The Facts of Financing Equipment for Your Facility
By Lucy Burke
Many pet service business owners have the same question when it comes time to purchase equipment for their doggie daycare, kennel or grooming business: Should I pay cash for my next equipment purchase or consider financing it?
There’s a saying in our industry: “Pay for today’s equipment with tomorrow’s dollars”. And for pet service providers, this can make a huge impact on how quickly they reach profitability and achieve growth. With the addition of items like synthetic grass for the outdoor play areas, kennels, tubs and grooming tables, you are not only able to attract more customers, but are also able to better accommodate them.
So, when does financing equipment make sense?
The natural assumption is that a start-up or young business would be more likely to pursue equipment financing since cash on–hand isn’t usually available. But then again, if you don’t plan on expansion when you start the business, you are not planning for success! Therefore, when you consider trying to expand your operations, a single outlay of cash can oftentimes set you behind. You can get yourself to profitability faster by financing the equipment you need in order to grow.
Everyone’s needs and how they approach them are different, so how do you know what is going to be the best option for your business? A lot depends on what equipment it is you need and how quickly you need it. Case in point—if an urgent need arises, how will you pay for the equipment required? Elements like this factor into whether you pay cash now or finance over a period of time. You should also be taking into consideration how long it will be before you will need to upgrade; sometimes it’s easier to roll one lease into another or even do a leaseback of your old equipment in order to purchase the new equipment when it’s time. This is a lot quicker than trying to find a buyer for your old equipment and getting enough cash to fund your new purchase.
Should I secure financing prior to talking with equipment vendors?
Our response is always yes, even if you end up paying cash in the end. It never hurts to get approved for financing as it gives you insight into what your complete landscape of financial options are—and this can be extremely helpful. Too often, customers do not buy (or they under buy) because they are limiting themselves to the amount they have available for a cash purchase. This can end up slowing otherwise great growth potential. Financing will provide you with options so you can make the best decision to grow your business. Even used equipment can be financed!
Benefits of Financing vs. Paying Cash
Less Cash Down: Save your limited cash for other areas of your business; like working capital, expansion, improvements or marketing.
Conserve Capital: Rather than paying one lump sum for your equipment, make smaller payments while the equipment can immediately start generating revenue.
Customize Your Terms: Set customized payments to match your cash flow and even seasonal income fluctuations.
Opportunity to Choose a Financing Partner vs. Bank: When you choose a financing partner, you gain ongoing support for your growth, not just for one purchase.
What to Look for When Choosing a Financing Company
When you are considering financing equipment, it comes down to what is most important to you and your business. To keep your options open, find a financing company that is vendor–agnostic, meaning you choose the manufacturer and distributor you want to buy from. Some financing providers only work with certain vendors and manufacturers which benefits them but creates limitations for you.
FAQ’s on Equipment Financing:
1. What determines my rate?
Usually your personal credit score and financial condition combined with your time in business.
2. What is an annual option?
For very seasonal businesses that make the bulk of their money once a year, a 2–5 year annual payment is made.
3. How long do I finance for?
This depends on your budget, since the longer you finance, the lower the monthly payment. On average, most finance companies offer 12–60 month terms.
4. As a start–up, what are my chances for financing?
Not all financing providers will invest in businesses operating two years or less. Do your homework and find the ones who will.
5. How much do I need to put as a down payment?
This can range anywhere from zero to three months of payments.
6. Do I own the equipment or is it just like renting it?
While it is technically a lease, you own the equipment at the end of the term—typically with a $1.00 buyout. You usually also have the option to buy out early with no early termination penalty, but again, do your homework to see if the provider you choose applies penalties for early buyout.
7. What kind of equipment can I finance?
If it’s for your business, chances are you can finance it! Kennels, cages, grooming tables and sanitation systems are all examples of the bigger ticket items that financing is beneficial for. You can also finance fencing, facility build–outs and artificial turf. Most banks won’t touch those items, but an equipment finance company will!
So, as you look to grow your pet services operation or are ready to embark on a new one, just keep in mind that there are many funding options out there for you to consider when investing in the equipment you need. Keep in mind that you don’t have to put off investing in the tools you need to grow or kickstart your business just because you don’t have the cash on-hand. Consider equipment financing as a viable and affordable means to pave your pathway for success.
Lucy Burke is a Business Development Specialist at North Star Leasing and has been providing Equipment Financing to the Pet Services industry for almost 8 years. Over the years she has helped both start-ups and established businesses alike to get financed for the equipment they need to be successful. She’s financed everything from kennels, synthetic grass, wash tubs, grooming tables and sanitization systems–just to name a few. Contact Lucy with any of your equipment needs to help you grow your business. [email protected]