financing an expensive camera package; risky?

[omar robles]

Hello group:

So I am considering purchasing an expensive new camera through global finance group. Just curious if anyone has had any experience in getting a camera through a equipment finance lender? I am assuming its risky because of the high payments. Just wondering for how many years is the typical lease extended to?

[Stuart Brereton]

Assuming that they are a reputable company, and obeying the lending laws of whatever country you are in, I'd say it's no more risky than getting a bank loan and buying a camera. Being able to afford the payments each month is obviously an issue, but that has nothing to do with who lent you the money.

 

If you're intending to rent the camera to others, then you should thoroughly research your market to make sure there is enough demand for you to be able to recoup your investment in 18 months or so. Any longer than that, and your camera will likely be obsolete and be harder to rent out. If you're purchasing just for personal use, then only you can know if you can afford the repayments.

[Bruce Greene]

If you can project on-going income to be able to cover the loan payments, this could be a sensible thing to do. Keep in mind that this sort of financing may be a bit more expensive than a bank loan. It would be best to explore multiple funding sources before committing. And read the contract very carefully.

 

I've also purchased cameras without the certainty of paying for the camera through rental income from the camera. As such, I treated this purchase as a marketing expense (though not for taxes!). In the end I recouped only 25% of the cost of the camera through rentals. As a marketing strategy (and educational strategy) it was very successful.

 

The company you referenced seems to specialize in leasing as opposed to lending. Please be sure to understand what this means and costs you. If I recall, these agreements often require substantial periodic reporting about your business which you may find to be quite time consuming. In addition, they are usually more expensive than a bank loan, but easier to obtain. In my case, I was able to obtain bank loans, but it was not easy to find a willing bank, and I needed to present a good business plan and make a good pitch:) The beauty of the bank loan was that the only collateral was the camera itself, and not my home or other assets. And, they didn't even know what the camera looked like and never even asked to see it. They were just convinced that it was a good risk for them and they trusted my personality and credit history. I think the rate was Prime + 1%, 5 year term. A lease to own agreement might make figuring out the actual loan% more difficult, so beware.

[Nicholas Fitch]

Hey Omar,

I have a finance background and work in the Entertainment Finance division of an equipment financing company. I also own my own Internet marketing and video production company I founded in 2006.

Just wanted to chime in on a few points to help the community in terms of financing new gear.

 

1) Equipment Financing Vs Equipment Leases- An equipment lease is a common form of financing. Under an equipment lease, the Invoice from the vendor/seller is SOLD TO and SHIPPED TO the bank/leasing company. After the term of the lease is over (36, 48, 60-months), you have to exercise an end-option to actually purchase the equipment and own it free and clear. The end-option is set when you first sign the documents, and could be $1, $101, 10% of the equipment price, or FMV (fair market value).

IMHO, financing gear under an EFA (equipment finance agreement) is much simpler, and takes away the end-option issue. The invoice from the seller is SOLD TO and SHIPPED TO you or your company from Day 1. This is especially helpful in the case of warranty's and upgrade programs like RED offers. Once the last payment is made on the agreement, the equipment is owned free and clear. The only collateral is the gear itself.

A company that offers "equipment leasing" should also be able to document on an EFA. If they refuse, they are probably playing games and will be trying to get extra money out of you at the end of the lease term. There is LOTS of fine print on a lease and end-option, and many less than reputable lenders try to take advantage of the customer at the end to pocket extra money.

 

2) Term- Most lenders will require at least a 24-month term, with options to go up to 60-months. In order to save on interest/finance charges, go with the shortest term with payments you can easily cover. One plus of financing gear vs. buying is that is helps with cash flow. Don't go with a shorter term with higher monthly payments if finances will be tight. 

 

3) Rate- Financing for "new" businesses is always going to be at a higher rate. If you have been in the industry at least 2-3 years, you are an established business and are able to get around the new business rates which can range from 14-25%. The high rate of new business defaults make these leases/loans more risky for the bank, and the rate is adjusted accordingly. However, this is still cheaper in the long run than putting the purchase on a credit card. Personal credit must be solid for new business financing.

Established businesses and professionals can get rates starting in the 7% range (for larger deals with excellent business/personal credit) to low 10%'s for smaller deals with average credit.

To give you an example, a $35,000 camera package would run $699 - $737/mo (60-months) depending on credit worthiness. This is assuming the deal is documented on an EFA with (1) payment in advance.

 

If your use of the equipment, plus possible rental income will easily cover the monthly lease/loan payment... go for it. If not, I would recommend renting gear needed for jobs until you are ready to pull the trigger on a financed package. You can check out my company's video/film specific page here:  https://www.financialwb.com/equipment-leasing/video-film/

[Gregory Irwin]

I have used WESTERN EQUIPMENT FINANCE in the past for large cine gear purchases.  They are unique because they use the actual gear being purchased as collateral.  Easy!

 

G