Machinery Finance can be a big help, especially if you are looking for a growth in your business. There are multiple banks and other lending institutions who offer these loans. The terms and conditions are different with each lending institution and even banks. Banks and lending institutions are extremely cautious and do a detailed verification on their end when they agree to lend you the required finance. Checking out the different institutions and banks before you apply for this loan is important. A check list can help you in making the right choice.
The Fees Charged
Consider loans that charges a penalty for early pay-offs. This can increase the rate of interest and also your expense overall. The loan companies tend to profit with this. Before you apply to a specific company for your machinery finance look for the ‘no charges’ factor.
Renewal Clauses and Hidden Fees
It is advisable to let an experienced and knowledgeable professional go through the terms and conditions. They look for hidden terms and charges which can be a burden for the borrower. You must also look for the clauses pertaining to auto renewal. This tends to extend the repayment term in case the borrower has not notified them in the specific time frame.
Rates of Loans
Penalties and other fees besides the rates of interest need to be checked out before you apply for machinery finance. This gives you a fair picture of the amount you will be paying when you take a loan from a specific company. The advertised rates are normally misleading.
Credit Rating
Before you apply for this machinery finance, ensure that your credit rating is up to the mark. Most lending institutions tend to obtain a credit report. This report includes not only your credit score but also payment history and information of public filings. With negative reports, you might find it difficult to get your loan approved.
Collateral Available
Most banks require collateral for the purpose of security. This protects the banks from possible defaulters, as the collateral is seized and sold to recover the money. For financing machinery, you might have to pledge the title of the equipment for the required loan. As, all the machinery is not suitable for the purpose of collateral and you might have to offer other assets to the lending institution.
Financial Standing
For machinery financing, customer might be required to provide the latest statement and also the previous years for comparison. This includes an
*Income Statement showing the performance financially over the specified period
*Balance sheet which includes a statement of assets, liabilities and the net worth.
*Cash Flow statement which includes the cash outflows and inflows.
These statements offer the required knowledge to the lending institution of the company’s weaknesses and strengths and also provide an idea on how soon the company can pay off the loans.
Bank Relationship
Ensure you apply for a loan with a bank where you have been a customer for a long period of time. There are better chances of the loan being approved by lending institutions you have relationship with.
The above-mentioned factors need to be considered before you apply for a loan. This can help in speeding up the procedure. Make sure to check the reputation and experience of the people with the lending institution before you choose one for your machinery finance. The type of agreement worked out depends on the type of machinery for which you require finance. Depending on the bank, you may also have to provide personal guarantees from the individual owners of the company. Check all the details before you initiate the process with a specific bank or lending institution.
