business equipment Loans

Business Equipment Loans

Business equipment loans can be used to purchase equipment for your business. A business auto loan is available for cars, vans, and light trucks. The term of an equipment loan is usually matched with the equipment’s expected life span. The equipment acts as collateral. Rates will vary depending on the equipment’s value and the strength of your company.

Pros:

• The equipment is yours and you can build equity.

• If you have good credit and strong business finances, you can qualify for competitive rates.

Cons:

• It is possible that you will need to make a down payment.

• The life expectancy of your financing can make equipment obsolete faster than its duration.

Ideal for:

• Companies that wish to purchase equipment.

Equipment financing is a loan to purchase machinery or equipment that is essential for your business. An equipment loan can be used to purchase anything, from office furniture and medical equipment to farm machinery and commercial ovens.

Equipment finance companies specialize in this type of small business loan. You can also obtain an equipment loan through banks and the U.S. Small Business Administration.

BuSiness equipment Loans

How Equipment Financing Works?

Equipment financing is an asset-based type of financing. The equipment is the collateral for the loan.

• Depending on the equipment finance company that you choose and the qualifications of your business, you can obtain an equipment loan up to 100% of what the equipment is worth. The loan is repayable over time with interest.

• Some small business lenders will also cover soft costs such as delivery, installation warranties, assembly, and any other one-time expenses that are necessary to get your equipment up and running. These costs can be covered by equipment financing companies. They may offer 100% financing for the equipment and 25% for soft costs.

• However, equipment financing companies may only finance a portion of the equipment’s cost, such as 75%, and then allot the remaining loan (25%) for your soft costs.

• Soft costs are usually expensive upfront and won’t increase the value of your equipment over time. It can be beneficial to find an experienced equipment financing company to finance these expenses. You’ll get the same interest rate for financing your soft costs as the rest of the equipment loan. This means that you don’t need to borrow additional funds or use money you already have.

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Equipment Financing Rates and Terms

Equipment financing terms and interest rates can vary depending upon the equipment finance company and your business’s qualifications.

• Equipment financing interest rates can range from 4% to 30 percent, according to anecdotally.

• Equipment loans generally have terms that are determined by the expected life of the machinery or equipment you purchase. You may find it difficult to pay your equipment loan payments, while a shorter term could leave you with less time. A longer term will mean that you’ll have to pay for the equipment when you stop using it.

BUSINESS equipment Loans

Equipment Financing vs. Equipment Leasing

Once your company is able to take out a loan, it’s time to start the process of gathering the documentation required for your loan application. Although the exact documentation will vary between business funding partners, it will likely include the following documents.

BUSINESS equipment Loans

Pros and Cons of Equipment Financing

Pros

• Affordable. Equipment loans are affordable and can offer long terms and competitive interest rates. SBA7(a) loans typically offer terms of up to 10 year for equipment purchases.

• Equipment ownership. Once the loan has been repaid, you will own the equipment. You might also be able to arrange a sale and leaseback agreement with an equipment finance company. This involves the equipment being sold to a lender for quick cash, then the equipment is leased back from the lender.

• Self-collateralizing. To qualify, you don’t necessarily need to rely on your personal credit, time in business, or any other collateral. Equipment financing may be available to startups and businesses with poor credit.

• Tax savings. Tax savings.

Cons

• Equipment that is no longer in use. You will need to dispose of equipment that is no longer needed.

• Deposit payment. A large down payment may be required for an equipment loan.

BUSINESS equipment Loans

Where to Get Equipment Financing

Online lenders

Online equipment finance companies may be able to offer equipment financing with flexible qualifications that are more flexible than traditional bank loans or SBA loans. Online lenders can work with businesses and startups with poor credit.

Many online lenders offer quick financing and simplified application processes. In some cases, you can even get funding within 24 hours.

Online equipment loans are generally more expensive than SBA or bank loans but have shorter terms and higher interest rates.

Credit unions and banks

While banks and credit unions offer equipment loans at the best interest rates and terms available, they have strict eligibility requirements. You will need to have strong personal credit (a minimum of 700 FICO score), a long history in business, and good financial records to be eligible for equipment financing from a bank.

If you meet these requirements, an equipment loan from a credit union or bank will be the most cost-effective option. Additionally, institutions such as Wells Fargo have business divisions that specialize in equipment financing for different industries.

SBA lenders

You might consider working with an SBA lending instead of traditional bank financing. This is typically a bank or credit union. SBA loans come with long terms, usually up to 10 years for equipment loans, and very low interest rates. You can also use equipment you are purchasing as collateral.

You will need to have a high personal credit score of 690 or more in order to qualify for an SBA loan. However, some SBA lenders may require lower scores.

Equipment financing is available in your industry

• Find out more about equipment financing.

• Compare the best financing choices for restaurant equipment.

• Locate online lenders who offer financing for dental equipment.