Today, Equipment loans are among the most popular small business loan financing options. Every company requires equipment in some form, heavy machinery, IT equipment, office furnishings, or manufacturing equipment. The problem is that much of this equipment can be pretty costly. Think of a restaurant, for example. The equipment required to run the establishment efficiently is expensive. Many small business owners will thus turn to equipment financing to procure the machinery or technology they need.
The great thing is equipment loans are more accessible than perhaps ever before. The criteria they evaluate your application are generally far less stringent than, say, you’d face when working with a traditional bank. Especially if working with an online or alternative lender, you get access to immediate funding.
Equipment financing may be the ideal option depending on your business’s needs and financial situation. The question is, is an equipment loan the right option for your company? Below, we look at a few reasons why so many entrepreneurs take out loans to purchase the equipment their business needs.
Equipment Loans: Key Benefits
When going for business financing, you want to ensure that the benefits outweigh the downside. You also want to make sure that you realize a measurable ROI. Among the key benefits of equipment financing are:
– You don’t have to have perfect credit.
Unlike other business loans, your credit score doesn’t need to be stellar when applying for an equipment loan. 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 loan. In other words, the lender will use the piece of equipment you are purchasing as collateral. If you default, they will likely seize the equipment to recoup their losses for whatever reason.
– 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 essentially 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, you will enjoy a fast and efficient application process if you opt to go through an alternative or online lender. 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 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 equipment purchased. And while loan documents will vary from lender to lender, some are common to most business loan applications, including tax returns, financial statements, articles of incorporation, and a credit report, among other pieces of information a lender will request.
First Union Lending is Here for You
If you are in the market for new equipment, we can help. Call today! Our equipment loan programs from Florida to Washington are fast and flexible—meaning you do not need to have perfect credit to qualify.