You’re in the market for new business equipment – maybe it’s a vehicle, some heavy machinery, or specialised tools. As you explore your options, you’re faced with an important decision: how to finance your purchase.
While dealership financing might seem like the convenient choice, there’s another option that could save you money and headaches: working with a specialised equipment finance broker.
In this article, we’ll explore the key differences between these two financing routes, helping you make an informed decision that benefits your business in the long run.
Understanding Your Financing Options
When it comes to acquiring new equipment for your business, you generally have two main financing avenues:
- Dealership financing
- Specialised equipment finance brokers
While both can help you secure the funds you need, the processes, outcomes, and long-term effects can vary a lot. Let’s break down how each option works.
The Process: Dealerships vs. Brokers
Dealership Finance Process
When you’re at a dealership, the finance process often feels like an extension of the sales experience. After selecting your equipment, you’re typically directed to the finance department. Here, a representative collects your financial information and submits applications to their panel of lenders. This process is designed to be quick and convenient, often with the goal of closing the sale on the spot.
Broker Finance Process
Contacting a specialised equipment finance broker initiates a more consultative process. A broker will take the time to understand your business, its financial situation, and your specific needs. They’ll discuss various options with you before approaching lenders, ensuring that when applications are submitted, they’re tailored to your circumstances and more likely to be approved on favourable terms.
Key Differences You Should Know
1. Impact on Your Credit File
Dealership Practice
Dealerships often take a “shotgun” approach to finance applications. In their eagerness to secure a sale, they might submit your details to multiple lenders at the same time. Each of these applications can result in a hard inquiry on your credit file. Multiple hard inquiries in a short period can negatively affect your credit score, which may make it harder to get financing for other business needs in the future.
Broker Advantage
A good finance broker takes a more careful approach to protect your credit score. They typically start with a soft inquiry, which doesn’t affect your credit score, to assess your situation. Only when they’ve found the most suitable lender and product will they proceed with a formal application. This way, your credit score stays intact, and when a hard inquiry is made, it’s for a finance option that’s more likely to be approved.
2. Access to Lenders
Dealership Limitations
Most dealerships have relationships with a small number of lenders. These partnerships are often based on volume agreements or other business deals that benefit the dealership. While convenient, this limited pool of lenders means you might not get the most competitive or suitable finance options for your situation.
Broker Flexibility
Specialised equipment finance brokers usually have access to a large network of lenders – often 40 or more. This gives them the ability to shop around for the best deals, comparing offers from different lenders to find the one that fits your needs. Whether you need a traditional loan, asset finance, or a more complex product, a broker can find the right option for you.
3. Expertise and Customisation
Dealer’s Scope
Dealership finance managers are knowledgeable about their products and the basic financing options available through their preferred lenders. However, their main focus is on selling vehicles or equipment. Their expertise in the finer details of business finance, tax implications, and structuring deals for the best business benefits may be limited.
Broker Expertise
Specialised equipment finance brokers bring a wealth of financial knowledge. They understand the ins and outs of different financing products and how they work for various business structures and industries. This lets them:
- Advise on the tax impacts of different finance structures
- Suggest ways to improve cash flow with customised repayment schedules
- Recommend finance products that match your business’s growth plans
- Structure deals that consider seasonal changes in your business
Brokers can also offer insights into market trends and lender policies, helping you make informed decisions beyond just the immediate finance need.
Key Takeaways
While dealership finance offers convenience, working with a specialised equipment finance broker provides clear advantages:
- Protecting your credit score with a careful application process
- Access to a wider range of lenders and finance products
- Expert advice tailored to your specific business needs and goals
By working with a broker, you can secure financing that not only meets your immediate needs but also supports your long-term financial health and business growth.
When you’re considering your next equipment or vehicle finance, remember that choosing between dealership finance and a specialised broker can have a big impact on your business’s financial future. Take the time to explore your options, and don’t hesitate to reach out to a finance broker to see the difference they can make for your business.
Choosing the right finance option is more than just getting a good interest rate – it’s about finding a solution that works for your business strategy and sets you up for future success.
