A business must always upgrade to help them grow, whether getting a new car or machinery. Getting business finance heavily relies on the subject of equipment and what you use in your daily operations.
You might wonder, “How do I know if I can manage the payment and fees of an equipment loan?”
That’s where using an equipment loan calculator comes in.
Here’s everything you must know about using an equipment finance calculator and making informed decisions to fit your financial situation before you apply for a business loan.
An equipment finance calculator allows you to calculate the possible repayments of your loan term. It’s a user-friendly way to know how much it will cost to get financed by a lender.
You can use it to calculate the following equipment finance options before you apply:
- Asset lease – this is when the lender purchases the equipment for your business to use during operations. You can either pay the residual to own it, refinance it to continue leasing, or sell the equipment.
- Equipment rental – it’s similar to asset leasing, where you purchase equipment and repay it with fixed monthly payments. Once the contract is complete, you can rent it, return it to the lenders, or purchase it at a fair value.
- Cashflow funding – you use your future cash flow as security to borrow from lenders.
- Commercial chattel mortgage – it’s when the clients take ownership of the car or vehicle (chattel) when you purchase using the funds from lenders. You can pay it back monthly with a balloon payment to ease the charges.
Note that each type has distinct payment schemes based on what would apply to the loan.
Consider the different factors that might apply and talk to a professional for a more specific calculation based on your needs.
These are the common benefits of using an equipment finance calculator before you apply for a loan:
- It lets you know the range of your buying power.
- They’re programmed to be user-friendly and easy to visit if you need to calculate your equipment finance before application.
- It considers your loan term and other objectives before you consult a professional.
- Most equipment finance options consider your particular circumstances, whether they’re banks or alternative lending companies, which can help you adjust the range of your calculations.
- Most lending criteria can be flexible regarding monthly repayments and additional fees.
The application process for an equipment finance loan usually takes a few minutes, taking little to no time for any business.
With how fast it is, it’s common for a business to go straight to the finance part.
Adding the equipment finance calculator will help you make more informed decisions for your business.
Here’s a step-by-step guide on using an equipment finance calculator to calculate your business loan repayments when you visit any website for lending.
When you visit the equipment loan calculator of a lender, it will usually ask you about the following.
- Loan term – this is the length of your equipment finance agreement.
- Interest rate – this is the fixed interest rate that’s added on top of your loan amount.
- The amount financed – this is the money you’ll be borrowing with your loan, usually the same value as the asset you’re purchasing.
- Residual or balloon percentage – this can help reduce your regular payments. However, you’ll need to make a large one-off final payment at the end of your loan term. Your balloon payment is calculated based on the percentage of the total loan amount, which is common for vehicle purchases.
Answer these according to what you need so it can calculate the repayments for you.
You can see an estimate of your business loan repayments based on your answers.
If you want to adjust them, you can change your answers to the questions for a recalculation until you see a deal you prefer.
Contact your lender regarding the loan and request the specifics of your loan term.
Since the calculators only show the options, you can submit an application form on your lender’s site for a more specific breakdown of your repayments.
This can also help you negotiate with lenders based on your circumstances or ask for advice to ensure that you can cover any charges. Similarly, it ensures that the interest rates and additional fees are accounted for in your estimate.
Then, you can send in your application along with the required documents.
Once you’ve come to terms with an arrangement and your application’s approved by the lender, you can get your money.
Ensure you review the charges of your finance option before you agree so you can be on the same page as your lender.
Once you have your loan, you can contact your supplier to buy the equipment for your business operations, whether a car or other items.
The lender will finance and pay for the car or equipment themselves, so it will be prepared for your use.
At the moment, you won’t fully own your equipment. However, as the acting owner, you’ll be responsible for the equipment as you pay.
Repay the equipment based on your loan term.
Consider your balloon payments and other fees, as these are subject to change, depending on the market.
You will notice that the range of your repayments should be close to what your calculator showed. However, there can be changes in the long run, especially regarding the interest rate and other fees.
Let’s discuss the common questions about using an equipment finance calculator.
Interest charges for equipment finance can vary from lender to lender. It’s best to do your research, speak to a few lenders to compare options and choose the best one for your business.
The simple way to calculate this finance option is monthly payment = principal x (interest rate/12).
You can speak to an expert for advice on the specific numbers to get specifics, especially for the percentage of balloon payments.
A common example of equipment finance is acquiring a new car.
Once you get financed by the lender, you can use the car for your business operations while repaying.
At the end of your loan term, you’re required to deposit any remaining amount financed to own the car or get another equipment finance option for a different model.
Make your business life easier by thinking ahead for your equipment finance options.
Get an estimate of your equipment loan and better manage your payments using an equipment finance calculator for reference.