If you run or own a business, it’s tough to find the money to buy expensive equipment that you need to grow your business or keep it going. Luckily, financing options are available specifically for businesses, like business equipment finance.
Business equipment finance refers to the process of finding the money necessary to purchase new office supplies, computers, furniture, or any other business asset. If you’re looking to get started with this type of financing, here’s what you need to know about how it works and how it can help your business succeed.
Understanding Business Equipment Financing
Financing business equipment can be difficult, but it’s often essential. For example, if you want to purchase a new machine that costs $25,000 and your business currently has little to no capital, an equipment loan may be in order. Here are some things to know about business equipment financing before moving forward.
Using business equipment finance, you can purchase new or used equipment for your business and pay it back in fixed payments over time. The lender will normally lend up to 100 percent of the equipment’s value, but the amount may depend on the equipment’s type, condition, and creditworthiness.
It is asset-based financing, meaning the equipment itself is the security for the loan. As a result, you won’t have to provide extra collateral or sign a personal guarantee. However, Equipment financing may require an initial down payment of 10% to 25%. Therefore, you will likely receive a lower interest rate if you make a larger down payment.
It is common to have a five- to six-year repayment term for equipment financing, though some lenders provide 10-year repayment terms. As another option, some lenders may assign repayment terms based on the life of the equipment—by doing so, they will still be able to recover their losses in the case of a default.
Advantages of equipment financing
A quick way to fund equipment purchases. A business loan (such as a bank loan or SBA loan) takes weeks or months to fund, but equipment loans move much faster. It is possible to get equipment financing in a few days, as long as you have the necessary information.
Easier to qualify. Businesses with bad credit or startups can benefit from equipment loans. Lenders often work with less qualified businesses since the equipment secures the loan. In addition, a credit bureau will also receive your payment history, so on-time payments will help you establish a solid credit history and make it easier for you to qualify for future loans.
Equipment is collateral on loan. the equipment acts as collateral for your loan instead of business property or real estate. Moreover, you may avoid having to sign a personal guarantee on the loan if you work with your lender.
Low-interest rates. Most equipment financing rates range between 4% and 40%. Although interest rates vary, they are generally affordable. In addition, taking the Section 179 business tax deduction could help you save money. The lower end of the range is similar to bank and SBA rates.
Fast application process and minimal paperwork. Banks and alternative lenders offer business equipment financing. However, Alternative lenders offer streamlined processes and faster processing times. In addition, you’ll see less paperwork requirements since lenders are less concerned about your business’s qualifications.
Who Is Eligible for Equipment Financing?
Small businesses of all sizes, even those with less than perfect credit history, or those operating for only a short time, can qualify for equipment loans. The criteria for equipment financing qualification differ between lenders, but most expect a good personal credit score and a relatively outstanding track record of revenue generation.
Stop worrying about your current cash flow problem and fix it.
At POM (Peace of Mind) Capital & Funding Services, we offer several equipment loans in New York, including term loans and Business Lines of Credit. Call us at 631-354-9290 or write to us at [email protected] to schedule a meeting with our team.
POM Capital & Funding Services is a leading provider of alternative funding solutions for businesses of all types and sizes, offering commercial finance solutions and products to businesses in the Centerport, New York area and throughout the state of New York.