Just 365 days ago, money was significantly cheaper than it is today. The federal funds effective rate was teasing zero, at 0.08% in February of 2022 and only 0.33% in April of 2022. Hesitancy to borrow, whether in mortgages, auto loans, or equipment financing, was virtually nonexistent. Just 12 months later, the federal funds effective rate is above 4.5%, and we are facing unprecedented economic conditions. Drastic inflation, major bank failures, inconsistent equipment prices, and high interest rates; have deterred consumers and small businesses from making significant investments in fear of over-extending themselves. Rates are high, and economists believe they will remain high for at least another year. However, the wash and detailing industry grew coming out of the pandemic, and experts believe it will continue to do so at a rate of 5-7% per year. So, what does that mean for a growing business in this space? It is more important than ever to have a trusted equipment finance partner to support your growth.
The risk and portfolio management teams at Blue Bridge Financial, Inc. came together and identified 3 key characteristics and offerings that you should be looking for when financing your next equipment purchase.
1. Set a monthly budget and utilize a lender who will work within that budget!
Before buying a new piece of equipment, it is crucial to consider how much revenue you expect to generate from that equipment, and this will enable you to determine how much you are comfortable spending on the equipment each month. Blue Bridge Financials’ goal is to support business growth, which is why the aim is to issue an approval for the customer that fits within their monthly payment budget.
2. Utilize pre-approvals and secure your rate ASAP!
The rate environment may seem tough to navigate now, but many experts believe rates could continue to increase throughout this year. That means it is important to get your financing approval as soon as you are considering adding equipment. At Blue Bridge Financial, approvals are good for 60 days, so you can lock in your rate now and be immune to further rate hikes during that time. This also gives you the opportunity to shop around for the perfect piece of equipment!
3. Take advantage of early buyout programs.
Unlike in the auto and mortgage industries, refinancing an equipment loan for your business can be daunting, and sometimes near impossible. Fortunately, many lenders offer early buyout programs, giving you the opportunity to pay off your loan early at a discounted interest rate. Blue Bridge Financial offers a 5-4-3-2-1 structured buyout; the longer you pay the higher discount you get!
Although a high-rate environment can be a scary time to invest in your company’s growth, there are ways to mitigate the risks. Always be prepared with a budget, and make sure your finance company is willing to work to get the best deal for you! Please feel free to reach out to Blue Bridge Financial to discuss your equipment loan options and continue growing your business!