Not All Equipment Loans Are Created Equal

You have choices when it comes to where you finance equipment. It's important to make the right decision and compare key factors.

Money & Credit

Not All Equipment Loans Are Created Equal

You are ready to buy new equipment, and now you're looking at how to finance it.  What type of loan are you going to get?  That's up to you as well as where you apply for a loan. And, the “where” matters more than you might think.

While your first inclination may be to go to your bank, it might not be your best option. Unless you are an established business with substantial collateral, many banks may turn you away. Often times banks are not particularly interested in financing a stand-alone piece of equipment, versus a large commercial loan with more income opportunity. 

Another option for business equipment financing is a non-bank finance source. This may be a company who your equipment vendor recommends or an organization you've personally had business dealings with before. When considering these sources it's important to realize, as with any product or service, not all loans are created equal.  

So to make a decision on what loan is best for you, we encourage you to compare key factors, including: 

  • Fees & prepayment penalties. No one likes to carry debt, so what’s the problem with paying a loan off early? With some loans and leases you may be charged a significant early payoff penalty which will increase your overall expense. You may also find that you're paying all future interest at the time of payoff, which eliminates the benefits (interest savings) of paying early. That’s where some loan companies make additional profit. However, there are loan solutions that do not incur large fees or prepayment penalties, so be sure to explore this during the application process.
  • Other hidden fees and auto renewal clauses. It's important to review contracts before you sign. We often times review contracts before our policyholders sign and find hidden fees. There are things like auto renewal clauses that allow a company to extend the repayment term if you do not notify them within a specified timeframe. These extra payments can really add up.   
  • Rates.  While a factor you certainly will want to consider, do not base a loan decision on the interest rate alone. Other fees and penalties mentioned above can be far more detrimental in the long run.  Don't be misled by interest rates splashed in the media for home or auto loans.  These very low advertised rates are very seldom available for business equipment loans. 
  • Company background. Be sure to work with a company you know and trust to provide the best terms and service.

Still have questions about whether you are getting the best deal?  NCMIC Finance Corporation has qualified staff ready to review offers and lease or loan contracts you’re considering to our terms so you don’t get caught paying more than you should.  We are here to help and will continue to be the fair and honest solution for equipment loans.

The information in the NCMIC Learning Center is offered solely for general information and educational purposes. It is not offered as, nor does it represent, legal or professional advice. Neither does this information constitute a guideline, practice parameter or standard of care. You should not act or rely upon this information without seeking the advice of an attorney familiar with the specific legal requirements of the state(s) in which you practice. If there is a discrepancy between the site and an insurance policy you have with NCMIC, the policy will prevail.