Used Equipment Financing

Pre-owned equipment benefits include:

• Reduced cost of acquisition compared to new machinery
• Lower depreciation compared to new equipment
• Immediate availability

New machines frequently provide:

• Increased capability and efficient energy use
• Improved features that increase productivity and throughput
• Lower maintenance costs

As you assess various equipment options, understanding your business's requirements, challenges, and goals can help determine if new or used machinery is the right choice for your business. The right financing partner can offer options for either type of investment.

• Does it have maintenance records? If so, be sure to take the historical maintenance information
• Just like consumers request the Carfax report on a car, ask if there is an inspection report available
• Understand what type of accessories or add-ons it has over a “base model”
• Check the hours/miles of use
• Inspect the machine - download our General Inspection Checklist 
• Ensure you can get clear title to the equipment. Make sure there are no outstanding liens filed.

• Cheaper than market value. Understand the market price for the equipment you are buying. If the price is significantly lower than the going market value, it’s probably too good to be true.
• Lack of background history. A reputable buyer should be able to provide you with background information.
• No maintenance records. This is a red flag that the equipment may have issues.

Questionable reputation. Refer to online reviews to conduct due diligence on the seller

While new machines come with the latest and most up-to-date features, they often also come with sizeable price tags. Depending on the industry, type of equipment and business needs, sometimes a less expensive used machine may be a better option.

New machines frequently provide:

• Increased capability and efficient energy use
• Improved features that increase productivity and throughput
• Lower maintenance costs

Pre-owned equipment benefits include:

• Reduced cost of acquisition compared to new machinery
• Lower depreciation compared to new equipment
• Immediate availability

As you assess various equipment options, understanding your business's requirements, challenges, and goals can help determine if new or used machinery is the right choice for your business. The right financing partner can offer options for either type of investment.

If you don’t have cash available, the obvious choice is to finance your new equipment purchase. However, there may also be times when equipment financing is a good choice even if you do have the available funds. 

Spending all or most of your cash to purchase equipment can leave you without money for emergencies or daily operation costs. Yes, you will pay interest, but you’ll also safeguard your cash flow for additional opportunities or expenses.

While functioning equipment is essential for running your business, the equity from your machines can be used for more than just resale or trade-in value. Businesses can use this equity to get working capital loans to fund operations, buy additional equipment, or borrow cash for unforeseen expenses. Without equity in your equipment, these financing options can be limited.

Some questions to ask when thinking about building equity in your equipment include:

• Are you interested in expanding your business or buying out a competitor?
• Would you ever need to replace equipment early?
• Is there a possibility that you could lose a material contract?
• What is the likelihood you may have a large unforeseen expenditure?

Banks look at your financial statements to determine the value of your equipment, but typically, they are only looking at the book value from an accounting perspective. Your equipment’s book value refers to the purchase price less accounting depreciation; the market value is the amount your equipment is actually worth, in most cases, its resale value. 

A good financial partner will not only look at the book value of your equipment but will also take into consideration the real equity you have accumulated. Finding a partner who understands your business and the value of your equipment is invaluable when you are trying to purchase new equipment, obtain capital for growth, or to meet expenses.

Their expertise can help you answer these questions:

• How much true equity do you have in your equipment?
• What are the best ways to use your equipment equity to accomplish your financial goals?

For some businesses, cash flow, liquidity, and monthly payments are most important. For others, interest rate and borrowing costs (the amount paid over the lifetime of the loan), or building equity are a priority. A longer payment term with lower monthly payments can help businesses that are concerned about maintaining cash flow liquidity. If the desire is to pay off the loan sooner and reduce borrowing costs, then a shorter loan term with higher monthly payments is a better option.