Understanding Equipment Loans

by | May 11, 2022 | Equipment Financing | 0 comments

Whether you’re a brand-new company or a well-seasoned industry veteran, you need equipment. You probably also frequently update or purchase new equipment for your company. The thing is, the equipment can get rather expensive. And in this challenging economy, finding the money to procure the equipment you need can be a challenge. This is where equipment loans come in. Equipment financing is becoming the go-to solution for small and medium-sized businesses to get the funds to keep things flowing smoothly.

What exactly is equipment financing? How can you prepare an application packet to ensure approval? And what types of equipment can be purchased with loans? This article will look at some of the basics associated with equipment loans.

What are Equipment Loans?

Generally speaking, equipment loans can be used to obtain pretty much any equipment you will need to run your business. So, for example, if you are a construction company, you may need to get heavy machineries such as a bulldozer or crane. Equipment loans can be used for this purpose.

If you’re a technology-based company and require updated systems, software, and servers, you might look into an equipment loan to purchase these items. These are just a couple of examples of how equipment loans may be used.

The lender you work with for your equipment loan is an important puzzle piece. If you opt to go with a conventional bank, the process can be somewhat lengthy, not to mention difficult. Banks are hesitant to loan to smaller or newer companies because they pose too much risk. In terms of equipment loans, more and more companies are turning to alternative and online lenders. They take a big picture approach versus fixating on one number or score. And your approval odds with an alternative lender increase significantly.

Getting Equipment Loans

The good thing about an equipment loan is that it serves as collateral for that loan. This means the lender will essentially have a lien on the equipment you buy. Should your company default, the lender can then turn around and sell the equipment to try and recoup their losses.

Due to the amount of collateral you have in equipment, many lenders will lend up to 100% of the value. However, that’s not to say that this is always the case. Often, some lenders will only lend up to 80% of equipment value. You may be required to put money down in some instances.

As far as the loan terms associated with equipment loans, they tend to range. Factors that help to determine loan terms include your credit history, the amount of time you’ve been in business, and the value and condition of the equipment being purchased. You can get an equipment loan for just a few months or extend that loan for up to 10 years, depending on the amount.

Preparing a Loan Application

As with any business loan, the more organized you are, the more up-to-date your documents are, and the better your chances of being approved. With this in mind, it’s imperative to have everything ready to go. When the lender requests certain information or specific documents, you have these on hand and are not holding up the process. Among the information you want to prepare:

  • Tax returns, both business and personal
  • Financial statements to include balance sheets and cash flow statements
  • Any business leases you might have
  • A business plan
  • And all relevant information on the equipment itself. Again, the equipment serves as collateral in most cases, so you want to ensure that the lender has everything they need to assess and evaluate that equipment.

First Union Lending is Here to Help

We specialize in equipment loans. We have worked with businesses throughout the United States. With short-term loans, equipment loans, and merchant cash advances, among other financing types, we can help you right now. We don’t leave you hanging for weeks or months. Most of our clients get funded within two or three days of applying. And we do take a big picture approach to equipment lending. Even if your credit score is less than ideal, we still want to work with you. Call today, and let’s get started.