By following best practices, you can increase your chances of obtaining the waste equipment you need to grow your business, secure the best equipment loan for your financial needs, and make a well-informed decision for your waste hauling and recycling business.
By Julie Murphy
When it comes time to acquire new equipment (or “new to you” if you are purchasing used equipment) for your waste and recycling business, there are some best practices you should follow to ensure your business needs are met and the process goes smoothly.
Determine What to Purchase
1. Identify your equipment needs: Determine the specific equipment you need for your waste and/or recycling operations. Consider factors such as capacity, efficiency, labor needs, and suitability for your business requirements.
2. Assess your budget: Evaluate your budget to determine how much you can afford to spend. Be sure to consider expenses associated with equipment ownership, such as fuel efficiency, maintenance, and insurance costs. This will help determine if you will purchase new or used equipment. If you are considering financing the purchase, consider how much you can afford to borrow, and repay comfortably.
3. Negotiate the purchase price: Work with your equipment dealer or equipment seller and negotiate the equipment price. Be sure to consider any customization, accessories, warranties, and tax, tag, and/or titling costs.
4. Evaluate total cost of ownership: Consider the total cost of ownership over the life of the equipment, including maintenance, repairs, and depreciation. This will help you determine if the purchase is financially viable, if the equipment will provide a positive return on investment, and if it will have long-term use.
Understand the Equipment Financing Process
1. Research reputable lenders: Look for lenders who specialize in equipment financing for the waste industry. Research their reputation, experience, interest rates, terms, and customer reviews to ensure they have a track record of working with businesses in your sector. Working with a lender that has experience with the equipment you purchase, and knowledge of the waste industry, can help the process go more smoothly.
2. Review the lender’s reputation for customer service and support: Read reviews or talk to other businesses that have worked with them to ensure they provide excellent customer service throughout the loan process and beyond.
3. Prepare financial documents: Gather all the necessary financial documents lenders typically require, such as your business plan, articles of incorporation, financial statements, tax returns, credit information, and contracts for work. Having these documents organized and readily available will speed up the loan application process.
4. Compare loan options: Obtain quotes and loan proposals from multiple lenders. Compare interest rates, loan terms, down payment requirements, repayment schedules, and any additional fees or charges. This will help you find the most favorable terms and choose the lender and loan that best suits the needs of your business.
5. Understand the loan terms: Thoroughly review the loan agreement before signing. Pay close attention to interest rates, loan terms, repayment periods, any prepayment penalties, and any potential collateral requirements. Seek clarification on any terms or conditions you do not fully understand.
6. Negotiate when possible: Do not be afraid to negotiate with lenders. If you have a strong credit history or collateral, you may be able to secure more favorable terms. Discuss your specific requirements and financial situation to see if there is room for negotiation.
7. Understand the payment process: Payment options typically include mailing of physical checks or electronic payments drafted from a bank account via ACH (automated clearing house) payments. Electronic bills and payments are the most time and cost efficient and ensure your payment is always made on time. Regardless of which you choose, be sure you understand the payment due dates to avoid incurring any late fees or insufficient fund issues.
8. Seek professional advice if needed: If you are uncertain about any aspect of the loan or equipment purchase, consult with a financial advisor or industry expert who can provide guidance based on your specific circumstances.
Additional Considerations
1. Explore the tax advantages of your equipment purchase: Under Section 179 of the IRS Tax Code, equipment purchases can often be fully expensed in the tax year in which they were put into service, whether you pay cash or finance the purchase. This can result in significant tax savings. It is important to consult your tax advisor to determine how you can best take advantage of the deduction.
2. Ask about down payment options: If the amount of the down payment is larger than you feel your business can handle, there are potential loan structuring options you can explore. One option is to refinance existing equipment to leverage its existing equity to get working capital to use for a down payment. Another option that some lenders can provide is to structure the loan with larger payments in the first few months of the loan, essentially financing a portion of the down payment, but in only a few months of the loan.
3. Prevent wire fraud: Large financial transactions are targets for scammers, often attempting to misdirect down payments, typically initiated via e-mail. It is important to verify any wire instructions directly via personal phone contact, with your lender. Any attempt to change wire instructions at any point in time during the purchase or financing process should be seen as a red flag, considered suspicious, and reported to your lender.
Explore Your Options
By following these best practices, you can increase your chances of obtaining the waste equipment you need to grow your business, secure the best equipment loan for your financial needs, and make a well-informed decision for your waste hauling and recycling business. Your equipment dealer and equipment lender should be willing to help you explore options and answer questions to ensure a successful transaction for all parties. | WA
Julie Murphy is the VP of Marketing for Commercial Credit Group Inc. Julie has two business degrees, but learned about budgeting and household finance from her parents. She has managed budgets as high as $6 million and absolutely hates to waste money. She joined CCG in 2016. Julie can be reached at [email protected].