others who might choose to wait out high interest rates. With financed equipment, you could offer products or services your competitors don’t or at a price they can’t match.

An Equipment Financing Loan Lets You Reserve Cash

Financing allows you to keep cash on hand to ride out a slow month or quarter, hire or retain staff, or purchase materials or assets needed to bid on and win a revenue-generating project. With a recession looming, conserving your cash is important. Over the next two years business owners will want to stretch their cash flow, which isn’t possible if it’s spent on an equipment purchase.

Where You Can Find Equipment Financing Loans and Get Approved Quickly

Bank and Credit Union Equipment Financing

Banks and credit unions offer equipment financing loans. Unless your credit score falls in the good or excellent range, financing equipment through them is difficult or impossible since they usually approve applicants with top-tier credit scores.

If your credit score meets bank or credit union qualifications, expect a lot of paperwork and a long wait time for approval. If you have an urgent need for business equipment, don’t have a sizable down payment, don’t want liens placed on other business or personal assets or have credit blemishes, traditional bank or credit union equipment financing isn’t your best option.

Vendor Equipment Financing

Equipment vendors can suffer during a recession due to lower sales volume. Vendors create equipment financing programs through direct lenders, like Global Financial & Leasing Services (GFLS). These programs benefit both you and venders. You can explore financing a higher priced piece of equipment rather than settle for less expensive machinery priced within a traditional bank’s amount they approve you for. You may have more flexibility, especially when the vendor works with a lending partner committed to closing sales. You might even be able to take advantage of sales and discounts vendors offer to boost sales during a recession.

SBA Equipment Financing

SBA loans are an option if you have excellent credit and are growing or expanding business and need equipment to do so. But, the application and approval process can take months, and the majority of applicants are denied due to bad credit, character issues, lack of collateral, insufficient revenue or capital to repay, and inability to repay due to other outstanding loan payments.

Direct Lender Equipment Financing

GFLS is a direct lender, providing funding opportunities that typical banks don’t. In certain situations, we can use our connections to numerous banks and institutions to offer you the best financing solution for your credit profile. In the end, you get the right financing for your needs and faster access to the funds.

If you’re interested in getting equipment financing before rates go up again, our process is simple and streamlined. Talk to one of our equipment lease financing experts at 480.478.7400 or start your application today.

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Loans vs. Leases: Choosing the Right Option for Equipment Financing

by Business AdviceEquipment Financing

With so many financing options available from a variety of lending sources today, it’s easy to be overwhelmed by choices, especially considering you’re making a serious financial commitment. While you’re weighing choices, your business lacks the equipment needed to launch or grow. If you’ve been trying to decide whether to rent, finance or purchase outright the essential business equipment your company needs, we hope this article makes the decision a lot easier for you.

Let’s take the business factor out of the equation. That way you can better understand your equipment financing options because you’ve probably already made similar choices in your personal life. For example, you had reasons for choosing where you live and what you drive. If you rent your home, essentially you are leasing it from the owner, be it a house or apartment. You can live there as long as you pay your monthly rent, and the owner still owns the property at the end of your lease. If you pay a mortgage, you took out a loan with a lender who gave you the money to buy your home. Once you pay the lender back, you own your property. Same goes for your vehicle. You chose to lease or buy it. If you lease it, you’ll return it at the lease’s end. If you bought it, you either paid cash or took out a loan and make payments, after which you’ll own it.

Why rent versus buy a home? There are many reasons, including saving up for a down payment, a rent payment being more affordable than a mortgage, ensuring what you buy meets your long-term needs and goals, etc.

Why lease versus buy a vehicle? Again, there are many reasons, such as high usage results in wear and tear you don’t want to be responsible for and the vehicle you need in the short-term isn’t the one you’ll need in the future.

If you think about how to finance your essential business equipment in those same ways, deciding between renting, financing or an outright purchase becomes much easier.

Questions to ask yourself before deciding whether to finance an equipment lease or loan:

Do you want to own the equipment eventually? If yes, then financing an equipment loan is right for you. Like a mortgage or car loan, once your loan is paid off, the equipment is yours.

Do you have a down payment or sufficient collateral to qualify for an equipment loan? If not, then financing may be your best bet for getting the equipment your business needs. The additional revenue generated from having essential equipment can be saved for purchasing equipment down the road.

Is the equipment something you’ll use for years or is it the type that is often updated, requiring you to upgrade? If you intend to keep the equipment for a while, an equipment loan makes sense. If you know you’ll need to upgrade the equipment to stay competitive (like medical equipment), financing an equipment lease makes sense because you can return the equipment at the lease’s end and upgrade at that point.

If You Decide to Finance, You Have Two Choices, an Operating or Capital Lease

Operating leases typically have lower monthly payments and you have the choice to either relinquish the equipment at the end of the lease term or buy it at fair market value.

Capital leases generally have higher monthly payments. Although a capital lease is much like a loan, you don’t include it on your balance sheet during the lease term. At the end of the lease, you can buy the equipment for a nominal price, such as $1 or a percentage of the purchase price.

Bottom line: If you decide to finance, consider a lease, as you will be often expensing the rental payments like any other operating expense as you use the equipment.

If You Decide to Take Out a Loan, Understand the Lender’s Requirements

If you choose an equipment loan, your lender will front the money to purchase your piece of equipment. Depending on your lender, you can finance all or most of the purchase price. Like a home or car loan, you’ll pay any down payment, if required, and make monthly payments that cover principle and interest. After the loan’s paid off, you own the equipment outright.

READ MORE: With Inflation and Rising Interest Rates, Is Now a Good Time to Finance Equipment for Your Business?

Our Team is Here to Help

Many small and medium-sized businesses prefer Global Financial & Leasing Services (GFLS) to traditional banks or alternative online lenders due to our easy application process, holistic decision-making and personalized approach to lending. Our equipment financing experts listen to your needs and goals to find a solution that works not only for your budget, but also to meet your short and long-term business goals.

GLFS’s credit application process is designed to be as streamlined as possible, while still giving us a full picture of your business and needs. We understand that time is of the essence when running a business, so we often can get back to you with a credit decision within 72 hours.

Contact us to learn more about how we can help your business.

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Where Can I Find Equipment Financing Loans?

by Equipment Financing

Luckily, banks and credit unions aren’t the only place you can find equipment financing loans. Times have changed, and now you have several options to finance the essential business equipment your business or startup needs.

Equipment Financing Loans from Banks

Banks and credit unions are still options for finding equipment financing loans, but too often they are not in reach for some business or startup owners. Unless you have good or excellent credit, financing equipment through a traditional bank is next to impossible since they typically approve applicants with top-tier credit scores. Even if your credit score is up to snuff, you face a lot of paperwork and long wait times for final approval. If you have an urgent need for business equipment, don’t have a sizable down payment, don’t want liens placed on other business or personal assets or have credit blemishes, you’ll be disappointed with a traditional bank’s equipment financing.

Equipment Financing Loans from Vendors

Equipment vendors, when faced with fewer sales, began offering equipment financing loans to customers. This gave business owners a way to obtain essential equipment without going through normal bank channels. Vendors create equipment financing programs through direct lenders, like Global Financial & Leasing Services (GFLS). These programs benefit both buyers and venders. Buyers can explore financing a higher priced piece of equipment rather than settle for less expensive machinery priced within the bank’s approved amount. Vendors are able to sell equipment to buyers who wouldn’t otherwise qualify from a traditional bank. With vendor financing, consumers have more flexibility, especially when the vendor works with a lending partner committed to closing sales.

SBA Equipment Financing Loans

The Small Business Administration (SBA) is a federal organization that has low-cost, government-backed loan programs for small business owners. The SBA backs a portion of the loan a small business owner obtains from lenders, such as banks and nonprofits. SBA loans are less risky for the lenders, and they can come with lower interest rates and longer terms for borrowers. For example, current interest rates for SBA loans in September 2022 are:

  • SBA 7(a) loans: 7.75% – 10.25%
  • SBA CDC/504 loans: Approximately 5.39% – 5.46%
  • EIDL loans for COVID relief: 3.75% for for-profit businesses and 2.75% for nonprofit businesses.
  • PPP loans: 0% if forgiven; 1% if not forgiven.
  • Maximum rates for other SBA disaster loans: 4.00% with no credit available elsewhere, or 8.00% with credit available elsewhere.

SBA loans are an option for business owners with excellent credit who are growing or expanding business with equipment. But, the application and approval process can take months, and the majority of applicants are denied due to bad credit, character issues, lacking collateral, insufficient revenue or capital to repay, and inability to repay due to other outstanding loan payments.

Financing Equipment Through Sale/Leaseback

Financing business equipment through a sale/leaseback is like using your home equity for a purchase. An equipment sale/leaseback loan is an option if your business owns assets like trucks, machinery or construction equipment.

The equipment is sold or leased, but retained for business use. Because the transaction is secured by the equipment, this loan type is relatively easy to qualify for, and it can be structured so you can own the equipment at the term’s end, ranging from 24-60 months and the payments are tax deductible. Sale leasebacks often require an equipment appraisal from a Certified Asset Appraisal firm, and the lender often lends to advance a percentage of the Force Liquidation Value of the appraisal.

Equipment Financing Through a Direct Lender, Like Global Financial & Leasing Services

Global Financial & Leasing Services (GFLS) is a direct funder, providing funding opportunities that typical banks don’t. In certain situations, we can use our connections to numerous banks and institutions to offer you the best financing solution for your credit profile. In the end, you get the right financing for your needs and access to the funds faster.

Unlike big bank applications, our process is simple and streamlined so you have a decision often in 24 hours or less. Talk to one of our equipment lease financing experts at 480.478.7400 or start your application today.

What is Machinery Equipment Financing?

by Equipment Financing

The textbook definition of equipment financing is a lease or loan used to obtain equipment for a business. Adding machinery to the term only means the equipment obtained is machinery or manufacturing equipment of some sort. There is equipment financing available for all industries, such as medical, restaurant, printing and more. Equipment financed is usually essential to a business’s operations and considered an asset, and therefore doesn’t include real estate because property is obtained via a commercial real estate loan.

Why Business Owners Need Access to Machinery Equipment Financing

If you follow any corporate moguls on social media, listen to business-related podcasts or read finance news, then you know how very rarely business owners and leaders contribute their success to luck alone. Maybe a few lucky breaks here and there or being in the right place at the right time, but success comes from making smart and strategic business decisions. Often, business decisions are based on whether or not you can afford to make them.

Regardless of how strong cash flow is, having access to equipment financing is especially important for business owners in industries that require machinery and/or manufacturing equipment because their cost runs tens to hundreds of thousands of dollars.

Having a source for equipment financing is just as critical for startup entrepreneurs who need machinery equipment financing to get their business off the ground.

Either way, considering the high price of machinery and manufacturing equipment, financing a purchase or lease means taking on a monthly financial commitment—one that will help your business grow and generate a level of revenue that more than covers the lease or financed purchase payment.

Machinery Equipment Financing Vs. Equipment Leasing

If you need to finance your machinery or manufacturing equipment, you have two options. Take out a loan to purchase it or lease it. Making the best and smartest decision for your business and circumstances depends on two main factors:

  1. Your personal and business credit rating because those affect your ability to qualify for financing
  2. The useful life expectancy of the equipment you’re financing

Let’s take a closer look at these factors.

If you have a good or excellent credit score, equipment financing is far easier. However, if your credit score is 640 or below, you will find a limited number of lenders willing to finance your machinery or manufacturing equipment.

LEARN MORE: Can I Finance Equipment with a 640 Credit Score?

Machinery and manufacturing equipment are workhorses designed to last for years with proper maintenance and service. So, the useful life expectancy is long. Think in terms of useful then to your business. Will you keep the equipment for the long haul? Then, financing its purchase may make the most sense. Will you be upgrading soon or using it for just a handful of jobs? Then, equipment leasing might be the way to go.

LEARN MORE: Your Approach to Financing an Equipment Lease Matters

Talk to One of Our CLFPs About Machinery Equipment Financing for Your Business

Global Financial & Leasing Services (GFLS) has Certified Lease and Finance Professionals (CLFP) on our team to help you choose and get the equipment financing that’s right for your business goals and finances. CLFPs must pass various tests and meet strict professional and ethical requirements to become officially certified, making them more reliable partners than non-certified lenders.

CLFPs are the best of the best in equipment financing. They demonstrate extensive knowledge of the field, and also, have never been involved in any questionable transactions. When you work with a CLFP like those here at GFLS, you know that your lender is competent and has your best interest in mind.

GFLS can finance almost any business seeking to acquire equipment. With our in-house funds and relationships with over 200 private label and public banks, we have the ability to finance those who have been turned down by the banks due perhaps to prior bankruptcy, student loans, tax liens and bad credit. Want to learn more? Let’s talk about the possibilities. Or, get started today by filling out an online application.