When taking on an equipment finance agreement, most companies will want to understand a little bit more about what they can expect regarding their repayments. In this document, we’ll be taking a look at the unique factors that go into a repayment plan or simply the a to z of equipment financing, how they work and whether or not they can be modified.
Short term loans
Many finance agencies extend short-term loans to their clients and although these are a great way to receive quick cash from a lender that can be put to immediate use – the interest rates applied to these services can be a little higher than those that would be deemed lengthier in duration. This can sometimes lead to difficulties when it comes to repaying what’s owed over shorter amounts of time.
Equipment Financing Repayment Options
Long term loans
These solutions are ideal for any businesses that wish to borrow more than $5,000. By extending repayment periods the company will end up paying interest back for a longer period of time, but they will also be minimizing their monthly outgoings. This can reduce the stress and demands associated with meeting payment deadlines, while allow the company enough time to make money owed.
Flexible terms
There are some agreements that might feature variable terms, which can play a major role as far as interest rates are concerned. Before agreeing to any terms, it’s worth hiring a financial specialist to compare the conditions and policies between different lenders, just in case a better option may be found by going with someone else. Some lenders will require specific payments while rates are at a certain percentage based on the equipment financing rule book, while others may try to keep their payments as neutral as possible - so it can certainly pay to check these details ahead of time.
Weekly repayments
As their name suggests, these types of repayments occur on a weekly basis, and although most borrowers will opt for monthly alternatives, this type does have its advantages. For a start, a borrower will be able to pay off what they owe at a much quicker rate, and the more frequent the payments, the
Monthly repayments
Being the more commonly agreed-to option, monthly payments allow borrowers a full four weeks to prepare their budget. This can be very beneficial within a business that experiences a lot of internal and external transactions. One drawback is that these methods often feature a slightly higher interest rate, which can be anywhere between 0.1% and 0.3% extra, compared to weekly alternatives.
Bi-weekly repayments
Mixing the best of both worlds, these options are actually much rarer than you would expect, considering their versatile nature and money-saving potential. By paying every couple of weeks, a business will be able to pay back as little or as much as they can afford, with higher payments being subjected to a lower rate of interest.
There are several other options available to lenders, but the above are the most prominent. If you’d like further information relating to other types, it may be worth getting in touch with a lending agent or a third party advisor to help with your application.
