When it comes to financing, businesses typically weigh their options based on rates, terms, financial qualifications, and the owner’s ability to repay and take on potential debt during that time.
You’ll notice all three have a fairly obvious common denominator: money. Business owners want to know what the lender’s expectations are, how much they need to invest to get an amount in return, and how long it will take.
The same is true for something as simple as needing a new piece of equipment and not having the funds to purchase it at one time.
Owners do not have the time to weigh options if they need equipment to run their business immediately. There is a need-specific funding option at your fingertips: equipment financing.
What is Equipment Financing?
Equipment financing is solely in place to help small business owners avoid the decision-making period, and receive their needed piece of equipment hassle-free.
Our experts define equipment financing as a funding option that allows you to purchase new equipment by putting up 100% of the purchase price. You can use equipment financing to place a lien against your company’s already owned equipment so that you can recoup up to 100% of the purchase price.
What are the Qualifications for Equipment Financing?
While these will vary among lenders, we’ve included our list of qualifications for equipment financing to give you a rough idea of the industry standards:
- A credit score of 600 or higher
- $100,000 in annual revenue
- 12 or more months in business
If you don’t quite meet these expectations, we encourage you to still talk with a financial advisor.
Tip: create a strong financial plan for your potential lender to review. This will not only look impressive but will help convince your lender that you are a trusty candidate.
How to Apply
A business owner must dedicate time to every loan process, and luckily, this financing option is one of the simplest in terms of time and effort.
To apply, you first have to find a lender. Compare your options based on who you engage best and are most comfortable with, your lender’s expectations and how well your business meets or does not meet them, and how their loan process aligns with your financial goals and needs.
Next, you’ll need to submit your equipment financing application as well as some paperwork including three months of business bank statements, and other detailed information about the piece or pieces of equipment subject to include but not limited to the year, make, VIN, mileage, etc.
After submission, you are in the awaiting approval stage. Your lender will review all documents and respond with acceptance or rejection for the loan.
How Does It Work?
Once we receive all of those documents, our team will be able to create a customized equipment financing offer for you in less than 24 hours.
After about one week prior to being accepted, you will be given financing for up to 100% of the equipment cost depending on your financial standing and the value of the items secured as collateral, leaving the final purchase a much easier and less stressful transaction.
With low rates, great terms, and the capital upfront, you will have the ease and ability to purchase expensive business equipment as necessary. Plus, if the equipment you plan to purchase will retain its value over an extended period of time, the financing you receive could extend out to 5 years, with rates as low as 6% APR.
At the point of your purchase, the equipment will essentially become collateral to secure the financed amount to make it easier for you and your lender when it comes to repayment. This is a big reason why business owners who are worried about committing to a financing agreement, choose this option.
Can I Get Equipment Financing with Poor Credit?
Yes! Equipment financing is a great funding option for those with less-than-average credit.
Due to the fact that the equipment you purchase will be used as collateral, your lender is able to feel much more secure about providing financing; there is no fear in whether or not you can repay the loan because it is already financially covered through the piece of equipment.
FAQ About Equipment Financing
What types can be financed?
We can finance almost every piece of equipment from items including ranging from a new pizza oven for your restaurant, to a new truck for your shipping company. Give us a call to find out if your equipment can be financed.
What are the benefits?
Benefits of equipment financing include possible tax deductions on equipment purchased and the ability to maintain cash flow without drawing from a business credit card. In addition, the loan itself is beneficial more so than others by offering lower rates.
Are all industries considered for this type of loan?
While most are considered and accepted, there are a few which do not qualify or present too many risks. Some of the potentially unaccepted industries include
Which industries can benefit the most?
CFG Merchant Solutions provided a list of strong advocates encompassing construction, agriculture, healthcare, energy, and transportation. If your business does not fit in this list, you are not alone and equipment financing may still be a very viable option for you.
What is the difference between equipment financing and leasing?
According to Lantern Credit, it all boils down to who owns the equipment. Equipment financing means that the business owner owns the equipment at the end of the term, whereas with equipment leasing, the owner rents the equipment from the leaseholder, also known as your lender.
Whether your equipment broke down and stopped working, you lack enough equipment to get the job done, or you believe it’s time for a refresher, this form of financing can help.
Now seeing the bigger picture, don’t wait. If you need the equipment now, you’ll need it later as well. Apply for equipment financing today.
