The interest on a loan is certainly the main contributor to the overall cost of equipment finance. For businesses looking to reduce the cost of their loans, the main focus is sourcing cheaper interest rate equipment finance for acquisitions. For businesses in difficult circumstances for securing affordable finance such as having bad credit or in the process of setting up a new business this can be a major challenge, but not insurmountable. But even for businesses with good credit situations there are still ways that they can secure an even cheaper interest rate.
The objective of securing cheaper interest rate equipment finance can be achieved if business operators consider a range of strategies prior to submitting a loan application.
Equipment Finance Interest Rates
Timing acquisitions can definitely play a part in achieving a cheaper interest rate. The current scenario is very good for businesses looking to invest in new plant, machinery and equipment at cheap rates. The cash rate is at the lowest level ever set by the RBA and that has flowed through to most lending markets.
But delaying acquisitions could result in not achieving as low a rate as acting now. The latest figures have revealed another drop in the unemployment rate and inflation is edging up. These are the two key indicators noted by the RBA to trigger a rate rise.
Some analysts have bolded predicted that rates could rise much earlier than previously indicated by the RBA. Whether that will eventuate and exactly when rates will be increased is not a known at the moment.
Tip: don’t let complacency reduce your prospects of the cheapest interest rates. Rates will go up at some point in the coming years. We offer fixed interest rates on equipment finance so a loan acquired now at the lowest rates can be enjoyed over the full term of the finance up to 7 years.
Choice of Equipment
Unless specifically indicated otherwise, the interest rates advertised by lenders are for new goods and for businesses with good credit rating. The interest rate offered on finance for used equipment may be higher than for new.
Tip: weigh up the option buying new compared with buying second-hand. We can provide a quick quote for both options to provide you with a basis for comparison. While the purchase price of new will definitely be higher than for used, when all the costs, including the interest on the loan, as well as the other benefits are considered, it may be a smarter move to go new.
Considerations may include the reduced maintenance and potential down-time from new equipment; fuel and operational efficiencies offered by newer models; improved productivity; and the ability to take on projects not as suited to used, less-reliable equipment.
Choice of Finance Lender
From our standpoint as a broker-style lender, the choice of which lender a business selects for their finance can be critical to getting a cheaper interest rate. This decision also takes in the choice of whether a business sources their own finance or elects to enjoy the benefits of engaging a lender such as Jade Equipment Finance.
DIY is incredibly time-consuming and contacting a number of banks and lenders for quotes can hamper the chances of a cheaper rate as multiple applications can be recorded on a credit report. Jade handles the loan sourcing so our customers have a huge area of the lending market covered, professionally, quickly and efficiently.
Interest rates and equipment finance conditions vary across the lending market. Especially in the area of heavy equipment, tapping into the specialist non-bank lender sector can be extremely advantageous in securing a cheaper interest rate.
Tip: not all specialist non-bank lenders deal directly with businesses. They operate through their selected broker network. We have accreditations with these specialist lenders and provide access to this market.
Choice of Finance Product
The interest rate varies across the range of equipment finance products. Chattel Mortgage (Equipment Loan) and Commercial Hire Purchase (Hire Purchase) offer the lowest, then Lease and Rent-to-Own (Equipment Rental) is the highest.
While the full scope of benefits of a finance product should be assessed against the objectives of the business, the interest rate may also influence the decision.
Tip: use our finance calculator to see the difference in loan repayment estimates for the different finance products.
Improving Finance Application
This is a very important step and particularly for new businesses just starting out but equally relevant for those that have been in operation for a long time. The credit score or profile forms an important part of the loan approval process.
For new businesses, the credit profile of business directors and owners can be included as part of the loan application assessment process.
Tip: businesses and individuals can get a copy of the credit profile and look to fixing any errors which it may have.
Another way to improve the loan application in order to achieve a cheaper interest rate is to improve the business balance sheet. This may involve reducing debt levels by paying out other loans prior to making application for new finance.
The Bottom Line
Achieving cheaper interest rate equipment finance is attainable and at Jade Equipment Finance we make it accessible to all types of businesses across all industries.
To secure cheaper interest rate equipment finance speak with a Jade Equipment Finance consultant on 1300 000 003
DISCLAIMER: IF MISINTERPRETATIONS, MISREPRESENTATION OR ERRORS EXIST IN THIS ARTICLE, NO LIABILITY IS ACCEPTED. THE INFORMATION IS PROVIDED ONLY FOR GENERAL PURPOSES AND NOT IN ANY MANNER INTENDED AS THE ONLY SOURCE FOR MAKING FINANCIAL DECISIONS. THOSE THAT CONSIDER THEY REQUIRE ADDITIONAL GUIDANCE OR ADVICE SHOULD REFER TO AN INDEPENDENT FINANCIAL ADVISOR.