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Vendor Equipment Finance for Clients
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Advantages Of Vendor Financing For Equipment Sales
Great deals on new equipment — many manufacturing companies, for example, have their own financing specialized department that offers discounts to incentivize customers to purchase equipment from them. Often their offers are hard to resist on new equipment, especially when customers are offered the option of taking a lower interest rate and even saving some cash. The equipment loan deals are generally compelling and competitive and help get more customers and increase sales.
Convenience — for many busy customers, the ease of securing financing while buying the equipment is a huge advantage. Banks are always an option for loans, but they have a strenuous and time-consuming process to assess your creditworthiness and the value of the equipment.
On the other hand, obtaining vendor equipment financing through a lender like 1st Commercial Credit is a lot more accessible and straightforward. Your situation will be quickly assessed, and in minutes you can be given a couple of different arrangements that will work for both the lender and your business.
Lower upfront costs — when your customers finance the equipment from you, the vendor, they will probably have to put some money as a down payment.
This payment can be a first and last monthly payment, but it will typically be considerably a lot less than what a bank would require for a down payment. The deals on new equipment that vendors could offer when partnering with third-party finance companies are generally very compelling for customers.
Easily and quickly upgrade equipment — with loans, the equipment cost is paid over an extended period, which means you won’t have to take a big chunk out of the working capital all at once. This also means that if you have a piece of equipment with a short lifespan or that needs to be updated frequently, you will be able to do it because loans give you the possibility of obtaining several pieces of equipment simultaneously.
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Equipment Loan Approval Tips For Vendors
1. Know the Required Documentation
When a vendor applies for an equipment loan, it helps to be prepared with the appropriate documents. A lender might request some or all of the following documents at the time of application:
- Equipment invoice: A quote for the equipment that will be sold under equipment financing, including any extra soft costs.
- Bank statements: 3 to 6 months of bank statements are needed to show the business cash flow situation.
- Tax returns: Lenders will often demand anywhere from 1 to 3 years of tax statements.
- Financial documents: A financial statement showing profits, losses, assets, and liabilities is required.
- Other: Business licenses and other additional documentation may be required.
2. Know the Additional Costs Involved With The Equipment
On top of the monthly payment, additional costs will come with the new equipment, including insurance, maintenance, wages, and storage. These costs can add to monthly expenses, and it is crucial that your customers have this in mind.
3. Know How the Equipment Will Benefit Your Customers
While there are additional expenses associated with purchasing new equipment for your customers, there should also be other financial benefits. For example, the new equipment might streamline the business, reduce the hours needed to complete tasks, and increase output. There are several benefits to financing equipment using a loan instead of a line of credit or other alternative types of financing.
Some of these benefits include:
- Cash flow: Working with 1st Commercial Credit will allow the vendor to receive full payment upfront for the equipment.
- Ownership: When the loan is paid, your customers will own the equipment outright
- Tax benefits: Customers can take advantage of Section 179, allowing businesses to deduct the total equipment cost during the tax year.
- Amortization: There are no balloon payments at the end of the loan.
Offering Payment Options To Customer Will Help You
Get rid of sticker shock and become a closing tool: All equipment sellers deal with customers who cannot afford to pay for equipment upfront. That's precisely why offering monthly payments when selling equipment is an excellent option. Offering a payment option keeps you ahead of the competition and closes more deals.
Cuts decision-making delays: Payments expand purchasing power and can help a buyer go from wondering and hesitating to going for the purchase.
Increases add-on sales: Monthly payments opens doors to additional options, add-ons, maintenance agreements, and more.
How Do Equipment Loans Work?
Equipment loans for vendors can be facilitated by banks or equipment financing companies to fund the purchase of large pieces of equipment. By taking a loan to purchase equipment, your customers can preserve cash in the short term by spreading out payments over some time. In addition, the purchased equipment can be used as collateral so the borrower can get better interest rates. Your clients choose equipment loans to buy equipment that will retain its value, such as:
• Commercial vehicles: Different types of vehicles, box trucks, and vans.
• Heavy machinery: Tractors, construction, and manufacturing equipment.
• Specialized equipment: Medical equipment, including X-ray and diagnostic machines.
• Other equipment: Restaurant equipment, professional office equipment, software, etc.
Offer convenience and solutions: Your customers will experience and enjoy the ease and speed of equipment financing. Your customers will benefit incredibly from your financing options to obtain equipment. Some of these customers facing the following situations will come to you:
- A business needs equipment
- Their current equipment needs an upgrade
- They want to avoid working with a traditional bank
- Companies who are looking for a small down payment
- Leasing equipment is not an option
- Looking for a means to preserve working capital
There are many advantages to providing options for customers with equipment loans. Still, whether offering finance to customers is the right option for you depends on your business and situation. Business owners understand how crucial it is to obtain, upgrade or replace the equipment quickly to perform daily business tasks, and they will appreciate having payment options from their vendors. Purchasing equipment out-of-pocket can put a substantial strain on their cash flow. Still, offering equipment loans can be the ideal solution to keep your business functioning and grow to meet increasing demand.
1st Commercial Credit can provide vendors with:
- An overview of how equipment loan financing works.
- The rates and terms.
- The basic requirements to qualify.
Equipment financing for vendors provides their customers the possibility to obtain a loan that can be used to purchase business-related equipment, such as software, vehicles, or printers. When a business owner takes out an equipment loan with a vendor, they will need to make periodic payments to the vendor, including interest and principal, over a predetermined term. As security for the loan, you (the vendor) will require a lien on the equipment as collateral. Once the loan is fully paid, the business owner will own the equipment free of any lien. Vendors can impose a lien upon some other business assets or require a personal guarantee. Suppose a customer fails to repay you the loan. In that case, you could repossess their business and personal assets.