How to Get Equipment Loans for Small Businesses

2015-07-21

Jeffrey Bumbales

Many businesses require the use of heavy machinery, equipment, and vehicles in order to perform the basic functions of the job. From manufacturing industries to transportation professionals, expensive equipment is essential to sufficiently cater to consumer demands. With equipment loans for small businesses, you can access the necessary capital to purchase the machinery needed to thrive in your industry.

 

What Are Equipment Loans?

Before explaining how to get equipment loans for small businesses it is important to explain what these loans are. Equipment loans are loans specifically designed to help businesses obtain necessary equipment, machinery, and vehicles to perform their basic job functions. Starting a business is a huge financial investment, and the largest chunk of that investment goes toward obtaining expensive machinery required by the profession.

Equipment loans can be applied toward machinery, as well as delivery vehicles, trucks, and other large pieces of equipment. Equipment can be both financed and leased, depending on the situation. Financing for equipment ranges between $10,000 and $500,000, enabling businesses to meet most of their operational needs with a single loan.

 

Benefits of Leasing Equipment

Many new businesses choose to lease their equipment initially, as they work to build sufficient returns within their company. There are many benefits to leasing equipment including:

• Accessing higher quality equipment than could otherwise be afforded upfront.

• A lower initial investment, enabling the business to establish returns prior to making larger purchases.

• Easier to qualify for, making it a more accessible option for new businesses.

• Saves business owners considerable time, as they won’t need to find a lender to extend credit to the lease.

• Maintenance costs are sometimes included in the lease, enabling business owners to save money in overhead costs.

Once the lease has expired, businesses then have the opportunity to purchase the equipment at fair market price, return the equipment, or renew their lease. This is an ideal option for new businesses that lack the startup capital to purchase all of their equipment upfront, as it provides more time to establish financial returns while they grow their clientele. Leasing equipment will cost more money long term, however, since you will eventually be expected to either purchase or return the equipment.

 

How Do You Qualify?

Nearly 80 percent of businesses choose to finance their equipment rather than lease. Repayment terms vary between 3 and 6 years, depending on your specific qualifications and the type of equipment you finance. For those seeking to finance rather than lease their equipment, there are a number of additional qualifications you have to meet.

• You need to provide up to 30 percent collateral for the loan.

• You need to provide up to two years of tax returns.

• You need to provide your business’s financial statements.

• You need to have a great business credit score.

For new businesses, qualifying for an equipment loan outright can be challenging, and many choose to lease their equipment as they work to build their credit. In either case, taking out an equipment loan or lease will enable you to secure the expensive machinery necessary to meet the demands of your industry. Most companies start out small, and continue to invest in equipment as their business generates returns. Invest in the future of your business by accessing the funding you need to prosper in the field. For all your working capital needs, contact Credibly.