Everything You Should Know About Commercial Equipment Financing Options in Saudi Arabia
Businesses with requisite heavy commercial equipment in their daily operations bear huge costs for either acquiring, refurbishing, or maintaining the machinery. While it is difficult to afford them out of your own budget, there are several commercial equipment financing options that you can rely on.
Here are a couple of fundamentals to help you choose the best commercial equipment financing plan in Saudi Arabia highlighting the loans and lease terms in the market.
What is commercial equipment financing?
It covers the leases and loans required to purchase vehicles such as backhoes, dump trucks, or bulldozers that are used for multiple purposes in the industry. The alternatives of commercial equipment financing depends on 2 factors- if it would be owned or utilized for a specific period.
Definition of heavy equipment
Heavy equipment includes a diverse range of specialized vehicles operated by certified firms. They might be dump trucks, tractors, street sweepers, backhoes, pile drivers, cranes, forklifts, and tunnel boring equipment.
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Terms and conditions of loans and leases
Loans and leases have a slight difference between them backed by the provision of monthly EMIs and interest. Unlike leases that can be availed with residuals paid at the end, loans can only be opted with down payments at the beginning of the term. Both down payments and residuals can differ as per the signed agreement with the sponsor. Residuals can be voluntary if one chooses to return the machinery or resume the lease.
Financing new commercial equipment vs. old ones
Depending on the type of heavy equipment required in any business, there are two options to choose from- new machinery or old ones. The latter can often be bought from equipment lessors in case you want to use it for a limited time period. Such companies offer operating leases for a short span to be remitted afterward.
On the other hand, if you’re planning to get old equipment from a third-party distributor accommodated with sponsorship, ensure that the financer is open to working with the discounts in the deal.
What can be the expected timeline and approximate costs?
The term of commercial equipment financing in loan or lease relies on 2 components: rent or purchase and the utility life of the machinery. In most cases, the proposed term length turns out to be 5 years.
Coming to the interest rates on leases and loans, they vary according to the preparedness of the lender and sponsor. In general, the rates begin in single digits with a cap excluding 30%. Again, one might impose some kind of supplemental fee or omit the constituent completely. An individual should convince the financer about a minimal amount of supplemental fees in the pact.
Usually, a loan doesn’t levy more than the customary fee which is deducted from the loan amount. On the contrary, leases sometimes levy administrative fees on a yearly or monthly basis to keep one’s account active over the period. When the schedule of payment is delayed, a late amount gets imposed.
How to apply for heavy equipment financing?
To be eligible for heavy equipment financing, one must have a minimum of 620 credit card scores or a figure higher than that. Leases that don’t count on down payments demand higher credit criteria over a comparable loan. Meanwhile, if your credit score isn’t simply 620, high-risk lenders might be ready to work the deal but with a definite charge.
What can be the other alternatives?
If you are unable to opt for heavy equipment financing via leases or loans, other alternatives can help you in the endeavor. That said, 504 loans and SBA 7(a) offer the option of lump-sum borrowing and prolonged terms to purchase commercial machinery.
Are you in the venture of choosing the right commercial equipment financing package in Saudi Arabia? Kanoo Machinery has collaborated with its sister group company, The Gulf Lifting Financial Leasing Company(GLFC) to ease the customers’ choice in financing heavy equipment.
If you’re on the lookout for machinery to be deployed on a regular basis or want to upgrade to high-budget equipment for achieving optimum output and accomplish your goals excluding the operating cost in a high-priced procurement, Kanoo Machinery can simply get you covered.