Other than getting financing in place, the primary goal of any business owner or manager trying to arrange funding for equipment acquisition is to get the best deal possible meaning securing the best rates and terms available in the market to them.
To expand on this further, the best rates basically refer to the lowest cost of capital you will be charged on any financing you secure.
But understanding what the best rates available to a particular business at a particular point in time is not always easy to determine.
Let me explain.
First of all, the best overall rate in the market place is not going to be available to all borrowers.
Second, the best rate can change on a day to day basis, based on financial market conditions that influence the cost of funds for a lender or leasing company.
Third, the best overall rate of any sort, by definition is the lowest risk rate, so the application assessment must fall into the lender or leasing company’s definition of lowest risk possible for their program.
Fourth, not all sources of financing provide the lowest possible market rate and instead provide the best available rate within their own programs being offered.
Its not hard to get a headache with this type of stuff.
But here are some general guidelines to follow when seeking the best available rates and terms for your business.
First of all, remember that financing rates are always based on a number of different factors. So how your particular business and financing application score out on these different factors will dictate the type of financing rate you are offered.
One of the key factors that influences financing rate is deal size.
Generally the larger the deal size, the lower the potential rate and vise versa.
So if you have great credit and are a well established, financially sound business, you still may not get as good a rate on a $25,000 equipment lease as you would a lease or loan for $250,000 or greater.
Another factor that greatly influences the rate and is also impacted by deal size is the credit profile of the applicant business.
Stronger credit also contributes to lower rates being offered.
Other considerations like type of asset, condition and age of the asset, location of the business, and industry that the business operates in can all contribute to the best available rates that can be provided to you.
So when were talking about the best rates we need to make a distinction between the best available rates in the marker place and the best available rates available a certain credit request and application process.
There can be a considerable difference between the two which needs to be well understood when shopping for equipment financing so that time is not wasted pursuing something that you may not be eligible for or is not available to you at a given point in time.