When it comes to seeking a loan for purchasing used equipment, lenders are interested in the same things as contractors, says Steven Nenn of Wells Fargo Equipment Finance. Such information includes clear title to the machine, past use and maintenance of the equipment, and machine hours.
When examining loan offers, Nenn recommends making sure the contract states the interest rate; finding out if there are penalties for paying off the loan early; and examining the lender’s reputation, including for customer service.
Mark Bainbridge, executive Vice President of Cat Financial, says you should expect shorter terms, higher rates and, in some cases, larger down payments, for used equipment financing. He also recommends adding extended protection plans or service agreements with the financing to help manage unexpected repairs and expense that are more common with used equipment.
If a contractor’s credit score has taken a hit, Nenn suggests explaining to the lender what happened to cause the credit ding, what’s been done about it, what jobs are lined up and why the equipment is needed.
And if your business hits hard times, Nenn says, keep your lender informed.”If you’re afraid to call them back and let them know there’s a problem, the lender is going to assume the worst.”