Equipment financing is a great option for small business owners who can’t purchase the equipment they need outright. Unfortunately, many equipment leasing companies bury the true costs so that you don’t realize what you’re paying until you’re so far in that it’s difficult to back out.

While there are online equipment financing calculators, many of them only reveal the lowest cost, which most shoppers do not qualify for. Also, most of the ads that you see only discuss 4% rates, which is not the norm.

Problem with Deceptive Leasing Calculators

Equipment leasing companies that do this believe that if you know what it will really cost you, they won’t be able to get your business. They want to make you dumb. However, most small business owners want to be informed so they can make smart business decisions based on facts.

For example, if a piece of equipment is going to cost you $800 per month, but you’ll make $3,800 per month with it, you can use that information to determine if it makes sense for your business.

The truth is, if your credit score is low, your payments may be double or more than what the payment calculators tell you- depending on your particular situation.

Why are Equipment Lease Payments so High?

Honestly, not all equipment lease payments are high- it depends on your credit score and cash flow. If these are low, equipment leasing won’t be cheap. After all, for lenders, loaning money to small businesses for the purchase of used equipment is risky.

For example, let’s say you purchase a car to drive to work in. This is low-risk lending because you have a job and will probably be able to make the payments. If you don’t, the lender just has to send a tow truck to pick it up and it can re resold easily.

On the other hand, if you have an equipment loan and your business has a hiccup and doesn’t have a high profit margin for 6 months. Plus, equipment tends to depreciate quickly. The lack of funds makes it hard to make your payments. Unfortunately, if you don’t pay, it’s much harder for the lender to send a tow truck to secure it. Plus, since it’s equipment, it’s harder to find a buyer for it- especially if business is down across the industry.

Therefore, when you are purchasing equipment, unless you finance through the dealer, the rates charged by financing companies are fair. After all, in order to remain in business, the lender must make enough to compensate for the people who can’t or don’t make their payments and make a profit.

Ready to Secure Equipment Financing?

If you need equipment to start a new business or want to upgrade your current equipment, contact Abundant Wealth Financial for more information. We can help you understand your options and guide you through the process.