Which Came First: The Equipment or The Budget? A Buyers’ Guide to Pre-Approvals.

“What’s your budget?”

This is the million-dollar question when we make the handful of significant purchases most people encounter in a lifetime, like buying a house, paying for education, or purchasing an automobile. It’s more likely than not that consumers will experience a similar buying journey for any large purchase, which includes how an individual will pay. It’s a question asked by bank personnel, real estate agents, car dealership salespeople, financial advisors, etc. But the answer isn’t always cut and dry, especially when buying equipment for your small business. What you can afford to purchase with cash versus what you need or want for your business is often in two different categories.

The Benefits of Pre-Approvals for The Buyer

Most people will take out loans to offset the cost of big purchases over a period of time: a 30-year home mortgage, a 10-year student loan, a 36-month auto payment, or a 36–84-month equipment finance loan. Typically, at the start of the buying journey, the consumer needs to understand how much they can afford before the shopping process ever begins. This is where pre-approvals help consumers (and businesses) manage expectations. Pre-approvals are also beneficial in the world of yellow iron (a.k.a. equipment sales) because sellers want to ensure buyers have the funds to purchase, and buyers want a frictionless process.

Pre-approval: provides the borrower with an estimate of terms based on credit score and potential equipment purchase(s).

At Oakmont Capital Services, we recommend our customers obtain pre-approval for an equipment purchase, especially if they plan to buy at a tradeshow or auction. Having a pre-approval in hand confirms to the seller that you’re a serious buyer with creditworthiness and enables room for price negotiation. It also facilitates a streamlined buying process for quick transactions (like at auction). Besides aiding with the equipment purchase, pre-approvals help the buyer financially, allowing them to better understand monthly payments and whether to utilize a down payment to manage cash flow. Understanding how much a business is pre-approved for also discourages overspending, helping budget in advance for the term/duration of the loan.

Why Dealers Love Pre-Approvals

In addition to end-customers, equipment dealers also see the benefits of pre-approvals. Let’s take a rental customer from Minnesota, for example. The business owner planned to attend a tradeshow to purchase scissor lifts. His Oakmont Capital Service Business Development Officer recommended a pre-approval for several reasons:

1. Streamlined Application Process happens when the buyer gets a head start on the loan process, helping to expedite funding when the time comes to purchase.
2. Budgeting and Planning (realistically) occurs once a business gains clarity on the maximum funding they can expect, helping the owner make informed decisions that align with growth objectives.
3. Negotiating Power makes the buying process on the tradeshow floor smoother, with more room for pricing negotiations.
4. Competitive Advantage applies to (potentially) getting “first dibs” on a machine, which is critical due to current equipment availability challenges.
5. Contract Consolidation enables equipment purchased from multiple manufacturers to be listed under one contract, consolidating paperwork, payments, and hassles.

Going Once, Going Twice…

Although pre-approvals are a fantastic fit for tradeshows, they might be even more perfectly suited for auctions, when seconds count. Over the years, we’ve seen customers, including dealer partners, “win” big at Lyon Auctions and other in-person or online auctions by having a pre-approval in hand. Scoping out the equipment needed before bidding time is an important part of the auction preparedness process, but so is having the funds to purchase the right machine. As the philosopher Seneca said, “Luck is a matter of preparation meeting opportunity.”

The (Easy) Pre-Approval Process

The great news is that applying for pre-approval with Oakmont Capital Services couldn’t be easier! Complete an online application and let our team do the rest. Once an application is submitted, a finance professional will reach out to discuss rates and terms and answer any questions. We recommend applying for pre-approval up to 90 days before you plan to make a purchase. Whether you’re ready to buy, kicking the tires, or anticipating how much to spend, pre-approvals are a great first step to answering the question, “What’s your budget?”