Understanding Equipment Finance Agreement.
Reviewing the finance agreement carefully before signing is critical to make sure you’re not signing an FMV Lease when the salesperson says dollar buyout but the contract is actual FMV or Fair Market Value. Key components to check include:
Ø Payment Terms: Understand the monthly payment amount and due dates.
Ø Interim Rent: Is there an interim rent, which is rent in between the time of the next billing from the date of acceptance or lease commencement.
Ø Maintenance and Repairs: Determine who is responsible for maintenance and repairs. Most equipment financing don’t apply unless warranty is added into the agreement and financing. If through the vendor, it will be through manufacturer warranty and services but not lender’s responsibility.
Ø End-of-TERM Options: Unlike equipment lease, equipment finance agreement doesn’t have a buyout or end of lease option.
Ø Early Termination: Be aware of any penalties for early termination of the EFA. You may not pay any penalty for paying it early, but you’re still liable for the full term regardless of when you pay it off.
Ø Advance Payment: First and Last, security deposit or down payment might be required. Check your equipment lease agreement to make sure you are aware of any money upfront to consummate the lease financing agreement.
Ø Down Payment: Down payment reduces the amount financed.
Ø Security Deposit: Security deposit is typically refundable unlike down payment.
Credit Requirements for Startup Financing:
For startup companies, we require: Credit requirements Varies. Here’s how you get your ducks in a row to make sure you make it easy for the lender approve you.
Ø Business license or active business entity registration.
Ø Personal guarantees from all owners – history matters.
Ø Minimum 650+ credit score.
Ø No bankruptcies in the last 7 years.
Ø No unresolved tax liens.
Ø No judgments, or repossessions
Ø Sufficient networth
Budgeting for Financing
v Initial Costs: Some leases require a down payment, security deposit or initial fees like admin fees, first and last. Factor these into your budget.
v Monthly Payments: Ensure your cash flow can comfortably cover the monthly lease payments. Does the equipment make money. Does it work all year round?
v Additional Costs: Insurance, delivery, sales tax and other additional warranty or services that might be included in the equipment financing purchase. Operating capital to manage the equipment and the machinery.
Additional financing benefits you can qualify for to conserver working capital.
Ø *$99 for the First 6 Months: Get started with minimal upfront costs for well qualified lessee.
Ø 90-Day Deferred Payments: Pay nothing for the first three months.
Ø **if you get disqualified for equipment financing you might have an option for a Working Capital Loans:
***Access short-term cash flow solutions for immediate cash need where your funds wired to your business bank account and you use it to purchase the equipment, leaving you a free and clear equipment. Working capital loans doesn’t specifically add the equipment into the UCC-1 Filing. Additionally, it doesn’t appear onto you personal credit.
Tips for Successful Equipment Financing Experience
Ø Plan Ahead: Start the financing process early to ensure all equipment is ready for your opening day. Provide credit and funding stipulations upfront. Don’t alter any documents. Get pre-approved early. Know you have the option to get financing.
Ø Contact your equipment dealer: Get an invoice/quote for the lender to review and approved. Apply with your bank so you know whether they’re an option or not for a peace of mind. Alternatively, if you know you won’t qualify at your bank, contact Liberty Capital Group, Inc.
Ø Vendor Approval: Each transaction a vendor must be approved. They want to make sure vendor is reputable who will deliver what you lease or purchase.
Ø Equipment Approval: Every financing transaction, equipment must be approved. They need to make sure a restaurant is not buying a restaurant equipment. A restaurant can’t buy a backhoe. It doesn’t make sense.
Ø Equipment must be business essential.
Ø Negotiate: Don’t just negotiate with the vendor, you can also negotiate with the lender. Don’t be afraid to negotiate lease terms to get the best deal possible.
Ø Consult Professionals Equipment Loan Broker: Work with a financial advisor or accountant to understand the financial implications of financing. They’re the best source for information on how you can maximize your financing options.
Equipment financing can be a strategic move for any business owner, providing flexibility and preserving working capital is a good cashflow management strategy.
By understanding the equipment financing process and carefully selecting your equipment and financing partner, you can set your business up for success faster, rather than waiting for cash to come by. Don’t let opportunity hold you back due to lack of capital. You have funding options with Liberty Capital. Contact us today. We’re ready to help your business grow and elevate to the next level. Best of luck! Liberty is your Freedom!
Bank Hopping for Equipment Finance Agreement: Why It’s Time-Consuming and How Liberty Capital Can Help.
Searching for the right equipment lender especially if you’ve already been turned down by your bank, by hopping from one bank to another just trying to figure out whether they will approval you can be a time-consuming and frustrating process, especially if you have challenging credit. Each application involves time-consuming paperwork and potential rejections. If you get turned down, how many more lenders will you apply to before seeking better options from a loan broker?
Special Financing programs
Ø $0 Down for qualified lessee
Ø 1 Advance Payment
Ø 90-day deferred payment
Ø $1 buyout, no prepayment penalty
Ø Monthly payment up to 5 years
Ø Equipment finance Agreement
Ø Low Admin and doc fee
Ø $99 for first 6 months
Working with an equipment loan broker like Liberty Capital can streamline the process, saving you both time and money. Brokers have access to multiple lenders that can structure any credit profile specific to you, even if your credit is less than perfect. With their expertise and network, brokers can navigate the complexities of loan applications and increase your chances of approval. You may not know all the intricacies of equipment financing agreement thus a loan broker will be able to help you navigate.
So why go through the hassle of bank hopping when Liberty Capital can do the work for you, ensuring you get the best possible deal?
What do I need to apply?
1. ONLINE APPLICATION: You can fill out our application, upload and authorized us to process your application. We do soft-inquiry, and our lender will do hard inquiries once you are approved for Equipment Financing only.
2. Equipment Invoice or Quote for the truck or equipment you want to buy. Multiple vendors accepted. We’ll lump them into one monthly payment for you. We’ll accept bill-of-sale for some private sale.
3. Banks statements (3-4 months) – Proof income, proof of banking, and proof funds availability in case down payment is needed and to match for ACH Payment Drafting – as an auto pay.
Equipment financing is vital for businesses that need expensive equipment to operate efficiently. Companies in construction, manufacturing, healthcare, and other heavy equipment-intensive industries benefit significantly from these financial solutions. Understanding the options and working with top financing companies can help businesses acquire necessary equipment while managing cash flow effectively.
When it comes to equipment financing, Liberty Capital Group, Inc. offers several advantages over traditional lenders:
Ø Corp-Only Availability: We cater exclusively to corporations, providing tailored financing solutions for businesses. Corp-only doesn’t apply to start ups. Corp-only doesn’t substitute for having bad credit. Corp-only doesn’t automatically apply because your company is corporation or LLC.
Ø Up to 120% Equipment Cost Coverage: Our financing options can cover not only the equipment cost but also associated soft costs.
Ø Flexible Funding Amounts: Access financing ranging from $250,000 with a simple one-page application to $5,000,000 with full financial statements.
Ø Quick Approval Process: Benefit from next day funding approval, ensuring minimal downtime for your operations.
Ø Approved Equipment Vendors: We work with approved packaging equipment vendors, streamlining the acquisition process for our clients.
Ø Lowest Industry Rates: Enjoy competitive rates for qualified borrowers, reducing the overall cost of financing.
Ø Eligibility for New and Used Equipment Financing: Whether you’re purchasing new or used equipment, we’ve got you covered.
Ø Minimal Impact on Personal Credit: Our equipment financing solutions do not appear on personal credit reports, preserving your personal credit history.
Ø No Early Payoff Penalties: Enjoy the flexibility of paying off your equipment financing or leasing early without incurring early payoff penalties.
Where can I apply?
1. ONLINE APPLICATION: You can fill out our application, upload and authorized us to process your application. We do soft-inquiry, and our lender will do hard inquiries once you are approved for Equipment Financing only.
2. Equipment Invoice or Quote for the truck or equipment you want to buy. Multiple vendors accepted. We’ll lump them into one monthly payment for you. We’ll accept bill-of-sale for some private sale.
3. Banks statements (3-4 months) – Proof income, proof of banking, and proof funds availability in case down payment is needed and to match for ACH Payment Drafting – as an auto pay.
Are you an Equipment Vendor??
If you sell new or used X-ray machine or other medical equipment, we’d love to partner with you to offer highest approval rate for your clients. Our goal is to get them approved no matter what their credit profile might be. Working with Liberty Capital will give you a wider credit window so you can stop shopping for your clients. We do soft-inquiry for each applicant.
1. Check out how you can grow your vendor business using our financing options. View our credit guidelines here.
2. Download our equipment vendor package here.
All we need from your clients is a simple application.
1. ONLINE APPLICATION: You can fill out our application, upload and authorized us to process your application. We do soft-inquiry, and our lender will do hard inquiries once you are approved for Equipment Financing only.
2. Equipment Invoice or Quote for the truck or equipment you want to buy. Multiple vendors accepted. We’ll lump them into one monthly payment for you. We’ll accept bill-of-sale for some private sale.
3. Banks statements (3-4 months) – Proof income, proof of banking, and proof funds availability in case down payment is needed and to match for ACH Payment Drafting – as an auto pay.
What is Equipment Finance Agreement (EFA)?
An Equipment Finance Agreement (EFA) is a straightforward way for small business owners to finance the purchase of necessary equipment without paying the full price upfront. Here’s a detailed explanation of how an EFA works, tailored for small business owners:
1. Initial Steps
– Identify Equipment Needs: Determine the specific equipment your business needs. Choose a Vendor: Find the equipment and provide invoice.
– Apply: Apply with a reputable lender or equipment loan broker like Liberty Capital that offers EFAs. This could be a bank, a financial institution, or a specialized equipment financing company but not knowing who does what you might end up with a wrong loan.
– Get funded. We’ll fund the vendor, multiple vendor acceptable, and you make monthly payment via ACH as an auto pay. No more monthly invoice.
2. Application Process
– Submit Application: Depending on the funding size, programs like “APP-ONLY” up to $250K could be accessible without tax returns or financials. Provide your business information, financial statements, and details about the equipment you wish to finance.
– Credit Check: Liberty Capital will pull soft-inquiry to see which lender, program is suitable to save time. Your credit history and business financials will determine your approvability, rates and terms including what if any down payment might be needed.
3. Loan Approval
– Approval Notification: If approved, we’ll provide you a term-sheet detailing all the equipment loan details such amount, interest rate, buyouts, down payment, administration fees, repayment schedule, and any other terms.
– Electronic Agreement Signature: You will sign the EFA via electronic, which outlines all the terms and conditions, including the total amount financed, interest rate, repayment period, and monthly payment amount.
4. Acquisition of Equipment
– Vendor Payment: The lender pays the equipment vendor directly, so you don’t have to handle the large upfront cost. Delivery, installation and other fees might be added into funding.
– Equipment Delivery: The vendor delivers the equipment to your business. You start using the equipment right away.
– Deferral program: If you qualify for deferral program, your payment will be deferred up to 90 days.
– Down Payment: Structured transactions, bigger transactions might warrant down payment.
5. Repayment
– Monthly Payments: You make regular monthly payments to the lender as agreed in the EFA. These payments are typically fixed amounts and include both principal and interest. Typical term for equipment financing is about 5 years. If you want an accelerated term you can go as low as 24 months. The lower the term the lower the over all paybacks. Rates may vary per term.
– Interest and Principal: Each payment includes interest (the cost of borrowing the money) and a portion of the principal (the actual amount financed).
– Tax Deductibility: You might want consult with your CAP to determine which equipment loan program is suitable to you and your budget.
6. Asset Ownership
– Ownership Rights: You own the equipment from day one. This means you can claim depreciation on your taxes and have full control over the equipment’s use.
– Collateral: The equipment itself often serves as collateral for the loan. If you default on payments, the lender has the right to repossess the equipment. If you have lower credit, you might be required to put down payment or additional collateral to make the lender warm and fuzzy.
7. End of Loan Term
– Loan Payoff: Once all payments are made, the loan is paid off. There are no further obligations to the lender.
– Free and Clear Ownership: You retain full ownership of the equipment with no additional payments or conditions. Lender will file a UCC1 which becomes public information.
Benefits for Small Business Owners
- Preserve Cash Flow: By financing the equipment, you can preserve your cash for other operational expenses or investments.
- Fixed Payments: Knowing your exact monthly payment helps with budgeting and financial planning.
- Tax Advantages: You can potentially deduct interest payments and depreciate the equipment, reducing your taxable income.
- Immediate Use: Gain immediate access to the equipment needed to run or expand your business without waiting to save the full purchase amount.
How would Equipment Financing play out as a small business owner:
Suppose you own a small bakery and need a new commercial oven costing $20,000. Here’s how an EFA might work:
- Select the vendor: Once you’ve narrowed down the equipment. Lender will approved the vendor, amount and the equipment.
- Select a Lender: You find a lender that offers EFAs and has favorable terms for small businesses.
- Application and Approval: You apply for financing, and the lender approves your loan with a term of 5 years at an interest rate as low as 8%.
- Sign Agreement: You sign an EFA that specifies monthly payments of about $405.
- Receive Equipment: The lender pays the oven manufacturer, and you receive the oven.
- Make Payments: You make monthly payments of $405 for 5 years.
- Ownership: You own the oven from the start and can use it to bake more goods, increasing your revenue.
By understanding these steps and benefits, small business owners can make informed decisions about using an Equipment Finance Agreement to acquire essential business equipment.
As always, for over 20 years, Liberty Capital will always be there to guide our clients the right funding at the right time. We will not weigh the process down. We’ll make it smooth, painless and frictionless as possible.
Your success is our success.
