Day: October 22, 2022

Equipment Loan Calculator

Blog Author By Kyle Clements
Published on

u’ll need to spend on equipment? Using an equipment loan calculator can help you find out exactly what you can afford. 

Construction equipment can be expensive, and you’re likely to need business loans to purchase it.

A good equipment payment calculator will allow you to customize all aspects of your loan — helping you figure out exactly what works for you. 

Many banks offer equipment financing, and some financing companies specialize in loans for construction and heavy equipment. Before contacting a lender, you can use an equipment finance calculator to get an idea of what to expect. 

The key inputs for a heavy equipment loan calculator are similar to those for many loans — the amount financed, the interest rate, and the loan length (also known as the loan term). However, there are some nuances specific to the equipment financing industry that you should know about.

Free Online Construction Equipment Loan Calculator

Here’s a free online equipment finance calculator that can help you see how your payment will change based on the various inputs you choose, such as interest rates and loan terms:


Tired of juggling spreadsheets and calculators? Click here to book your demo with quipli !

How Equipment Loan Payments Are Usually Determined

Three key inputs will largely determine your loan payment:  

  • The amount you’re financing 

  • Your interest rate 

  • The loan term 

When using an equipment loan payment calculator, you’ll find that the more money you finance, the higher your payments will be. This reality is true for interest rates as well — the higher the rate, the higher the payment. 

However, the payment amount will go down if you increase the loan term (although you’ll likely pay more interest over the life of the loan). 

Let’s look at the three key elements in more detail: 

1. Equipment Loan Total Amount

The loan amount will be the amount you’re financing, which is generally the total purchase price of the equipment, less any down payment you make. 

Equipment costs in your industry will largely determine the amount you need to finance. Other factors that will determine the amount you can borrow include the lifetime value of the equipment and whether it’s new or used. 

Some equipment loans are for $5,000 or less, while some lenders have minimums on the amount they’re willing to lend for equipment loans, such as $10,000 or $25,000. Typically, the lower the amount you’re financing, the higher the interest rate. If you are financing $5,000, the rate will tend to be higher than if you’re financing $50,000. 

2. Interest Rates

Interest rates will vary based on the industry and equipment you’re financing. They can be anywhere from 2% to 20%. If you’re required to provide a personal guarantee, your credit score will also play a part in determining the interest rate. 

Other factors that play a part in the interest rate calculation are your company’s financials, such as annual revenue and length of time in business. The type of equipment and its lifetime value will play a role in the interest rate as well. 

Resale value is also a consideration. If the equipment holds its value well, you may be able to get a lower rate. The lender might see the loan as less risky when compared to one for equipment that depreciates quickly. 

3. Loan Terms

The loan term is the length of time of your loan. This duration for equipment loans tends to be between two and seven years. Some lenders may have a cap of five or ten years on the terms they’re willing to offer for equipment loans. 

Generally, the longer the loan term, the higher the interest rate tends to be. Thus, if you’re financing a piece of equipment for two years, the rate should be lower than if you selected a loan term of seven years. 

Note that you can often pay the loan off early or make additional payments to shorten the loan term (and save interest). However, some financing companies may charge a prepayment penalty if you decide to pay off the loan early. Make sure to factor that cost against any interest savings when you’re considering paying early. 

What You Should Know About Equipment Financing 

Even the best equipment financing calculator won’t be able to account for your specific situation or the special requirements that a lender might have. 

Minimum Requirements 

Equipment lenders may have minimum requirements for your business, such as thresholds for annual revenue and length of time in business. For example, a lender may require that you have at least $25,000 in annual revenue and have been in business for at least six months before considering you for a loan.

Other key requirements include minimum credit scores and required down payment amounts, which may vary between 5% and 20%. Also, recall that some lenders may have a cap on the loan term, such as 48 months, and minimum loan amounts, such as $25,000.  

Special Requirements

Some lenders will also allow for special repayment schedules, such as weekly or bi-weekly payments instead of monthly ones. They may also specify a balloon payment that’s due every 12 months or at the end of the loan’s term.

Other things to watch out for when using a construction loan calculator include upfront charges by lenders, such as origination and application fees. Don’t forget to ask about prepayment penalties or potential discounts for early payoffs.

 

Examples of Typical Loan Payments for Construction Equipment

So what do the numbers generally tend to look like? Here are a few examples, based on the average cost of common types of heavy construction equipment, based on our calculator.

These numbers assume a 36-month loan repayment period, an interest rate of 7.5%. Total loan amounts are based on the mean average cost for each type of equipment.

(For more information on typical prices for heavy equipment, check out our post on Construction Equipment Prices in 2022.)

  • Excavators: $9,331.87
  • Backhoes:$1,477.55
  • Bulldozers: $3,888.28
  • Skid steer loaders: $1,010.95
  • Wheel loaders: $4,665.93
  • Concrete mixer trucks: $3,888.28
  • Motor graders: $7,776.55
  • Forklifts: $1,088.72
  • Bucket trucks: $2,752.90

Prices can vary significantly, but these numbers can give you an idea of around how much you can probably expect to spend each month. Need more help on pricing? Explore our how to value a rental business guide.

Financing Equipment for Your Equipment Rental Business?

If you’re looking to add new equipment to your rental business and increase your profit, Quipli can help. Quipli’s rental eCommerce platform helps manage your inventory and website to make it easier for customers to find what they need. 

Our all-in-one software also makes it easy for you to manage your invoices and orders. You can find out how Quipli makes the sales and inventory management processes easy by booking a 15-minute demo.

Starting a new rental business? Refresh on the basics with how to start equipment rental business.


Learn About Quipli’s rental Software

How to Value a Rental Business: Valuation Tools and Methods

Blog Author By Kyle Clements
Published on

After starting a rental business and running it for years, you may eventually find yourself thinking about selling it to someone else.

To sell a business, you’ll need to get an accurate determination of how much the business is actually worth. There are several different valuation methods that you can use to do this.

Types of Valuation Methods

Various methods can be used to value a rental business. Three of the most common methods are asset value, future earnings, and comparable sales. 

Asset Methodology

The asset methodology for valuing a rental business uses the value of the equipment you own.

This is the fair market value of all the assets you possess. Thus, you’d find the value of each piece of equipment and add them all up. Each asset’s value can be calculated based on what similar pieces of equipment sell for on used equipment marketplaces. 

If a particular asset is no longer on the market, you may have to use another method to value it, such as figuring out what it would take to build your equipment to the current specifications with today’s price. Similarly, if you have a customized asset, you may need to calculate what it would take to add the same customizations in today’s dollars. 

Future Earnings Methodology

The future earnings methodology calculates your company’s value based on its current and future earnings. This involves estimating what your business will likely generate in the future and discounting it back using a discount rate.

This method is also known as a “discounted future earnings” valuation, as it requires you to forecast your rental company’s future revenue. After modeling earnings for each period and calculating a terminal value, you discount the amounts back to the present to get the current value. 

Comparable Sales Methodology

Comparable sales valuations look at what similar businesses have sold for recently. This generally involves calculating the valuation multiples for past business sales. The ideal multiple will be based on the specific industry.

For example, if your business generates $2.2 million in EBITDA (earnings before interest, taxes, depreciation, and amortization) and the average EBITDA multiple that equipment rental businesses sell for is 8, your valuation would be roughly $17.6 million.

While the EBITDA multiple is widely used, you may also see other multiples applied, such as an earnings multiple, sales multiple, or EBIT (earnings before interest and taxes) multiple. Some comparable sales methodology valuations may include an average of various multiples. 

Factors Impacting Your Valuation

Many factors can come into play when valuing your equipment rental business. Most of these are things you might expect, like revenues and profit margins, but there are others worth highlighting.

Amount of Sales

To start, you’ll need to know the estimated amount of sales you’ve had — specifically, your average annual sales figure. Generally, the higher the sales, the better. 

Total Profit

Total profit is another figure you’ll need to arrive at an accurate rental business valuation. This is the average annual net profit for your business. Once again, the higher, the better.

Recent Growth Trends and Future Growth Projections

The continued growth of your sales and profits will also play a key role. Is your business slowing down, or have sales and profits been steadily on the rise? Is your business expected to keep growing with new sales channels or partnerships? These are all questions worth knowing the answers to.

Growth in the Number of Sales (and the Origin of That Growth)

If your revenue is on the rise, where is the surge coming from? Maybe you’ve been more effective with marketing, or perhaps the sales growth was short-lived. Prospective buyers will want to know what’s behind your growth and whether it’s sustainable. 

Market Positioning

Where are you regarding market share for your industry? If you’re the market leader, do consider whether you have any competitive advantages that will let you keep that position. If not, look for opportunities to claim more market share.

Geographic Location

When it comes to the location you serve, it’s wise to determine whether you have opportunities to expand your current geographic footprint. Being located in a fast-growth area for the equipment you offer can be a great advantage.

Systems and Processes in Place for Running the Business

Lastly, think about how involved you are with your business. Do you have systems in place that let your business run efficiently without a lot of labor hours? You might have opportunities to automate parts of your business, such as inventory or rental management, for superior efficiency.

Selling Your Equipment Rental Business

When it comes to selling your rental business, you have several options.

Business Brokers

Business brokers are great if your company generates $1 million or less in annual revenue. Business brokers specializing in the rental industry can be found on various online marketplaces. 

Merger and Acquisition Advisors

Merger and acquisition (M&A) advisors are suitable for businesses with revenues between $1 and $50 million. A good M&A advisor will help you find buyers, negotiate terms, and structure a favorable deal.

Investment Banks

Investment banks are ideal for larger businesses, especially those with more than $50 million in annual revenue. Investment banks specialize in tracking down big buyers and handling the terms of the deal.

Interested in Leasing your rental equipment? Explore our guide on equipment rental leasing pricing strategy today!

Are You Ready to Sell Your Business? 

If you have a rental business but are considering breaking into a different industry, you’ll first need to figure out what your business is worth. This is true if you need a business appraisal as well. A precise valuation will ensure you get the correct amount for your niche business. 

These well-protected businesses sell well and often, making it easy to find an estimated value for your company. A qualified broker or advisor can help you figure out your valuation and connect you with prospective buyers offering what your business is worth.

There are also a few simple steps you can take to help boost your valuation. A great place to start is to make sure you have as many tasks automated as possible, including your rental and inventory management processes.

Learn About Quipli’s rental Software