When it comes time to invest in new equipment for your business, oftentimes all the costs associated with it can seem daunting. But they don’t have to be. Some lenders, such as Direct Capital, have ways of rolling soft costs right into your equipment financing, meaning you don’t have to spend valuable time worrying over where those funds will come from.
What Are Soft Costs?
Soft costs are the ‘extra’ costs associated with leasing or purchasing a new piece of equipment for your business. Examples of such costs are consumables warranties, shipping costs, freight charges, refurbishing secondhand purchases, build-outs, installations, and more. They can sometimes add up quickly when it comes to purchasing or leasing a piece of equipment for your business, though many lenders will provide an allotment of your lease funds to go towards paying these soft costs.
What Can I Use My Soft Cost Cash For?
You can use your soft cost cash for anything that pertains to the equipment that you are financing. It can be any one of the examples listed above, or simply ones that arise as you set the wheels of obtaining your new equipment in motion. Even something like the cost of trading in the old equipment to make way for the new is considered a soft cost, since oftentimes trade-ins come with removal or disposal fees.
How Much Can I Get for Soft Costs?
Generally, lenders will offer up to 25% of your equipment purchase or lease amount to cover soft costs. This means that if you were to sign an agreement for a $100,000 deal, $25,000 of that can be given to you for soft cost coverage.
Why Bother With Soft Cost Cash?
There are other ways to get a quick injection of cash into your wallet, such as working capital programs that give you the money you need when you need it. But when taking out equipment lease and accounting for a soft cost allowance, you can get the same terms for your soft costs that you do on your lease. This means more time to pay it off, and the extra amount hardly makes a difference in your monthly payments.
What sets Direct Capital apart from other lenders is that we no longer require invoices in order to pay soft costs. Instead, we allow you, the business owner, to handle your soft cost cash in a lump sum, and use it to pay off the necessities as they arise. This means that if your build-out costs more than you expected, or you have an unexpected electrical rewiring invoice, you have the means to handle these extras with your cash on hand.
How Do I Know If Soft Cost Allotments Are Right for My Business?
If you’re considering purchasing a new piece of equipment (or a refurbished new-to-you piece of equipment), an equipment lease with a soft cost allotment is a smart way to get the most for your money. It serves as a buffer for any of the many potential extra costs that can arise, such as cranes needed for transporting in bulky equipment or the necessary add-on of a climate-controlled room to your business. Even if your soft costs are as simple as consumables for your new equipment, it’s best to have the money on hand rather than worrying about how to pay for it and foregoing making your purchase or lease altogether.
Don’t let extra costs scare you away from getting the equipment that your business needs when it needs it. Instead, reach out to a trusted lender, such as Direct Capital, to work out a plan to cover all of the costs, expected and unexpected, and give your business the investment it deserves.