While there are many types of equipment financing, IT equipment financing is among the most popular types of funding in this category. Small businesses need to update their technology and software quite regularly. Even for those businesses not within the IT sector, this is still a primary concern. If your technology is outdated, if your IT is too far behind the times, your business will not keep pace with current demand. It is as simple as that.
So what exactly does IT equipment financing entail? What options are available for those businesses looking to update their equipment now? And how do you qualify for an IT equipment loan? In this article, we will explore these questions and more.
Understanding Equipment Financing
When you go for an equipment loan, IT equipment, or some other form of equipment, the amount you will be able to receive will depend on the value of the equipment. In many instances, the equipment you buy, be it software or some other form of technology, will serve as the security on loan. Meaning, you usually do not have to put down collateral on an IT equipment loan. If your small business defaults on a loan for whatever reason, the lender will take back the equipment and then try and sell it to recoup their losses. Often, with IT equipment financing, you are eligible to receive 100% financing. So there may not be a deposit or down payment required.
There is also the option of leasing the equipment in question. This means that, in essence, the lender will be the ones purchasing your IT equipment. You will then lease the equipment from them for an established amount over a set period of months or potentially years. At the end of that lease term, you then have the option to buy the equipment outright, usually for a meager dollar amount. However, when dealing with IT equipment, it is often a better option to update your equipment because it does become outdated relatively quickly.
Benefits and Advantages of IT Equipment Financing
As with any type of small business financing, there are pros and cons to an equipment loan of this nature.
– As mentioned, the IT equipment itself serves as a security on the loan. So you may not have to come up with additional money to procure the funding.
– You will own the equipment. Once the loan is paid off, you then have the option of selling the equipment and thus getting the funds needed to purchase new, updated equipment.
– There is the depreciation tax benefit associated with the purchased equipment.
– Equipment can become outdated rather quickly, especially when it comes to IT equipment. You want to keep this in mind when considering the loan terms.
– There may be higher interest rates associated with a loan of this type.
Qualifying for IT Equipment Financing
What is the best way to qualify for this kind of loan? How can you prepare your application so that you position yourself in such a way as to have favorable approval odds?
1. Make sure you have all your documentation ready to go. While the requested information and documents might vary from one lender to the next, many will require the following: tax returns, financial statements to include balance sheets and cash flow statements, articles of incorporation if applicable, any licenses or permits, business leases, and all detailed information about the equipment you intend to purchase. The more you have prepared and ready to go, the more streamlined your process.
2. Check your credit report. Sometimes errors and inaccuracies can be present. Rectify these immediately. Also, take steps to improve your credit score if at all possible. Start to pay down some of your higher-interest debt.
3. Have patience. Especially if you are working with a traditional bank on an IT equipment loan, the process could take some time – sometimes weeks, if not months. However, if you opt to work with an alternative or online lender, this could significantly cut down on the amount of time it takes to get your loan. Some clients get their loans within one or two days. Again, it will depend on how quickly you can get the lender the information they require.
First Union Lending is Working For You
We want to see our small business clients thrive and grow! This is why we offer fast and flexible IT equipment financing. If you currently need to update your existing equipment or need to purchase new IT equipment, we want to help. We offer short-term loans, lines of credit, and equipment loans among other financial products. Even if you do not have a stellar credit score, we likely still have a financing option for you. Call today and let’s get started together!