We’re continuing with our “ten reasons an equipment financing company is better than the bank” series today with the second reason – and that reason is that upfront costs are lower.
So there you are, contemplating financing a new (or even used) piece of equipment. You’re financing this equipment because like many companies, you’d rather keep your cash liquid. Which makes sense – everyone likes more cash on hand.
You walk in to your friendly neighborhood bank, and sit down with the loan officer. After exchanging pleasantries and a brief conversation about the weather (“been hot lately, huh?… “I’ll say”), you get down to business. You have a piece of equipment that will cost $50,000 – let’s work out a deal.
The bank officer looks things over, and finally says “ok, here’s a check for $40,000”.
Huh? 40k? But… but the equipment is 50k.
“Indeed” says the bank officer “but we only finance 80% of it. You have to come up with the rest.”
You stand firm… “But wait a second. The only reason we want to finance this is to keep cash liquid – you’re telling me that we have to take out a loan, but STILL need to put a lot of cash into the deal? I thought we had a better relationship than that?”
“No, we don’t” says the bank officer*
*full disclosure – this part is fictional. Instead of saying this, the bank office will comment on the weather again. But this is what he or she means.
And thus ends the trip to the bank. You didn’t even get to ask the loan officer about financing the soft costs, like tax, shipping, and installation (which would have resulted in more weather talk.)
Now let’s see what happens when you talk to an equipment financing company:
You: “We would like to finance a 50k piece of equipment. We want the entire cost to be financed, plus the tax, shipping, and installation.”
Equipment Financing Company: “Ok.”
You (puzzled): “Err… that’s it? Umm… it’s hot out, isn’t it?”
And yes, that’s really it. Reason #2 the equipment financing company is better than the bank is a lower upfront cost to you, because we’ll finance 100% of your equipment, including the “soft costs” like delivery, installation, etc.
And if you like, we’ll even talk about the weather.