Reason #9 why an equipment financing company is better than a bank – RATE ADJUSTMENT

By | July 25, 2012

fixed finance ratesBoy, we’re almost there. We’re all the way to number nine in our “ten reasons why an equipment financing company is better than a bank” series. And reason nine is a pretty simple one – an equipment financing company offers fixed term rates. The bank would prefer an adjustable rate.

To illustrate this, let’s pretend I’m an equipment financing company. I’ll loan you a hundred dollars. You agree to repay me $9 a month for 12 months. This means you will repay me $108 – $100 principal, $8 interest (hey, Fletch needs to eat too, you know).

But Joey (who is playing the part of the bank) says: “wait – I’ll loan you the $100, and you pay me back $8.50 a month, plus a little more based on the economy… maybe it’ll be as low as $8.75, but it could be as high as $10, $11, $12… who knows?”

So who do you want to borrow money from? Me, or Joey? With me (an equipment financing company), you know exactly how much you will be paying for the life of the loan. No surprises, no “oh gee, interest rates went up… sorry”. Your accountant can plan and budget.

But with Joey, you can’t plan for much. This is because Joey’s rate can change with interest rates and the economy. And really, does anyone expect rates to go lower?  I sure don’t. And to be fair, when you are borrowing for equipment, the numbers are a lot bigger than my little example above. Thus, little fluctuations in the interest rate can mean a sizable chunk of money – enough of a chunk to give your accountant indigestion. And they don’t like that.

Any businessperson will tell you – it’s better knowing than not knowing. And with an equipment financing company, you just “know” what you are going to pay, and that’s a good thing.

So tell Joey to jump in the lake. Deal with Fletch.

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