There comes a point in every business owners where they need to purchase, replace or update a crucial piece of equipment, it could be as simple as a new touchscreen for your POS system or an entire automated dishwashing system. Sometimes this could put a huge dent in your current budget, luckily for you there are equipment loans. An equipment loan is ideal for expanding businesses and startups because it provides you with the tools you need to grow your business.
The beauty of equipment loans is that you are using the item you purchased (your equipment) as your collateral on the loan. If you are not able to pay the loan back, instead of losing your house or going into bankruptcy, the lender merely repossesses the equipment.
Why Should I Get An Equipment Loan?
The list of reasons is endless to why you should look into an equipment loan, so I’m going to save some time and cut to the chase:
- You can own up-to-date cutting-edge equipment at a fraction of the cost. In many equipment loan programs you have an option to turn in your old machines for the latest models which not only perform better but you will have the upper hand over your competition.
- Less paperwork! Nobody likes to have to find or fill out seemingly endless pages of documentation, your tradition business loan requires up to at least 2 years of paperwork showing profitable operation. On the other hand your equipment is your collateral in an equipment loan so lenders are not as concerned about your business’s financial history.
- You find out right away if you got the loan or not, as long as you provide them with the necessary paperwork, you could have your equipment delivered to you before the day is done.
- By adding to your net assets without spending loads of money, you’ve just increased the value of your business.
- Most importantly, they save you money. These loans generally let you finance 80% of the cost of the equipment. Some lending companies will offer you flexible repayment options that will help you maximize cash flow.
What Do I Need To Know?
There are a variety of equipment lending sources including banks as well as specialize equipment lending companies. Get to know your company before even speaking with them, find out what kinds of businesses to they lend to, this will give you more leverage when working out a rate.
You should also find out all the requirements before you apply, even though the credit requirements and documentation are greatly reduced, lending companies still require a minimum credit score and other criteria before they can offer you a loan.
When you are negotiating a rate keep in mind:
- Your Default. If your equipment has been repossessed, there is a chance that the value has declined from the time that you initially borrowed it. Make sure the difference you could owe them is formulated and within reason.
- Your Collateral. Make sure that the only collateral you are putting up is the equipment you are borrowing, not any of your other assets.
- Can you Trade In? Check with your lender to see if you have trade in or upgrade options, these will come in handy when your equipment breaks or becomes out dated.