In the dynamic world of equipment sales, navigating the intricate landscape of financing poses significant challenges. Recent dialogues with equipment sellers and dealers shed light on a recurring obstacle: customers delaying purchases in anticipation of interest rate reductions. However, behind these challenges lie valuable insights and strategies to empower sellers and dealers in overcoming these hurdles.

In the wake of the COVID-19 pandemic shutdown, the world of business in the immediate future is destined to be very different from what was once normal.

The Numbers Game: Unveiling the Real Impact of Interest Rates

Picture a scenario where a customer contemplates a $100,000 equipment purchase over a 5-year term. Each quarter-percent reduction in interest rates translates to a mere $11 decrease in monthly payments. Even with an optimistic projection of a 1% reduction by year-end, the resultant $44 monthly savings begs the question: is delaying essential equipment acquisitions truly worth it for such marginal financial gains?

Similarly, for a $30,000 purchase, the difference in monthly payments amounts to approximately $13. When juxtaposed against the potential benefits of immediate equipment acquisition for business growth, the trade-off becomes palpable.

Site Safety and Social Distancing 

No matter what the business, from mom and pop retail to large-scale manufacturing, the workplace of the future is likely to be more safety-oriented than in the past. Whether that means an installation of Plexiglass screening at every cash register, additional partitioning between desks, remote work stations and teleconferencing, shorter operating hours, or PPE and disinfectant wipes for every customer, business owners should assess future needs in relation to current capabilities. If that means leasing or purchasing new equipment to return to business, the increased costs will become a new requirement for doing business in this new age.

Cash vs. Financing: Unraveling the Profit Potential

Many business owners contemplate paying cash for equipment due to concerns about high borrowing costs. However, the untapped potential lies in understanding the substantial future profit sacrificed by opting for outright purchases.

Consider two hypothetical scenarios involving equipment valued at $50,000:

Owner 1: Opts for upfront cash payment, leading to no debt but diminished reserves.

Owner 2: Chooses financing at an 8% rate, investing the $50,000 cash in dividend-paying stocks. After 5 years, the investment value burgeons to $70,127.

In the event of unforeseen circumstances necessitating quick access to cash, Owner 1 faces challenges, including prolonged equipment sale processes and potential capital gain taxes. Conversely, Owner 2 can promptly liquidate stock holdings for immediate capital.

Risk Assessment 

Related to site safety, of course, is the risk of opening for business. Reopening guidance is supplied by federal, state, and local officials, but it’s the owner’s duty to weigh the risk to both employees and customers against the options of reopening on a limited scale or remaining closed. There may be no easy answers. What is vital is having a plan, even if it’s not attached to a firm timeline as yet. Drafting contingency plans is also highly recommended, in the event that spread of the infection continues or recurs.

Unlocking Investment Potential: Seizing Opportunities Beyond Equipment

For those hesitant about the stock market due to past experiences, it’s essential to recognize the opportunity cost. While equipment depreciates over time, investments, even conservative ones, can yield substantial returns. A $50,000 investment in CDs or high-interest savings accounts could potentially grow to $63,814 over 5 years, highlighting the unexplored potential in financial markets.

Official Guidance

There is little doubt that legislative and regulatory oversight will continue, at least for the immediate future. Some forecasts do not point to relaxed restrictions until an effective vaccine is available, and that may not happen for another year or more. Compliance with official guidelines will be required; there simply are no options.

Partnering for Success: Differentiation Through Expertise

With over two decades dedicated to assisting equipment sellers and dealers, we understand that differentiation and expertise are pivotal in winning deals in today’s market. At ACG, we offer tailored financing solutions with access to our own capital at extremely competitive rates.

In conclusion, navigating equipment financing challenges requires a multifaceted approach. By educating customers on the nuanced financial implications and offering tailored solutions, we can navigate challenges effectively, ensuring mutual success.

Official Guidance

There is little doubt that legislative and regulatory oversight will continue, at least for the immediate future. Some forecasts do not point to relaxed restrictions until an effective vaccine is available, and that may not happen for another year or more. Compliance with official guidelines will be required; there simply are no options.

If you have a current customer who needs funding, have them apply, or reach out to our team for a quick quote or consultation.

Keep a Watch on Funds

Uncertain times require not only a better analysis but greater concern with finances. This is an area where having American Capital Group “in your corner” can be a great advantage. Our ability to work with both large and small companies to finance needed new or used equipment can be a perfect solution. We offer low-risk options to help your business survive and thrive in these difficult times. We have been a resource for American business for the past 25 years.

It’s important to consider these 5 vital areas as you make your plan for reopening your business. Contact ACG to discuss your individual needs. If you have a current customer who needs funding, have them apply, or reach out to our team for a quick quote or consultation.