Checklist Checklist

Tag: EQUIPMENT FINANCING

  • #31 EQUIPMENT FINANCING Buyer Checklist You Need To Know Before You Spend Your Money. 60 Buyer-Beware Intelligence Points.

    Legal Information Notice: This checklist provides general educational information only. It is not legal advice, does not create an attorney-client relationship, and may not apply to your jurisdiction or circumstances. Laws and deadlines vary. Do not rely on this checklist for a specific legal decision or deadline; consult a qualified attorney licensed in the relevant jurisdiction.

    1. The monthly payment can hide the total financing cost.
    2. A low rate does not necessarily mean a low-cost loan.
    3. Equipment can depreciate faster than the debt declines.
    4. Used equipment may have uncertain residual value.
    5. The lender may require a down payment.
    6. Fees can substantially increase acquisition cost.
    7. Documentation fees should be identified.
    8. Origination fees should be identified.
    9. Personal guarantees may be required.
    10. Collateral requirements may extend beyond the equipment.
    11. Cross-collateralization can increase exposure.
    12. Balloon payments can create refinancing risk.
    13. Variable rates can change payments.
    14. Prepayment penalties can limit flexibility.
    15. Equipment may become obsolete.
    16. Maintenance costs are part of the economic decision.
    17. Downtime can destroy the expected return.
    18. Manufacturer warranties may not cover everything.
    19. Vendor financing should be compared with independent financing.
    20. Leasing and purchasing produce different economics.
    21. Tax treatment can materially affect the effective cost.
    22. Insurance requirements add to ownership cost.
    23. Delivery delays can leave you paying before generating revenue.
    24. Financing equipment that doesn’t generate sufficient cash flow creates a debt problem.
    25. The right question is “What will this equipment actually earn me?”, not “What is the monthly payment?”

    B. PREMIUM BUYER CHECKLIST

    EQUIPMENT

    ☐ Exact equipment identified
    ☐ New/used condition documented
    ☐ Serial number recorded
    ☐ Age verified
    ☐ Hours/usage verified
    ☐ Maintenance history obtained
    ☐ Warranty reviewed
    ☐ Inspection completed

    ECONOMIC VALUE

    ☐ Purchase price
    ☐ Installation
    ☐ Delivery
    ☐ Training
    ☐ Maintenance
    ☐ Insurance
    ☐ Financing
    ☐ Expected useful life
    ☐ Expected resale value

    FINANCING

    ☐ Interest rate
    ☐ APR/effective cost where applicable
    ☐ Term
    ☐ Down payment
    ☐ Origination fees
    ☐ Documentation fees
    ☐ Prepayment terms
    ☐ Balloon payment
    ☐ Variable-rate provisions
    ☐ Personal guarantee

    CASH-FLOW TEST

    Estimate:

    Additional Revenue

    Cost Savings

    −

    Financing

    −

    Maintenance

    −

    Insurance

    −

    Downtime

    =

    Net Economic Benefit

    Then test the result at:

    ☐ 10% lower revenue
    ☐ 20% lower revenue
    ☐ 20% higher maintenance
    ☐ 3-month delayed implementation

    FINAL QUESTION

    If this equipment produces 30% less economic benefit than expected, can the business still comfortably make the payments?