The financing rates of the equipment may vary considerably from one lender or leasing enterprise to another, among different types of assets and geographies.
This is largely due to the wide range of financing models that are on the market and how each lender or lender targets the market and the prices of their risk funding.
Thus, while some specific criteria for the funder have an impact on effective loan rates, some basic guidelines that you can follow when you try to assess the type of funding rate you should pay.
First of all, the financing rates of the equipment will have some dependence on the size of the agreement. For example, amounts of less than $ 200,000, the rate will generally be higher than the laundry and rental amounts.
Secondly, lower rates tend to be offset by a slower process of application and funding, as well as a lower funding amount or a loan at the value. For example, if you had to get a small business equipment loan through a bank, the potential cost of the lowest funding would be paramount + 3%. But in order to be eligible for this rate, you will have to survive a very thorough application process that will require you to have strong credit and strong personal value to guarantee the loan … and the loan at the value will probably not be likely. to be more than 75%.
If you want a higher loan valorize, it is likely that the rate will also be slightly higher to offset the relative risk of the funding source.
For example, most leasing companies will provide “A” credit customers with a leverage or near 100% of the cost of acquiring assets. But the effective rate on borrowing also tends to be slightly higher than they may be able to guarantee an institutional bank or lender where they can always be eligible.
The slightly higher rate of a small banknote leasing company can not only provide a higher leverage, but also a faster turnaround time compared to the bank financing option.
So, as a business owner, there are compromises to take into account in terms of cost, leverage and schedule.
Companies that have been created for a period of less than three years or have a certain degree of credit or financial distress will be faced with a higher borrowing cost due to the higher risk of potential loss to any funding business that approves funding.
There may also be equipment rental rates or less than bank rates, but these are generally reserved for businesses with very strong credit profiles or in situations where the equipment manufacturer or dealer provided At the financing company a type of risk reduction that allows the effective rate offered to the customer to be lower.
The type of equipment can also affect the effective loan rate. The more equipment is considered a commodity with a high and predictable resale market in terms of resale and time value to complete a sale, the less risk will be associated with this particular asset.
From a geographical and industry point of view, funding companies will also have preferences for their loan and fundraising criteria, offering better rates for locations and industries that best meet these criteria .
The main main takeaway here is that it is not always obvious as to the best financing option for a given situation until all relevant factors are taken into account.