Leverage the internet
Consider buying used equipment as alternative to new equipment
Do a lien search
Consider the total cost of ownership
Consider all financing alternatives
Get your Paydex Score
Review your Dun & Bradstreet record
Get your FICO score and credit report
Verify your Secretary of State has the correct business information
1) LEVERAGE THE INTERNET
Always make sure to do your research. Start by finding online forums that discuss the equipment you are trying to purchase for your business. Find out what brand or model might be best for you. EBay is a great place to see the price range for equipment, make sure you are looking at the right year and model you are interested in. Google and other search engines are a great way to look for vendors that sell your equipment, sometimes the larger the vendor the cheaper the price.
2) CONSIDER BUYING USED EQUIPMENT AS ALTERNATIVE TO NEW EQUIPMENT
Figure out the economic life of the equipment you need in relation to the time you will be utilizing it. Example: if the used equipment is 10 years old and has an economic life of 15 years and you only need it for 3 you might consider buying used. Be sure to ALWAYS get the complete history of the used equipment including: maintenance, accidents, serial numbers, etc. Have the seller fill out a condition report.
3) DO A LIEN SEARCH
You don’t want to find out there was a lien on the equipment you purchased and that the seller didn’t have the legal right to sell it to you. You can avoid this headache by conducting a lien search. If you are financing equipment most likely the lender will be sure to find out if there are any liens on that equipment.
4) CONSIDER THE TOTAL COST OF OWNERSHIP
The total cost of ownership takes into account more than just the price tag value of the equipment. You have to take into consideration the shipping rates, installation fees, mandatory and optional service plans, upgrades (additions and add-ons). Be sure to fully price out your equipment before making your decision.
5) CONSIDER ALL THE FINANCING ALTERNATIVES
One size does not fit all in regards to small business financing. What might work for your small business might not work for another. Some businesses establish multiple lending relationships and use a blend of cash, loans and leases. These provide various benefits such as; speed, tax write offs, off balance sheet financing, low rates, fixed payments.
*Note: The access to capital has diminished however the demand has not; it is important to keep in mind that your ability to access financing with favorable terms is highly depending on personal and business credit, collateral, transaction size and time in business.
6) GET YOUR PAYDEX SCORE
This is a score that is given by Dun & Bradstreet. The Paydex score is similar to your FICO score, but rather personal it is business based. You can purchase your Paydex score directly through Dun & Bradstreet.
*Note: A business with a score of 60 or greater has a better chance of obtaining financing, the scores range from 0-100.
7) REVIEW YOUR DUN & BRADSTREET RECORD
Your record includes your Paydex score as well as other business information including; industry, owners, year business started, location, etc. Some industries are riskier than others.
*Note: Make sure Dun & Bradstreet lists the correct industry because that could be the difference between approval and decline.
8 ) GET YOUR FICO SCORE AND CREDIT REPORT
This is the primary metric used by underwriters to determine whether or not to extend personal credit or business credit on a personally guaranteed business debt. The higher the FICO score the lower cost of funds and can also make the difference between approval and decline. Review your credit report to make sure there is no incorrect information that could prevent your approval.
9) VERIFY THE SECRETARY OF STATE HAS THE CORRECT BUSINESS INFORMATION
Before a business receives credit, an underwriter will verify the businesses information with the Secretary of State. Underwriters will be checking your registration date, businesses that are less than 2 years old tend to have a more difficult time getting financing or will have to pay higher rates. They will also check verification of ownership; underwriters want to fully understand the ownership structure. Be sure your records are up to date or you might face delays during the financing process.