Finding the right equipment financing brokerage company can be a daunting task. Business owners must consider all the important factors. For instance, you need to find someone that meets your needs in a timely manner and offers affordable financing, while also expanding your options.
The potential downside of working with the wrong firm is you could end up paying too much in fees or losing access to key partners that other firms have in place.
This article will walk you through each step of the process to help you make the best choice for your small business.
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What Do Equipment Financing Brokerage Firms Do?
Equipment financing provides the funding to acquire all sorts of equipment, including machinery and vehicles.
Brokerage firms help businesses locate the right lender for their unique needs. They may help with everything, from negotiating equipment lease payments or financing terms and conditions, to determining the best time to sell or upgrade equipment.
Types of Equipment Financing Brokerage Companies
There are two main types of brokerage companies for equipment financing:
- Manufacturer-base and dealer
An independent broker organizes financing for nearly all types of equipment.
You may want to choose an independent company if your business needs different types of equipment because they will offer more options. They will have access to multiple lenders and banks so they can shop around on your behalf. Some of them may also have good ties to landers. As a result, they could be able to obtain exemptions that frequently aid cases.
Manufacturer-base and dealer
A manufacturer-based dealer focuses only on one industry — whether construction or medicine.
Therefore, these brokers should know more about the target sector than independent firms serving all industries.
You may want to go with this type of company if you need only one specific item as they will be able to provide the most information about it.
Picking the Right Equipment Financing Brokerage Company for Your Small Business
Factor 1: Experience and Financial Expertise
It is important to find a broker who has both experience and expertise in their field. You need someone who knows what they’re doing and can provide you with financial advice that will benefit your business down the road.
A financial advisor is often a good choice, especially if they have worked with other businesses similar to yours— and is willing to teach you more about how to lease equipment.
Factor 2: Types of Equipment Financing Programs Offered
Every business has its unique financial needs when it comes to purchasing equipment. An experienced broker will link you with lenders that offer a range of financing programs to help accommodate your situation.
Some companies specialize in offering only one or two types of financing programs, limiting the types of transactions they can help you with. Full-service heavy equipment financing companies are your best bet because they tailor programs to match unique business needs.
Factor 3: Industry Knowledge
The more you know about the industry you serve, the better off you will be. Having an expert around to give you information about how your business works and what it takes to succeed makes it easier to make decisions when it’s time to finance your equipment.
An expert broker should be able to explain everything from start-up costs to maintenance costs and everything in between.
Factor 4: Broker Fee
Some firms also charge administrative and file handling fees, often before even evaluating the file, while others prefer to transfer that burden to the lenders instead, thus being able to service their clients without charging them any additional fees.
Some brokers charge a flat rate fee instead of a percentage. It is important to know how your broker will be compensated so you are not caught off-guard by any fees at the end of the financing process.
Factor 5: Interest Rates on Loans
The interest rates offered by different brokers can vary depending on their relationship with their lenders. Before signing anything, ask for the annual percentage rate (APR) so that you can compare brokers and the cost of your loan.
You should also find out if the interest rate is fixed or variable so that you know if it will change over time.
Factor 6: Payment Plans
Ask about payment plans before you commit to any financing option. The payment plan generally depends on what type of loan you get and how long it will last.
Most equipment loans require monthly payments over three to five years, but some may have shorter or longer terms depending on your needs as well as those of the lender.
Factor 7: Extra Services
Some brokers also offer other services, such as equipment appraisal and maintenance. A company that provides more than just financing gives you peace of mind knowing you have someone to turn to if something goes wrong with the equipment.
It also means you don’t have to worry about finding another company if something happens – it’s all under one roof!
Factor 8: Consider their History of Success.
Equipment financing is a big investment decision that will affect your overall business operations. This is why it’s important to pick the right broker for the job.
One thing that makes a broker reliable is their track record of success. Ask around about them and see how reliable their services are by talking to their other clients.
How to Go About Equipment Financing: Steps to Approach Brokerage Companies
While most entrepreneurs understand the value of leasing or renting equipment, the process of finding the right financing partner can be stressful.
Here’s a step-by-step guide to approach brokers:
- Begin with a clear understanding of your needs.
- Be prepared with all the necessary business information.
- Ask for recommendations from other business owners and managers.
- Check out online reviews and ratings about the companies you are considering using, but take them with a grain of salt because they may not be accurate.
- Make a list of vendors, suppliers, and manufacturers (those who are most likely to offer a direct financing option) that carry the equipment you need. Many companies provide direct financing so this list will give you a sense of how much you can expect to pay for the equipment and what type of payment plans are available.
- When you find a company that you think will meet your needs and budget, schedule a time to speak with someone in person or by phone before submitting an application. Meetings allow you to ask questions and assess how responsive they are and whether they seem knowledgeable about their product offerings.
- Before signing any contracts, make sure there are no hidden fees that could be added later on down the line, so there won’t be any surprises during renewal!
Because of their greater knowledge and experience with numerous lenders’ policies, a brokerage firm may operate in a more comprehensive and long-term approach. It will handle the transaction from A to Z, whether it’s gathering paperwork with its admin or accountant, interacting with the seller during the deal, preparing an invoice, collecting photographs, tracking down a link to safeguard the client, all the way through disbursement and even registration transfer at the end.
A good brokerage firm should add value and expertise to your overall process. At Finco, we look at your case comprehensively. We identify where you may qualify to get the finest equipment financing solution based on your situation.
The best brokers also have techniques for obtaining cash if a lender requires a large down payment.
In conclusion, there are many factors to consider when finding the best equipment financing brokerage company for your business. Hopefully, these tips will help you narrow down your options so that you can pick the right broker for your needs.