Equipment loans are among the most popular small business loan financing options available today. Every company requires equipment in some form or another, be it heavy machinery, IT equipment, office furnishings and/or manufacturing equipment. The problem is that much of this equipment can be quite costly. Think of a restaurant, for example, the equipment required to run the establishment efficiently is expensive, to say the least. Many small business owners will thus turn to equipment financing in order to procure the machinery and/or technology that they need.
The great thing is equipment loans are more accessible than perhaps ever before. Especially if working with an online or alternative lender, you get access to immediate funding, and the criteria by which they evaluate your application are generally far less stringent than say you’d face when working with a traditional bank.
The question is, is an equipment loan the right option for your company? Depending on your business’s needs and financial situation, equipment financing may actually be the ideal option. Below we take a look at a few of the reasons why so many entrepreneurs do in fact take out loans for purchasing the equipment their business needs.
Equipment Loans: Key Benefits
Obviously, when going for any sort of business financing, you want to ensure that the benefits outweigh the downside. You also want to make sure that you are realizing a measurable ROI. Among the key benefits of equipment financing are:
– You don’t have to have perfect credit.
Unlike with some other business loans, when applying for an equipment loan it isn’t absolutely necessary that your credit score is stellar. Even, in some cases, if you have a less than ideal score you may still qualify for an equipment loan—particularly if applying through an online lender. One of the main reasons for this is because the equipment serves as the security on the loan. In other words, the lender will use the piece of equipment you are purchasing as collateral. If for whatever reason, you default they will then likely seize the equipment in an effort to recoup their losses.
– Your equipment doesn’t become obsolete.
If especially, yours is a tech firm and you rely upon the latest cutting-edge technology to keep things up and running, the risk of having equipment become obsolete is one you cannot afford to take. Depending on the type of business equipment loan you get, you can in essence lease the equipment in question. You are not locked into owning a piece of equipment long past its relevance. And you can thus upgrade sooner than you otherwise might be able to.
– The process is incredibly fast.
While this may not be the case when working with a conventional bank, if you opt to go through an alternative or online lender, then you will definitely enjoy a fast and efficient application process. Because, again, the equipment secures the loan, this expedites the process even more. When working with an online lender, you may even be able to receive the funds to pay for the equipment within just a day or two.
– You can maintain a positive cash flow.
If, for example, you do have to come up with tens of thousands for heavy machinery, this could substantially impact your cash flow which in turn hinders your daily operations. However, if you opt to go with an equipment loan instead, this frees up the cash that would have had to be used to pay for the equipment.
How to Qualify for an Equipment Loan
Qualifying for an equipment loan may be easier than you think. While traditional banks tend to maintain much stricter standards, alternative and online lenders make equipment loans more accessible than they previously have been. As the equipment represents the collateral, your credit score does not have to be perfect—even lower credit scores may qualify for funding.
Generally, you will have to have been in business for at least a year, and depending on the nature of the equipment financing, there could be some revenue criteria that must be met.
When you apply the lender will ask for all of the details regarding the equipment to be purchased. And while loan documents will vary from lender to lender, there are some that are common to most business loan applications to include: tax returns, financial statements, articles of incorporation, and a credit report, among other pieces of information a lender will request.
First Union is Here for You
If you are in the market for new equipment, we can help. Our equipment loan programs from Florida to Washington really are fast and flexible—meaning, you do not need to have perfect credit to qualify. Call today!Published in