Financing Equipment Loans

Equipment loans are a credit advanced to enable a business or individual to purchase business equipment. Companies that seek to upgrade, purchase, replace, or repair different kinds equipment to produce, manufacture, or process their product can obtain these loans. However, getting the equipment you require to further your business needs can be trickier than you may think. This article will help you understand the criteria that lenders consider before providing you with the finance you require to get the assets you need for your business.

These loans help to fund equipment such as restaurant ovens, tables and chairs, dental and medical machinery, catering supplies, computer monitors, printers, furniture, copiers, commercial vehicles, industrial equipment, and much other equipment that are essential for a business to run at full capacity and maximize output. Equipment loans are a lifeline for any business.

Should You Loan or Lease the Equipment?

So you need a certain equipment so badly and are faced with a decision on whether you should lease the equipment or get a loan to help fund its acquisition. This is a tough decision for anyone to make. However, here are some of the things you should know before you decide to settle for either of the two.

Equipment Leasing

Equipment leasing is a financial arrangement where an individual or business pays to use a piece of equipment for a particular period. If you prefer to lease a specific equipment, then you will have to fund around 100 percent of its cost in addition to between 20- to 25% of soft costs such as taxes or delivery charges. The individual/business is expected to return the item at the expiration of the lease agreement. Either that or they purchase the item for a small amount after paying the principal of the loan amount in full.

Equipment Loans

With equipment loans, you can pay for about 80 percent of the total purchase price of the item you wish to obtain. Funding the acquisition of equipment through this method gives you ownership of the item from day one. Nevertheless, you will have to make a down payment of around 20 percent, as is the case with small business equipment loans. The loan collateral is strictly tied to the item(s) you are buying with the equipment loan.

Securing Business Equipment Loans

A creditor’s judgment of your creditworthiness determines whether or not you will be eligible for an equipment loan. As such, it is wise to apply with the bank with which you conduct the most financial transactions. Traditional banks are usually reluctant to extend equipment loans to individuals/businesses with poor credit ratings.

How to Get Equipment Loans

The following strategies have been proven to be efficient and reliable when it comes to obtaining equipment loan for your business:

  • Ensure to have an excellent credit rating. Having a history of good credit will play in your favor. This is one of the major things a bank considers before they decide whether to provide you with an equipment loan facility or not.
  • Prepare a convincing business plan. Your plan of activities intimates the bank as to how you intend to achieve business growth. Your business plan should be thorough and well-thought enough to convince the financial institutions that you have a workable plan that will see you pay back the loan as agreed.
  • Update your resume. The character traits expressed in your resume help show whether you will be responsible enough to pay back the loan upon maturity. Ensure to only information that will help sell you to the banks.
  • Prepare your cash flow statements. Banks need to know the amount of money flowing into and out of your business in current terms so that they can assess how your business is fairing in the real world.