As a small business owner, you likely understand the need for getting cash quickly. There are emergencies that arise, there’s inventory that needs to be paid for, a new roof might need to be put on your building, or, you may need to purchase new equipment. Equipment loans are among the most popular forms of commercial financing available today. There is however some confusion regarding what exactly equipment loans can be used for. In this article, we try and clear that up.
How do Equipment Loans Work?
First thing’s first, before knowing what exactly you can use an equipment loan for, you should understand something about how equipment financing works. An equipment loan is actually one of the more accessible loan products for which you might qualify. This is because the lender will usually use the equipment being purchased as security on the loan. So let’s say you fail to repay your loan, the lender can then repossess the assets you purchased and try and sell them in an effort to recoup their money.
There are a couple of different forms of equipment financing. There’s an equipment loan and there’s also equipment leasing. Essentially, with equipment leasing, the lender is the owner of the assets. You are basically paying them rent to use those assets on a daily basis. At the end of the lease term, you will then have the option to buy the equipment outright—usually for a very small sum – or you can then upgrade for newer equipment. Both forms of equipment financing, leasing and equipment loans, are incredibly popular among small business owners.
Different Types of Equipment That Can be Financed
As noted, equipment loans can be used for essentially anything related to your business. Below are a few examples:
Construction equipment. Among the most common reasons to get an equipment loan is for the purchase of construction equipment and machinery. From backhoes to bulldozers, construction companies will often turn to equipment financing in the event that they need money to buy new equipment or to update their existing equipment.
Restaurant equipment. Restauranteurs require all different sorts of equipment in order to operate their restaurant at the level that they need to. This could include refrigeration units, cash registers, dishwashers, stoves, grills, sinks, you name it. All of these things can fall within the umbrella of an equipment loan.
Technological equipment. Just about every company out there is in need of IT equipment. Equipment loans can be used for this purpose. Some companies will use the money to update their computer systems, purchase new software, or get new devices for employees, the list goes on and on.
Copiers and printing equipment. Having access to a reliable copier and printers that work on command is imperative for many businesses. Business loans of this nature can in fact be used for printing and copying equipment.
Qualifying for Equipment Loans
As mentioned earlier, it can be easier to qualify for an equipment loan than other commercial financing types. This is because the lender does have the reassurance that the equipment in question will stand as security on loan. There is thus less risk involved with this type of financing. The lender can always repossess the equipment and in this way, try and get their money back should the company default on the loan.
You want to be prepared to show the lender any requested documentation, this could include tax returns, bank statements, articles of incorporation, financial statements such as balance sheets and cash flow statements, any business leases and licenses, and also a business plan if you have one.
Working with an online or alternative lender will be your best bet over working with a conventional bank. This is because an online lender will take a more holistic approach to commercial lending. They are not fixated on one number or score but rather, take a big picture approach in terms of who you are as a company and what you represent. Not to mention, they work a lot more quickly than banks do with many customers getting the funds within a couple of days.
First Union Lending is Here for You
Whether you need to purchase cranes, computers, or cash registers, we have a funding solution custom-tailored to suit your business needs. Even if your credit score is less than ideal, we might still have an option for you. Our representatives are on hand to walk you through this process every step of the way. Call today and let’s get started.