What to Know About Financing/Titles
With a chance at improving your operations, purchasing, renting, or leasing a forklift is exciting. You have a selected a forklift that fits your specific needs, applications, and work volume. Before getting that forklift to its new home, the business must choose how they plan to finance it. Unless the plan is to pay in cash in full, businesses must apply for a credit line for the specific unit, not an amount, before obtaining the forklift or any piece of material handling equipment.
To apply for a line of credit, the financial institution and the forklift supplier needs trust that you will be a responsible buyer and make payments on time and in full. Analyzing four key factors of your business will give them an understanding of how trustworthy and reliable your business is.
The Four Factors:
- Employer Identification Number
Also known as Federal Employer Identification Number (FEIN) or federal tax ID, your employer identification number is used when businesses apply for credit. The financial institution will use this number to run the business’s credit history. If the business is a sole proprietorship, a personal credit report will be run too.
- Tax Exemption Certificate
If your business is tax exempt, be sure to have this form ready for both the forklift seller and the financial institution. The file is kept on file by the forklift business to assure that this purchase and any future purchases remain tax free. The form may require: the date prepared, buyer’s company and location, seller’s company and address, buyer’s signature, and the expiration date.
- Trade References
A trade reference is similar to credit history. It is reference that your business has a long-standing relationship with and considers you or the business a reliable financial partner. These may be accountants, wholesalers, and automobile leasers. The seller should be able to reference at least three trade references. These references can drastically affect your ability to get a credit line.
- Financial History
Both the trade references and the employer identification number can give an in-depth explanation of the organization’s financial history. Financial ratios and profitability are often used to determine interest rates and the amount of credit given. For companies less than five years old, financial institutions will be weary to give a large line of credit; this is due to the fact that most businesses fail in the first five years.