These days, it seems nearly every online Pro Audio dealer offers some form of repayable finance at checkout. Below are some loose example of such online finance options:
- Buy It Now - Pay For It Later
- 0% Interest Over 12 Months - Pay £24.99 for 24 months
- Pay over 12, 24 or 36 months
There is no denying it, finance options are extremely tempting. Small monthly outlays always look more appealing when compared to full upfront studio gear prices but never get tempted into blindly purchasing studio gear with repayable finance. Entering into finance agreements are serious commitments, the decision to borrow from lenders should never be taken lightly.
I have purchased a fair amount of studio gear using repayable finance since forming my recording studio business in 2010. There have been times in my career when I needed to purchase certain types of studio gear to either extend my studio services or to improve my workflow. Those times in my career though I never seemed to have all the funds available to invest in the gear I needed - I had to purchase gear by applying for repayable finance.
In this article, I share a selection of Pros & Cons for taking out loans or buying studio gear on repayable finance - The opinions in this article are based solely on my own professional experiences and do not reflect the broader views of the Pro Tools Expert Team.
This article is written for professional studio people or audio professional who earns a living from their talents and studios. We don't recommend that audio enthusiasts or hobbyists get into debt over studio gear.
Real World - My First Large Studio Gear Purchase Bought Using Finance
Full band tracking and mixing projects became quite popular 18 months into my recording studio business. At the time I was using an eight-fader Digi 003 Factory control surface. It wasn't quite up to the job, it couldn't keep up with my pace of work and I couldn't quickly navigating large Pro Tools sessions with 50+ tracks.
I knew from my past experiences using a Digidesign Control 24 (24 fader control surface) that larger control surfaces suited my workflow. I needed a larger control surface to help me manage large tracking and mixing sessions. I looked into purchasing the then current Control 24 alternative - The mighty C|24.
At the time these units cost £8,000. After some shopping around I found an ex-display unit for £5,000 - I couldn't let this deal slip by. I didn't have the money to purchase the C|24 outright so I asked the dealer about what finance options they have available. Within 15 minutes I was approved for a £4,000 0% interest finance deal to be paid in full within 12 months with an upfront deposit of £1,000. Not a bad deal, however, I had to digest the small print before I confirmed my commitment.
If I didn't repay the £4,000 within the 12 months I would have had to pay 36% on the £4,000 lent to me spread over 36 months after the 12 month 0% interest period. If this happened I would have had to pay an extra £1,100 worth of interest over three years as a penalty for not keeping the payments up! - Always read the small print.
Within the year I managed to pay off the outstanding balance and not suffer any penalties. I consider that experience as a successful studio gear finance purchase. The C|24 did indeed help me work more efficiently which in turn proved the investment was just. The risk of entering into finance for my C|24 was well worth taking.
Below is a list of what I consider to be the Pro & Cons of entering into finance agreements or taking out loans to purchase studio gear.
- Fast Track Business: If you know you can better serve your clients by introducing some new technologies in your workflow then finance maybe the easiest way to acquire the gear, that is if you don't have the available funds to purchase the studio gear outright in the first place. It's fairly easy, credit checks permitting, to get accepted for loans these days which is great if your business demands quick growth and you can adfford the repayments.
- Studio Gear Can Pay For Itself: Example: When Pro Tools 11 launched I didn't have the money to purchase an expensive Pro Tools 11 HD Licence outright. At the time I really needed the extra power and performance of the 64 Bit processing so I took a 12 month 0% interest loan from an Avid Dealer knowing that the monthly finance costs would pay for itself within the year as I knew my workflow would be dramatically improved and subsequently more efficient.
- Lots Of Finance Options: Luckily, there are lots of finance options available these days. Finance is extremely competitive so use this to your advantage. If you are serious about taking out finance for your next studio gear purchase then shop around, get the best deal and terms for you and don't stop researching until you've find the best deal.
- All Too Easy To Finance Every Purchase: Try not to consider finance and/or loans as the only means of purchasing studio gear. On the face of it, repayable finance does look to be the quickest and cheapest option but in reality, it isn't, not unless you choose the right lender and agree to the best terms. Remember, finance offers are designed to look like the better alternative to purchasing studio gear outright... don't fall into the trap unless you absolutely need to.
- Penalties: If for any reason repayments are not made as per your terms the lender has the upper hand. Your credit rating will suffer which will affect your future borrowing. Always read the...
- Small Print: There is a very good reason why important terms and conditions are in small print. I like to think it's where lenders can easily and legally catch you out if you are not smart. Be smart though, read the small print thoroughly and if you have any doubt ask the lender for clarification or look elsewhere.
Tips - Considering Purchasing Studio Gear With A Loan Or Finance Agreement?
If you are considering taking out a loan or purchasing studio gear using repayable finance services then reference your business finances. Borrow or commit to an amount that you know without doubt you can afford to repay within the terms of an agreement.
Avoid Vanity Purchases On Finance
Ensure the studio gear you are about to buy through finance is absolutely worth the risk. Avoid buying items that you like, instead, make sure that you are buying studio gear that will earn you the investment back or grow your business interests.
Write a strong financial business plan to calculate your business' average profit earned over the last year with projections for the next year. If I work out that I have an average profit of £1,000 each month I consider one-quarter of that (£250) to be the maximum (safe) monthly repayable finance figure. Knowing your profit is key to keeping finance and loan repayments manageable and stress-free.
Shop around for the best loan and finance terms. Only enter into finance or loans if you are 100% happy with what is expected of you and your business.
Start As You Mean To Go On
Start any finance agreement or loan with the right attitude. Pay a deposit which could very well lower monthly financial commitments.
Clear Debt Sooner Rather Than Later
If your studio gear investment has paid for itself and you have some extra profit (post-tax) in your accounts then clear the debt early. Do double check the terms and conditions of your agreement stated in the small print as some lenders demand an early settlement fee. I've been caught out by this once or twice in the past and have been required to pay such a fee in the region of £35.
Take A Breather Between Loans
If like me, you had a successful finance experience then take a breather... don't rush into another commitment right away. The extra funds that were once spent on loan/finance repayments may just add up to go towards your next important studio gear investment meaning you may not need to take a loan at all.
Be Smart - Be The Entrepreneur
Be smart, use common sense and always be the entrepreneur when making important decisions regarding whether or not to commit to a loan or finance agreement for studio gear purchases.