5 Common Mistakes to Avoid When Financing Business Equipment

Looking to grow your business exponentially? As a business owner, you understand that having the right, up-to-date equipment can significantly enhance your operations. But where do you begin? While there’s plenty of information available online, it’s important to weigh several key factors before committing to any agreement.

In this article, we’ll walk you through the five most common mistakes entrepreneurs make when financing business equipment, and how to avoid them.

What is Equipment Financing? 

Imagine this: Computers, printers, coffee machines, cars– all ready to use without needing to pay for them upfront. In essence, that’s what equipment financing is all about. 

It’s an agreement between you and your equipment provider where you make regular payments over a set period in exchange for the use of the equipment. 

Essentially, it works like a loan, with the amount and terms typically dictated by the equipment’s price and value. Once all payments are made, the equipment may be yours to keep. 

5 Mistakes You May Make When Financing Business Equipment

1. 1. Not Considering ALL Your Options

      One of the biggest mistakes you can make as a business owner is not shopping around. There are a range of equipment financing options available to businesses such as finance leases, commercial hire purchase contracts, and equipment loans.

      Don’t rush into agreements without comparing multiple options from both traditional and non-traditional lenders such as banks and specialist equipment financing companies.

      For more information, use a broker to help you source the best deal. By enlisting the help of a broker, you’ll be able to gain access to terms with favourable interest rates, payment flexibility, and be well-informed about any payment penalties.

   2. Overlooking Final Costs

      Another major and costly mistake businesses make is overlooking the total costs of equipment ownership. This involves maintenance, insurance, interest, and downtime costs. These unexpected costs can vary over time and while initial cost of ownership may be low, hidden fees may crop up making the loan more expensive than anticipated.

      You certainly don’t want to take on too much debt when it comes to financing your business equipment. So, it’s always best to go through every term and condition carefully to have a rough but relatively accurate estimate of the total expenditure before signing on to an agreement.

   3. Not Taking into Account Future Needs

      When you get into an equipment financing partnership with a lender, it is crucial to have a solid business plan in place. Without a proper plan, your loan application will seem weak– turning away prospective lenders or resulting in unfavourable agreements terms .

      In turn, this short-sightedness will impact the future needs of your business. Hence, when seeking a partnership with a lender, a few factors to consider include repayment terms, equipment upgrades, and early payouts without penalties.

   4. Skipping Out on Tax Benefits

      The Australian Taxation Office (ATO) offers a range of  incentives for businesses investing in equipment. To make the most of them, here are some golden rules: 

      • Some businesses may be eligible for an instant asset write-off where you may claim an immediate deduction for an eligible asset. 
      • You might gain access to GST credits on eligible purchases if you have valid tax invoices. 
      • Keep in mind the depreciation rules that apply to different types of equipment. 
      • Always be strategic about the timing of your purchases. 
      • Seek the help of a professional to ensure you’re making full use of available tax benefits. 

   5. Not Getting the Right Advice

      Not getting the help you need from the get-go can be a costly mistake in the long-run. Whether it’s tax experts or insurance brokers, it is necessary to count upon the expertise and skills of financial experts in determining the best course of action for your business.

      By utilising the expertise of a professional, you’ll more than likely secure the best possible deals and terms when it comes to equipment financing.

   Take Control of Your Business

   Explore your financing options with the help of our team of brokers at Morgan Insurance Brokers. We’ve cultivated relationships with various lenders– from banks and leasing companies to private investors, ensuring that we’ll source the best possible deal on your behalf. 

   Throughout the financing process, we’ll navigate all complexities associated with the paperwork and administrative tasks, providing you ongoing support and guidance throughout the financing process. Most importantly, we’ll ensure that your business equipment is properly insured. 

   Sometimes, all it takes is a simple partnership with an insurance broker to skyrocket your business success. Reach out to us today.