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Why Is Machine Tool Financing Better with a Private Lender than with a Bank?

Posted On: March 6, 2018 author Paul Kendall

When you are deciding how to acquire your new tools, an equipment leasing company is a very good option for your machine tool financing. A machine tool financing company will work with you to make sure you are able to have everything you need for your business to operate successfully as well as not overwhelm you with a huge up front cash outlay. 

The best equipment leasing companies will offer no payments for the first ninety days or $99 for the first six months to give you time to ramp up production and start seeing revenues before your regular monthly payments begin. 

Machine Tool Financing Advantages

Machine tool finance companies have an advantage over local banks because they will work with startup machine tool companies whereas banks will not unless you have a close relationship with them or a really high net worth. You can obtain your machine tool financing for your new company much more easily with a machine tool finance company because they require one payment up front and use only the equipment as collateral for the loan. With an equipment leasing company you wont have to offer up your home as collateral or put a lien on your entire new company. Lower up front money will allow you to work towards being profitable quicker in your own business.

Another advantage a machine tool leasing company has over a bank is that there are usually provisions that allow you to upgrade your equipment easily with your machine tool financing agreement. Flex leases will allow you to trade in half way through the term with out any extra money due so you get the latest machine tool equipment half way through the term. Industrial equipment leasing companies have ways to buy out the lease or create a new lease so you can stay current with your tools or even add more to increase your productivity. Either way you are in better hands with an industrial equipment leasing company that works closely with the industrial manufacturers than with a bank.

Bank Loans Are Credit-Driven

If you are a new company looking to obtain machine tool financing from a local bank you are going to have a hard time because local banks do not work with startups looking to finance industrial equipment. They want established companies with excellent personal credit scores being over a 700, proven profitability and a track record of success. If you're a new manufacturing company, then going to a local bank, even your own bank, may be a waste of time.

If you were able to obtain your machine tool financing with a bank, then you will run into another problem that would not be an issue with an equipment leasing company.  Banks usually require large down payments of around 20% or more depending on your situation. This can be a huge burden on your start up capital and businesses cash flow for hiring new employees and new business location rent. The point of machine tool financing is better cash flow, but if you are behind from the start after a large down payment on your tools, that is not a good way to begin your business. The smarter way is to lease equipment that depreciates and pay cash for things that appreciate. 

Qualifying Through A Machine Tool Financing Company Is Fast

One of the main benefits of equipment leasing companies is the ease of the application and speed of the approval process. Equipment leasing companies usually have an online application that you can fill out in minutes. Once you submit the application, the approval for your machine tool financing could be as quickly as one to four hours. The best industrial equipment finance companies funding department can even have your money to you in about the same time frame after you sign the equipment leasing agreement. When you take the time to fill out the application, it shows that you are ready to start your business and waiting delays that process, which is not ideal.

If you go through the banks to try and receive machine tool financing, they will not be so quick to approve your application. They have a number of steps that they go through before even looking thoroughly at your application, much less approving it. Banks also seem to be in the business of denying applications for silly reasons whereas leasing companies seem to want to find a way to approve your request for machine tool financing.

In today’s society, the online application for machine tool financing is standard and the equipment leasing companies are no exception. The difference is that the equipment leasing companies usually have a quicker application, which is incredibly beneficial when you are trying to get your machine tool financing started. Bank loan applications often take a lot of time and effort to complete, and they often come back with a big fat “no,” even for the most qualified individuals or businesses.  

Uses for Funds Are More Versatile

When you are beginning your business, knowing how your money will be used is important. When you get your machine tool financing through an equipment leasing company, you are able to use more of your capital for the daily operations of the business since a lower down payment is required.

Being able to have your business operate without being tight on funding is as important as having the very best tools on the market. Your capital is best used for your business, not your leasing contracts or buying very expensive equipment outright.

A machine tool finance professional can give you up to 20 different payment scenarios. You will typically see fixed monthly payment terms from 24 to 84 months. You can structure your agreement as an Equipment Finance Agreement, $1 Buy out, 10% PUT or Fair Market Value purchase options. Machine tool finance companies will offer fixed level monthly payments and deferred payment programs such as no payments for the first 90 days or $99 for the first 6 months. 

Since you should be planning on operating your business for years in the future, it is obvious that equipment that you receive through your machine tool financing will eventually become obsolete. When that happens and you need to look into new equipment and tools, an equipment leasing company is better prepared to help you with that than a local bank.

Even if you have created all the necessary aspects in your business to obtain a bank loan, utilizing an equipment leasing company for your machine tool financing is the best way to go.

If you decide to proceed with a bank loan, those loans are usually used for operational expenses like payroll, expanding the business to new locations, or other operational functions.

When you are looking at your machine tool financing or any equipment needs, machine tool leasing companies provide you with the best options and there is usually no limit on how you utilize the funds. They will pay for warranties, freight and taxes. 

Machine Tool Financing Is Better With Equipment Financing Companies

When you are looking at starting your business, then equipment leasing companies will work with you on your machine tool financing to help you structure your monthly payments to work around your budget. They also make it easier to upgrade your equipment when it is needed to either obtain newer tools or expand your business to increase productivity.

Local banks are less likely to work with you on creating flexible terms where the  equipment financing companies understand that you need to be able to operate your business and make a profit or else your business will not succeed. 

Equipment financing companies are there and ready to help you with your machine tool financing so you can start your new business or expand your existing business.

Make The Right Decision to Finance Machine Tools

When choosing your financial partner, their terms and policies must be appropriate to your business. Make sure to study their terms carefully and determine if it suits your budget. Only borrow the amount of money that you think your business can repay. Avoid getting too much equipment at once because debt is the number one reason why many businesses end up in bankruptcy.

Aside from the money related matters, also consider the process of their application. If you immediately need the money, avoid companies that have a long approval process. They usually talk in circles and you’ll still end up being denied in the end.

However, among the best equipment leasing companies that offer machine tool financing comes Trust Capital. The process for applying will only take a minute or two because they have a one-page application on their website. Trust Capital can approve your application in just two - four hours.

Trust Capital has everything you’re looking for in a a machine tool finance company… and more.  They will help you gain a faster return on investment, provide the most competitive rates, and even introduce you to trusted equipment vendors! Machine tool financing with Trust Capital  doesn’t require a down payment at all which also helps you save on capital. You can acquire the machine tools within hours after your application's approval and get machine tool leasing even with bad credit.

All you need is to visit the Trust Capital website and apply online for a no obligation approval.

Having the most reliable and upgraded machine tools for your business, acquired with affordable and flexible monthly payments, can have a lot of benefits for your business.  With machine tool financing you get section 179 tax benefits. With the passage and signing into law of H.R.1, aka, The Tax Cuts and Jobs Act, the deduction limit for Section 179 increases to $1,000,000 for 2018 and beyond. The limit on equipment purchases likewise has increased to $2.5 million.

Click here for a machine tool financing calculator to calculate how much your machine tool financing payments could be and how much machine tools you can afford to buy based on your monthly budget. 

For more information about machine tool financing, you can contact Trust Capital at (866) 458-4777 to speak with a machine tool finance specialist that can take your application over the phone.

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