LOOKING FOR FINANCING? ASK YOURSELF THESE QUESTIONS FIRST
You’re in the market for a new machine. You’ve found something you like and now you’re ready to secure financing. But before you connect with a lender, take a minute to ask yourself a few basic questions.
Is our current fleet fully utilized?
Check the utilization data from your telematics system or other records. The rule of thumb is if the utilization rate for your fleet is less than 80 percent, you may be able to do the work you’re currently doing with fewer machines — so adding capacity might not be necessary. Of course, other factors come into play. Maybe you’re growing your business or disposing of older assets or planning to capitalize on new technologies. The point is, make sure you have a plan to use the new capacity you expect to add.
Have we considered all the options?
A new machine could be best for your business, but perhaps you’d be equally successful with a low-hour used model, a factory rebuilt unit or a longer-term rental. Leasing could pay off too. But if that’s your plan, will you take ownership of the asset at the end of the agreement? If so, you want a capital lease. If not, an operating lease is the way to go. When it comes to equipment acquisition, there are many paths to success. Make sure your financing partner can help you explore them all.
What can we actually afford?
Many factors affect affordability from monthly cash flow and size of a potential down payment to interest rates, contract terms and intention to buy at the end of an agreement. To get a better sense of what works for your business, try the affordability calculator at CatFinancial.com. It’s a simple tool that lets you manipulate a set of variables to quickly determine your financial limits. Find the affordability calculator here.
How will the monthly payment fit into our budget?
Whether you’re financing or leasing, it’s important to negotiate a monthly payment that meets your cashflow requirements and other business objectives. With the payment calculator at CatFinancial.com, you can easily determine how changes in price, down payment size, interest rate and other factors affect your monthly payment. It’s a good way to do a little pre-planning before you make any big decisions. Find the payment calculator here.
What does our credit score look like and are there any issues we may need to explain?
Before contacting a financial services organization, review your credit report. Correct any inaccuracies and update any information that’s no longer current. If there are negative things in the report, be prepared to explain them.
When you’ve answered these questions and you’re ready to take the next step, make sure you connect with a financial services organization that will treat you like a partner. Work with a team that understands your industry, has the flexibility to accommodate the cyclical nature of your business and is fully invested in your long-term success.