Article created in collaboration with DLL, a global financial solutions partner
For many small-business owners, financing is one of the most intimidating and challenging parts of owning a business. It’s also one of the most important.
For a tree care contractor, financing can be essential to getting the equipment you need to do your job day in, day out.
Here is some information that may be helpful as you navigate this challenging, but crucial, issue. Keep in mind these are general tips and owners should speak to their own financial expert for specifics about their business. Individual circumstances and conditions may vary and the information contained herein may not apply in all situations.
What financing options are available to the average business owner?
There is a wide variety of traditional and non-traditional funding sources a person could draw from. Examples include local banks, which may be able to provide funding or help a business owner understand the best avenue to obtain funding, and the Small Business Administration.
What type of information will a lender ask for?
Before lenders make financing decisions on equipment purchases, they want to understand the business’ financial health — the state of its financial situation — and get a clear picture of how the equipment will be used. This could include the background of the company, conditions of the work environment, average hours of use for the equipment throughout the year and any details on equipment trade-ins or down payments. A report summarizing a company’s current financial position, often referred to as a financial statement or shortened to “financials,” is sometimes needed if the equipment price exceeds a certain threshold.
What are some factors to consider when deciding whether to purchase or lease equipment?
It is important to know the long-term goals of the business. If you are interested in owning the equipment, a loan is the best financing solution. If the owner would like the flexibility to return the equipment at a later date or prefers to upgrade equipment more frequently, a lease may be the best solution.
How can a business owner keep capital costs down?
Capital costs are onetime expenses to be used in the production of goods or rendering of services. Buying equipment is an example of a capital cost. Financing is one of the tools that can assist in keeping capital costs down. Most importantly, financing enables business owners to conserve their cash, allowing them to budget their equipment costs over the term of a loan or lease instead of spending that cash upfront. Depending on the type of financing, owners can often save on income taxes, replace equipment more frequently and preserve their bank lines of credit for other business needs.
What are some other tips for small-business owners?
- A common mistake is not putting enough equity into a transaction. Trading in a used piece of equipment or making a down payment will help to lower the monthly payment over the life of the lease or loan.
- Develop an adequate business plan.
- Do not start a business with a large loan.
- Keep your expenses under control.
- Carefully consider how many employees you will need.
- Have the appropriate amount of building space for your business.
- Have a plan for collecting bills.
- Have a plan in case you run into cash flow issues.
About DLL
DLL is a global financial solutions partner working in Agriculture, Food, Healthcare, Clean Technology, Automotive, Transportation, Construction, Industrial Equipment and Office Technology. We collaborate with equipment manufacturers, dealers and distributors to enable businesses to obtain and use the assets they need to contribute meaningfully to the world. DLL delivers original, integrated financial solutions to support the asset life cycle from leasing, vendor and commercial finance to remarketing. In addition, we offer mobility solutions, factoring and consumer finance. DLL’s 5,500 members support its partners in 36 countries. The company is a fully owned subsidiary of Rabobank Group. www.dllgroup.com