Leverage the Internet
The web has turned virtually every marketplace from a local one to a global one. Equipment sellers are no longer just competing with the competition down the street but also the competition across the country.
- Use eBay to research prices of comparable equipment. If you are buying used equipment be sure to compare equipment that is similar in age and condition to what you are looking for.
- Many industries and trade associations have established online forums in which you can connect with other buyers of the equipment you need. Use this resource to ask what brands, vendors and websites may be worth investigating and what questions to ask.
- Use Google or your search engine of choice to look for vendors that may have better pricing than your local vendor. Vendors selling more volume can save you money, even when you factor the extra shipping costs!
Considering buying used equipment as an alternative to new equipment
Depending on the industry you are in and the equipment needed, buying used equipment can save hundreds, if not thousands of dollars.
- Be sure to examine the economic life of the equipment relative to how long you will need the equipment. Buying a 10 year old piece of equipment can make a lot of sense if you only need it for 3 years and the estimated life of the equipment is five more years.
- Do your research to insure you get as complete a history as possible. This includes maintenance schedules, accident and reports, serial numbers, etc. As a start, have the seller fill out a condition report detailing pertinent information.
Do a lien search
When buying real property or titled equipment, finding out if there are any liens on the equipment is relatively easy. However, there is a wide range of equipment that does not fall into either one of those categories. No matter what the equipment is, make sure it is free of liens before you hand over any money and take possession. The last thing you want is to have someone contact you after you’ve purchased the equipment claiming the person you bought it from didn’t have the right to sell it! If you are financing the equipment, in almost all cases the lender will complete this for you.
Considering the total cost of ownership
Doing a little extra research up-front can save you money in the long run by taking a holistic approach to the equipment investment. Other things to consider outside of the purchase price include:
- Shipping and installation costs: Depending on the size and location of the equipment, getting the equipment to your place of business can add on 10% – 30% to the cost. Consider negotiating the cost of the shipping with the vendor or finding a vendor who is physically closer to the location the equipment is being shipped.
- Either mandatory or optional service plans: Some equipment necessitates the addition of a service plan. While some financing alternatives, such as leasing, allow you to include this cost in the total amount financed, if you pay cash or use a bank loan, a service plan can add significant costs.
- Upgrades, additions and or add-ons: In many industries the environment is changing so quickly that businesses have to stay nimble to be competitive. Being nimble with your equipment should be part of this your long term strategy.
Some questions to ask to make sure your equipment can stay nimble:
- Are there upgrades I can make to the equipment should changes be necessary or will I have to buy an entirely new piece of equipment?
- If I have to buy a new piece of equipment, what are the disposition costs of the old equipment? If there an active market that allows me to recover my investment?
- Is there a more expensive model or option that will meet my needs over the total economic life of the equipment that negates the possibility I’ll have to upgrade components or replace equipment.
Consider all the financing alternatives: When it comes to small business financing, one size does not fit all.
To position your business for success, your best option is to establish multiple lending relationships so you have options available to you when you need financing. It’s common for small business owners to strategically use a blend of cash, loans and leases as a way to tap into the various benefits of each of these finance options – speed, tax write offs, off balance sheet financing, low rates, fixed payments, etc. Even though access to capital has diminished, the demand has not so it is important to keep in mind that your ability to access financing with favorable terms is highly depending on personal and business credit, collateral, transaction size and time in business.
Get your Paydex score
Paydex is a score given by Dun & Bradstreet that is intended to show how promptly a business pays their creditors. The Paydex score is used by underwriters to grant business credit in much the same way the FICO score is used for personal credit and personally guaranteed business debt. Paydex scores can be purchased directly from Dun & Bradstreet and are also available through ….. Ideally businesses with Paydex scores of 60 or greater have the greatest chance of obtaining financing.
Review your Dun & Bradstreet record
In addition to their Paydex score, Dun & Bradstreet maintains a database of information about businesses. This information can include what industry you are in, who the owners are, what year the business started, where the business is located and other important information that could affect financing approvability. For example, some industries are considered more risky than others. If your Dun & Bradstreet record lists your industry incorrectly, it could mean the difference between an approval and a decline.
Get your FICO score and credit report
Your FICO score is designed to predict the likelihood of the borrower going 90 days late with creditors in the next 24 months. This score is the primary metric used by most underwriters to determine whether or not to extend personal credit or business credit on a personally guaranteed business debt. Typically, a higher FICO score will mean a lower cost of funds and can also make the difference in whether or not you get an approval. It is also important to review your credit report prior to applying for financing to insure there is no incorrect information that could prevent you from getting an approval
Verify your Secretary of State has the correct business information
In order to minimize risk, when underwriters consider extending credit to a business, they will verify information listed with the Secretary of State. Common information that will be checked includes:
- Registration date: this is an indicator of how long the business has been in operation. Businesses that are less than 2 years old will generally have a more difficult time in getting financing or will pay higher than average rates.
- Verification of ownership: most Secretary of State filings include ownership that businesses are required to furnish during the registration process. Underwriters will want to fully understand the ownership structure of your business before extending any kind of credit. Don’t let record-keeping mistakes delay your financing approval – insure information is accurate with your Secretary of State
Subscribe via RSS
Follow on Twitter
Connect on LinkedIn
Connect on Facebook
Loading ...