Ways To Lower The Cost of Your Equipment Financing and Leasing

Discover ways to keep the cost of your equipment financing and leasing within your budget

By Jon Flagg| Mar 30, 2022| 4490 Views
Ways To Lower The Cost of Your Equipment Financing and Leasing

Are you looking to grow your operations but lack enough funds to purchase equipment?

Buying equipment with cash can be expensive or impractical, especially if you see yourself upgrading it regularly. It’s not surprising nearly 8/10 U.S. companies prefer equipment financing and leasing as a cost-effective alternative.

There are several advantages to equipment financing and leasing compared to buying equipment outright with cash. One advantage is it allows you to take advantage of the latest industry equipment for a low monthly payment. Plus, you can start generating revenue to cover the cost of business expenses.

But how do you find the right option that fits your budget?

In this article...

  1. Benefits of Talking about Your Business Goals
  2. Ways You Can Reduce Risk (And Strengthen Your Credit Application)
  3. 5 Factors That Affect Cost of Funds
  4. Flexible Options That Offer Affordability
  5. Find the Right Option for Your Business

This article is for business owners who are interested in financing and leasing equipment but need to keep their purchasing costs low.

Benefits of Talking about Your Business Goals

Don’t be shy about communicating your priorities to your financing consultant. Perhaps you’re looking for the lowest cost or need a specific monthly payment? By knowing your business goals and financing needs, you can put yourself on the right path to securing the right funding by having a conversation with your financing consultant. This helps assure they recommend creative solutions for your business.

For example: If your goal is to get a lower monthly payment, your consultant may recommend putting more money down. Or if you were looking for the lowest cost of funds, they may recommend reducing the term of your financing (36 months instead of 60 months).

Learn more about getting a payment that fits your budget by watching the following video.

Some Ways You Can Improve Your Credit Application:

  1. Put more money down (down payment)
  2. Reduce the term of the lease (shortened term)
  3. Provide additional financial reporting, including:
    • Tax returns
    • Bank statements
    • Copy of pending purchase orders or upcoming contracts
  4. Add an additional guarantor
  5. Put more collateral in your agreement

The good news is you don’t have to figure this out alone. Schedule a FREE consultation at beaconfunding.com/talkwithus and get answers from a financing consultant as soon as possible.

Strengthen Your Credit Application (Ways to Reduce Perceived Risk)

One way to reduce the cost of your equipment financing and leasing is to show lenders you’re a low risk. The less risky you are for a lender, the more likely they are to enter an agreement with you.

A guage showing the risk potential for an applicant is pointing in the middle towards "medium" risk.

Lenders want proof you’re a good candidate for a financing or lease agreement.

5 Factors That Affect Cost of Funds

When considering leasing as an option to acquire equipment, the overall cost of your lease is driven by your credit quality.

These are the factors that lenders consider when calculating the cost of your equipment’s lease:

1. Time in business

Lenders prefer to work with businesses that have demonstrated a history of success. Time in business is a measure of how long a company has been operating. Lenders use this metric to determine how successful a business has been or could be in the future.

The longer a company has been in business, the more competitive its monthly payment may be. Businesses greater than two years old have more financing programs to choose from, while start-up companies may have limited options.

Three stacks of coins in ascending order sit next to an hourglass.

Unlike traditional lenders, time in business is not an issue for Beacon Funding. Our financing experts specifically work with startups and understand the value of your business’s equipment. That way, we’re able to approve 7/10 of our applicants.

If you’re worried about your start-up not getting approved, talk to an equipment financing expert today about financing your next equipment purchase at beaconfunding.com/talkwithus.

2. Personal credit

The personal credit quality of a business owner often plays into the strength of business credit. Lenders often assume that poor personal credit will lead to poor repayment of their business loans.

Personal pay blemishes, bankruptcy, judgments, and/or liens may have an impact on your business’ perceived credit risk making it more difficult to obtain business credit.

3. Business credit

The better the business credit, the less risk for the lender. The less risk, the more likely a business can obtain financing.

Like personal credit, lenders want to see how reliable a business can fulfill its financial obligations before giving them a loan. The more business history your business has, the better picture lenders have of how your business pays its debt.

4. Asset being financed

The total cost of the equipment’s purchase price is a key factor in determining the cost of your equipment financing or lease. Your overall cost fluctuates depending on the equipment you choose and its condition.

The condition of an asset plays a part in how lenders will calculate your monthly payment. Some factors that include how a company calculates this include:

  • Age of the equipment
  • Mileage on the equipment
  • Hours on the equipment

Rule of thumb: The older, more miles and hours your chosen asset has, the more it might create the need for a shorter-term offering. Something to keep in mind is that financing an older equipment asset can save money overall (and doesn’t necessarily mean you will get more rental charges), but might come with higher monthly payments because of its shorter term.

5. Cash flow for the business

When lenders look at your business, they will want to know whether your business is bringing in revenue and has the potential to build value over time.

As your small business starts to grow you will want to show lenders you can cover expenses and pay monthly lease payments. A high-quality cash flow indicates whether your business has the potential to succeed.

Pro tip: It’s advantageous to show as much sales activity as you can to your lender. Regular cash deposits into your business business bank account demonstrates a positive cash flow. Lenders will typically require the last 90 days of bank statements, so be sure you make deposits on a regular basis.

Flexible Options That Offer Affordability

Concerned about getting a good ROI on your equipment financing or leasing? Ensuring your bills are covered by the revenue you generate each month is a top priority for every business. A breakeven estimate is a powerful tool for helping you find your monthly budget.

Use this free tool so you know how many fulfilled jobs you need to break even on your equipment investment. That way, you can rest assured of knowing exactly how to price your services and make a solid profit each month.

A business owner uses Beacon Funding's breakeven estimate app on their mobile phone.

Download the FREE breakeven calculator today.

Flexible plans that are known for their ability to reduce upfront costs:

  • No Money Down
  • Buy Now, Pay Later
  • Step Payment Options

When affordability is a concern, don’t shy away from talking to an expert about equipment leasing. Talk to a financing consultant at beaconfunding.com/talkwithus for a free consultation on a flexible plan that fits your unique situation.

Find the Right Option for Your Business

At Beacon Funding, we understand every business is unique. Set your small business up for success with a fast and easy application – it takes less than 15 minutes to apply online.

Unlike traditional lenders, we invest energy and time into understanding your business goals. When you work with one of our expert financing consultants, you’ll receive help to craft a lease payment plan that fits your company’s needs.

When you work with one of our expert financing consultants, we can help craft a lease payment plan that fits your company’s needs. Still not convinced? Learn more about how Beacon Funding can help your business get the “best deal” by checking out the following video.

Jon Flagg
Jon Flagg

P: 847.627.1608  |  ESchedule a Meeting with Me

Jon is a high-profile Senior Financing Consultant with a professional track record of providing efficient equipment financing for small business owners.