When “Scary” Payments Aren’t So Scary
If you have been putting off leasing equipment for your business because of your less-than-perfect credit score and fear of a “scary” lease payment, stop. You may be stunting business growth for no good reason. Even if you fall in the B or C credit tier, there is much more to the equation than your equipment finance rate and monthly payments.
In fact, we’re going so far as to say that if the equipment you finance is essential to your business and will generate profit then the finance rate shouldn’t affect your decision to lease. You already know whether new or upgraded equipment is essential to your business. Determining if it will generate revenue (and how much) is a matter of analyzing the numbers.
The best way to illustrate that what you stand to gain is more important than what you spend on a payment is by example.
You have your eye on a piece of equipment that you can invoice $100 per hour in use. Based on competitive research, a conservative estimate of use per week is 30 hours.
$100 x 30 hours = $3,000 in billing per week
$3,000 x 4 weeks in a month = $12,000 in billing per month
Of course, operating and labor costs have to be factored in, and you’ll want to be generous in estimating these. For our example, we’ll use $45 per hour.
$45 x 30 hours = $1,350 in expenses per week
$1,350 x 4 weeks in a month = $5,400 in expenses per month
$12,000 in billing per month – $5,400 in expenses per month = $6,600 PROFIT
Now, let’s look at the equipment lease payment.
Falling in the B or C credit tier, your rate, and therefore payment, will be higher than a rate based on a better credit, which is a reason to improve your personal and business credit score. However, your credit score is what it is for the time being. Your rate and monthly payment will reflect that.
$6,600 monthly PROFIT – $1,200 per month payment = $5,400 per month PROFIT
With a better credit rating, the payment might fall in the $700 range
$6,600 monthly PROFIT – $700 per month payment = $5,900 per month PROFIT
Do you want to spend more on a monthly payment because of less-than-perfect credit? Of course not. But can your business growth afford to be stunted because of it? Usually not. Even paying a higher rate due to poor credit, you’re still generating an extra $5,400 a month profit. And, every month you make your equipment lease payment on time, you’re improving your credit score. The next time you lease equipment you’ll be better positioned to earn a lower rate. Last, but not least, there are many other benefits to consider when leasing equipment that outweigh the expense of the lease payments.
When Other Lenders Say No, We Often Say Yes
Global Financial & Leasing Services (GFLS) strives to approve equipment leases regardless of your credit score. We work with business owners across many industries, such as health/medical, construction, restaurant, machinery/manufacturing, printing, logging/forestry and many others. Our team listens to your story and business goals. We help you run realistic numbers to determine whether leasing equipment with what may seem like “scary” higher rate makes sense for your situation and growth rate.
For an objective look at what’s possible, talk to us.