A Complete Guide to Equipment Financing in 2023

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excavator blue sky heavy machine construction site

Are you a business owner looking for ways to finance equipment to help grow your company? A finance officer trying to determine the best way to manage your company’s finances? If so, this guide is for you. In this article, we’ll discuss the ins and outs of equipment financing—from understanding interest rates and repayment terms to exploring the different types of financing available. By the end of this article, you’ll have all the information you need to make an informed decision about how to finance your equipment needs. Let’s get started! 

What is Equipment Financing? 

Before we get into the nitty gritty of equipment financing, it’s important to understand what it is exactly. Equipment financing is a type of loan or lease that provides businesses with the means to purchase equipment. This may include items such as transport trucks, excavators, forklifts, tractors, and other heavy-duty machinery – simply put, anything you can touch can be financed. When you take out an equipment financing lease, you are essentially applying for the dollar amount of what that equipment is worth. WiseCap works with lenders to get the best financing deal for businesses based on the equipment needed, the stage of the business, and the current credit profile. A lease is often more favourable than taking out a loan, as it is a tax deduction and is also considered a business expense rather than debt on the balance sheet. Upon reaching an optimal financing agreement, businesses can obtain equipment quickly and continue to use it while the lease is being paid off.  

Understanding the Cost of Financing and Repayment Terms 

When it comes to equipment financing, interest rates and repayment terms can vary significantly depending on your credit profile, combined with factors such as the age, type, and price of the equipment. Repayment terms refer to how long it will take a lessee to repay their lease. Typically, leases can be paid back over a period of 24-84 months. There is often a small payout anywhere between $10 and $200 at the end of the repayment term, and once this is paid off, you own the equipment. It’s important to understand these concepts, as they are key factors in determining which financing option is best for the business. The main question to consider is whether you’d rather use money out of your working capital to purchase equipment or make payments on a lease over a period of time where you would eventually own the piece of equipment.  

Types of Financing Available 

There are several types of financing available for businesses hoping to acquire new equipment. These include traditional bank loans, private loans from individuals or organizations, leasing options, lines of credit from banks or other financial institutions, and government-backed small business loans. Each type has its own pros and cons depending on business circumstances such as creditworthiness and budget constraints, or just how you want your financials to appear (debt vs. expense). Equipment financing can be a great option for those who are looking to purchase new or used equipment, but don’t want to impact their balance sheet, or don’t have the upfront cash to pay for the equipment. This can allow business owners to spread out payments over a period of several months or years, which can make it easier to manage budgets and cash flow. Additionally, since payments are reported each month to the credit bureaus, financing can be a great way to build a business’s credit. It’s always important for business owners to talk to their accountants and discuss how best to structure their business accounts before deciding on which type of financing best suits their needs. 

Why You Should Use an Equipment Financing Broker  

When it comes to equipment financing, working with a financing broker like WiseCap can be extremely beneficial for you and your business. WiseCap’s experienced brokers have established resources and relationships to source the lenders that work best for your needs and financial profile. Brokers take the work out of having to look for and vet lenders on their own, which is often a lengthy and complicated process. WiseCap works hand in hand with clients to get the best financing possible. As a member of the Canadian Financing and Leasing Association, WiseCap also ensures lenders are trustworthy and reputable so that you don’t end up in a fraudulent deal. Finally, WiseCap walks clients through all of the paperwork and financial details necessary to complete the lease agreement. It’s also important to note that, when you search for lenders on your own, your credit is negatively affected by about seven or eight points each time the credit history is pulled. Brokerages like WiseCap have access to all of the credit bureaus, and only need to pull your credit once. This means that WiseCap can send your credit history out to 20 different lenders, with your credit only getting hit one time. By contrast, if you applied to 20 lenders yourself, you’d basically be left with no credit score.  

Equipment financing can be confusing, but it doesn’t have to be! With an understanding of leasing rates and repayment terms, plus knowledge about the different types of financing available, you can easily determine which leasing option works best for you in 2023. The beauty of working with a reputable broker is that they find out what the best leasing option is for you so that you don’t have to! At WiseCap, our experienced team can help walk you through the financing process and help clients get access to the equipment they need fast. We offer business financing solutions to help those across all industries and credit profiles looking to finance their future. Because we understand the nuances of each industry, we are equipped to be more than just brokers to our clients, but a trusted financial partner helping you determine the best path forward. We hope that this guide helps you prepare to apply for financing and demonstrates how working with a reputable broker can get you the best financing deal possible. With WiseCap, you can rest assured knowing that you’ve chosen an option that meets both your budget constraints and long-term goals for success!  

If you’re in the market to purchase or acquire used or new equipment, WiseCap can help you finance your future. Contact us today to discover your financing options!