5 Factors that Affect Equipment Finance Interest Rates in Canada

January 12, 2022

As a business owner, you are always striving to improve your productivity and one way to do that is with equipment financing. If you are looking to modernize your operations or replace outdated machinery, financing can cover the cost of your new or used equipment so you can increase production and continue growing. 

Equipment financing can increase the capacity of your company, complement your line of credit and improve overall efficiency. When it comes to financing, you need to consider the interest rate that the lender is offering you. An interest rate is an amount a lender charges the borrower and is a percentage of the principal, the amount loaned. 

Before you decide to finance equipment, here are five of the primary factors that affect interest rates for financing equipment in Canada. 

1. National interest rates

When the national interest rates increase in Canada, it forces banks and other lending companies to charge more for small business finances and business lines of credit. These national interest rates will typically increase when the economy is doing well. 

The pandemic has had a big impact on interest rates which is why you need to find a lender with the best possible financing solutions. Blue Capital Equipment Finance offers zero down payment and low-interest rate plans including same-day approvals with multiple finance options. 

2. The national economy 

As we mentioned in the first point, the Canadian economy has a tremendous impact on finance interest rates. The goal of lower rates is to prompt businesses to apply for finances so they can invest more into their company and continue to grow while stimulating the economy as well. 

3. Your personal credit profile 

Many business owners are not aware that their personal credit profiles can affect their ability to obtain finance or a line of credit. A good personal credit problem makes it easier to be approved and it then opens the door to lower interest rates and different repayment term options. 

4. The age of your business 

New businesses and startups can be seen as risky to banks and other lenders because more often than not they will lack capital, collateral and business credit. These businesses will likely face more approval requirements than older, more developed businesses. 

5. The financials of your business 

You should always monitor the finances of your business and ensure that they continue to be in good standing. It’s always better to catch any potential problems early so that you can maintain a positive cash flow, hopefully at all times. When you talk to a lender about equipment financing, you want to be able to show them an attractive balance sheet, cash flow statement, and a profit/loss statement. 

What to consider when financing equipment 

If you are not sure whether you require equipment financing, here are a few things you should consider before applying. 

Company needs

Before searching for equipment financing, you should first assess the importance of this new piece of equipment. Does your business really need the equipment? Are you replacing a crucial part of your production system? Do you need to buy the equipment to increase production and stay competitive? Is this new equipment going to decrease costs or increase revenue?

How long you will use the equipment 

If the financing plan exceeds the amount of time you plan on actually using the equipment, you might need to reassess and consider equipment leasing. If you do not want to lease, you will need to consider a lender who has flexible and shorter financing plans available. 

How quickly do you need the equipment 

Some lenders can approve funds within one day while others make you wait weeks. But be sure to not choose a lender solely based on their turnaround time but focus on the best rate possible. 

Choose Blue Capital for your equipment financing 

Blue Capital Equipment Finance is a nationwide finance brokerage, and we have years of experience helping businesses grow with equipment financing. We offer many financial services and can help you easily get approved with zero down payment options and low-interest rates. Whether you are looking to lease heavy equipment or need truck financing, the Blue Capital team is here for you. 

We have multiple finance options including operating leases and can help you find the right loan for your construction business so that you don’t have to let old, and unreliable equipment slow you down.

Click here if you want to get approved today!