Finance Options for the Start-Up Entrepreneur

Used equipment leasing and financing is often a very misunderstood type of financing. While established businesses tend to understand in greater detail the advantages of leasing and financing used equipment, less experienced businesses often look for equipment loans that exist primarily for businesses with the very best credit that have a considerable amount of time in business. The Equipment Leasing and Finance Association (ELFA) reports that equipment financing volume was strong during the summer months and expects that trend to continue for the rest of the year. Let’s look at some finance options for the “Start-Up Entrepreneur.”

Used Equipment is an excellent barometer to reflect the current economy. When construction jobs and the economy in general pick up, there are many motivated individuals who want to join the ranks of the self-employed. Here are their options:

A. Purchase new equipment – This is most often out of the price range of a start-up owner / operator and not considered a very good option. It is the larger and more established businesses that can take advantage of new equipment rates, although the cost of the equipment is obviously quite high. This is almost an entirely separate industry in terms of financing.

B. Find a financial partner – Most people simply do not have family, friends or investors that they can go to for money, but even if they did it would be common for an investor to want an ownership percentage in the business.

C. Purchase used equipment – Now we’re talking! Although many lenders will not consider financing for a start-up business, there are many that will. It’s true that the payments can be high, but when the alternative is to find an investor and give up a percentage of your business, it helps a new proprietor to look at his return on investment (ROI) instead of a preconceived idea of what a payment should look like. Add in the tax advantages and the low cost of obtaining the financing, and used equipment purchasing becomes an extremely viable option.

A recent finance package for a dump truck start-up business in New Orleans offered $1,400 a month payment for a $35,000 truck, which is standard among lenders for the term. As the buyer summarized: “Instead of trying to figure out the cost of the money, I was figuring the money that I would be making at $125 per load, at 6 loads per day for 6 days a week versus my current driving job for $22 an hour.” Now THAT is an entrepreneur.

If a business has a track record of success and has been in business for over two years, the above holds true, but the cost of financing begins to go down dramatically. This tends to frustrate brand new entrepreneurs but it is a well-deserved reward for established businesses to be rewarded for their success.

Why is all of this relevant? It is relevant because the basis of our economy is supply and demand. When hourly contractors or employees begin to realize that there is a bigger opportunity out there because they’re being asked to work overtime or extra days, it moves them to find a way to get financing. This is why used equipment is directly related to the strength of the U.S. economy at any given time and this is why the used equipment industry is so important in moving the economy forward.

(Joslen Commercial Funding, LLC is a privately held commercial lending brokerage located in Vancouver Washington that services all 50 states. JCF specializes in servicing the needs for used heavy equipment financing for new and established businesses.)

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