Last month, Goldman Sachs CEO, David Solomon told Reuters he believed there is a “reasonable chance of a recession in the U.S., but it’s not certain.” His statement is in line with what others in the financial industry are predicting. Fitch Ratings reported the U.S. economy will experience a recession beginning the second-quarter of 2023, but robust U.S. consumer finances will help soften its impact.
Meanwhile, the Federal Reserve has increased interest rates five times in 2022 alone, bringing up rates three percentage points this year, the most in a single year since the 1980s. The Fed showed signs of increasing rates by another 1.25 percentage points before the end of 2022, bringing the federal funds rate to 4.25-4.5 percent.
What are business owners who know they need to finance essential business equipment to do?
“If you’re balancing risks and you get less worried about the economy slowing and more worried about inflation just staying high and getting built in to the price and wage-setting process, then you might conclude you need to move faster,” says Bill English, finance professor at the Yale School of Management, who spent 20 years at the Fed. “Lags just make the problem harder because you have to be forward-looking and judge where the economy is going to be.”
“You Need to Move Faster”
Interest rates will not drop any time soon, that’s for certain. Locking in a lower equipment financing rate now will save you money compared to financing later at a higher rate. Not only do you benefit from lower rates before the Fed raises them again, you also gain the advantage of being able to competitively positioning your company against others who might choose to wait out high interest rates. With financed equipment, you could offer products or services your competitors don’t or at a price they can’t match.
An Equipment Financing Loan Lets You Reserve Cash
Financing allows you to keep cash on hand to ride out a slow month or quarter, hire or retain staff, or purchase materials or assets needed to bid on and win a revenue-generating project. With a recession looming, conserving your cash is important. Over the next two years business owners will want to stretch their cash flow, which isn’t possible if it’s spent on an equipment purchase.
Where You Can Find Equipment Financing Loans and Get Approved Quickly
Bank and Credit Union Equipment Financing
Banks and credit unions offer equipment financing loans. Unless your credit score falls in the good or excellent range, financing equipment through them is difficult or impossible since they usually approve applicants with top-tier credit scores.
If your credit score meets bank or credit union qualifications, expect a lot of paperwork and a long wait time for approval. If you have an urgent need for business equipment, don’t have a sizable down payment, don’t want liens placed on other business or personal assets or have credit blemishes, traditional bank or credit union equipment financing isn’t your best option.
Vendor Equipment Financing
Equipment vendors can suffer during a recession due to lower sales volume. Vendors create equipment financing programs through direct lenders, like Global Financial & Leasing Services (GFLS). These programs benefit both you and venders. You can explore financing a higher priced piece of equipment rather than settle for less expensive machinery priced within a traditional bank’s amount they approve you for. You may have more flexibility, especially when the vendor works with a lending partner committed to closing sales. You might even be able to take advantage of sales and discounts vendors offer to boost sales during a recession.
SBA Equipment Financing
SBA loans are an option if you have excellent credit and are growing or expanding business and need equipment to do so. But, the application and approval process can take months, and the majority of applicants are denied due to bad credit, character issues, lack of collateral, insufficient revenue or capital to repay, and inability to repay due to other outstanding loan payments.
Direct Lender Equipment Financing
GFLS is a direct lender, providing funding opportunities that typical banks don’t. In certain situations, we can use our connections to numerous banks and institutions to offer you the best financing solution for your credit profile. In the end, you get the right financing for your needs and faster access to the funds.
If you’re interested in getting equipment financing before rates go up again, our process is simple and streamlined. Talk to one of our equipment lease financing experts at 480.478.7400 or start your application today.