Accurate information makes the difference between a decision that benefits your business and one that proves to be costly.
Decision-making is a huge part of the job when it comes to running a business. And when it comes to making decisions about money, you want them to be informed decisions based on facts – not guesses or opinions or dreams. You want to know what you’re working with, what to expect, and how to plan.
When you’re looking to invest in some new or upgraded equipment, you want to have an idea of what that’s going to cost you and what that will look like financially. If you’ve determined that lease financing is right for you, you probably want to know what that will mean for your operating budget going forward.
In an effort to make informed decisions at this stage, many people do what they do whenever they’re buying something and want the best deal – they shop around; they comparison-shop. We’ve talked about why that’s a bad idea when it comes to lease financing in another article, but for the moment, we want to address the issue of lease quotes.
Lease Quote vs. Lease Approval
There is a difference between a lease quote and a lease approval. When talking to financing companies, be sure you clearly understand what they are referring to. It could significantly save you money.
A lease quote is a dollar amount that is calculated based on no information other than the cost of the equipment and usually an overly optimistic estimate. This might be fine if you just want an idea of what your budget should look like and really have no idea about what to expect a lease payment to cost. However, if you want numbers you can really base informed decisions on, quotes are not what you’re looking for.
The same is true if you want numbers that allow you to accurately compare financing options.
A lease approval is what you can count on to give you accurate information and facts on which to make informed decisions. In order for a financing company to give you a lease approval, they will require information from you to base a credit decision on. Typically, they might ask the following:
- How many years have you been in business?
- What is the current financial strength of your company?
- Is your business tax-friendly or credit-friendly?
- What benefits will this new equipment provide your company?
In most cases, they will also be checking the credit rating of your company. With all of this useful information about your business, a financing company knows everything they need to know to determine what your financing options are and what it will cost you. They can give you exact numbers and they can guarantee amounts that you are absolutely approved for.
The differences between a lease quote and a lease approval explain why comparing quotes is really not giving you any information you can work with. If you’re making decisions based on quotes, you’re making decisions in the dark, whereas, with lease approvals, you can know with certainty.
Shopping Around For The Best Deal
The caveat: As we’ve mentioned elsewhere, shopping around for lease approvals can significantly harm your credit score.
So what are you supposed to do? The answer is to find a financing broker you can trust; one that understands your business and the equipment you are getting.
A financing broker should:
- have access to a wide range of funders,
- have a wealth of knowledge about what each of those funders likes in a financing deal and the types of credit history they are willing to work with,
- works hard to establish great relationships with their funders which allows for the trust that is required in order to create a healthy business deal for you.
- be someone you can trust so you can leave the shopping around to them.
Your broker has a very good idea of which funders are most likely to provide you with the financing you need, as well as which funders are able to provide you with a deal that fits within your budget and the terms that you prefer. You broker doesn’t need to contact every available funder – just the one or select few that are going to be your best options. This eliminates that hit to your credit rating/score.
So be sure you understand what you’re getting when you ask for a lease quote. Make your decisions based on lease approvals. And don’t hesitate to contact us if you would like more information about this topic.