When you need to buy new or used equipment for your business, but don’t have the cash on hand to do so, what do you do? One option is to take out an equipment loan, which is a type of financing that allows you to purchase new or used business equipment by borrowing money from a lender. In this article, we’ll discuss financing for equipment, including how it works and what you need to know before you apply.
What is Equipment Financing for Startups?
When you’re first starting out, there’s a lot of financing for startup business equipment leasing. You have to have the right equipment to get the job done, but you may not have the money upfront to buy it outright. That’s where small business equipment loans come in. There are a few different equipment financing options available, so be sure to explore all of your options before making a decision.
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How Does Small Business Equipment Financing Work?
Most financing options for equipment require a down payment, typically ranging from 10-30% of the total purchase price. The down payment can be paid with cash or through personal assets pledged. Equipment financing can be used to purchase both new and used equipment. In some cases, you may even be able to finance the cost of shipping and installation.
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Benefits of Financing Equipment for Your Small Business
Here are five benefits of getting equipment loans for your small business or startup:
- Get what you need. You can get the equipment you need to run your business without having to pay for it all upfront. You give a down payment and make monthly payments until the loan is paid off.
- Build business credit. Financing equipment can help you build your business credit score, which can be helpful if you ever need to take out a business loan in the future.
- Get tax deductions. You may be able to get tax deductions on your equipment loan payments.
- Flexible financing options. There are a variety of financing options available for equipment, so you can find one that best suits your needs.
- Fixed monthly payments. Your equipment loan payments will be the same each month, making it easier to budget for them.
Ways to Use Equipment Loans
There are many ways to use a business equipment loan. Let’s dive into a list of various uses for equipment financing:
1. Heavy Equipment Financing
This type of financing is used to purchase heavy-duty equipment, such as construction equipment, agricultural equipment, and manufacturing equipment.
2. Farm Equipment Financing
Farm equipment loans are used to finance the purchase of farm equipment, such as tractors, combines, and other agricultural machinery.
3. Construction Equipment Financing
This is used to finance the purchase of construction equipment, such as excavators, bulldozers, backhoes, graders, trenchers, tower cranes, and more.
4. Restaurant Equipment Financing
If you’re looking to finance the purchase of new or used restaurant equipment, such as ovens, stoves, refrigerators, freezers, dishwashers, and more, then this type of financing can help.
5. Medical Equipment Financing
Medical equipment financing can be used to finance the purchase of new or used medical equipment, such as X-ray machines, MRI machines, CT scanners, and more.
6. Audio Equipment Financing
This type of financing can be used to purchase audio equipment, such as mixing boards, microphones, PA systems, and more.
7. Used Equipment Financing
If you’re looking to finance the purchase of used equipment, many lenders will require that the equipment be less than five years old.
8. Photography Equipment Financing
Photography equipment financing can be used to finance the purchase of new or used photography equipment, such as cameras, lenses, tripods, lighting equipment, and more.
9. Computer Equipment Financing
This type of financing can be used to finance the purchase of new or used computer equipment, such as laptops, desktop computers, printers, and more.
10. Office Equipment Financing
Office equipment financing can be used to finance the purchase of new or used office equipment, such as desks, chairs, filing cabinets, and more.
Is an Equipment Loan from a Bank or Credit Union Right for Your Small Business?
Small business owners often have to secure financing for their equipment needs and there are a few reasons why they should get a loan through credit unions or banks.
First, banks and credit unions typically offer lower interest rates than other lenders. Second, banks and credit unions are more likely to work with small businesses to establish repayment terms that fit the small business owner’s budget. Finally, banks and credit unions usually have a more lenient approval process than other lenders.
However, there are some drawbacks to financing equipment through credit unions or banks. First, the approval process can take longer than with other lenders. Second, the small business owner may be required to put up collateral in order to secure the loan.
Overall, an equipment loan from credit unions or banks is a good option for small businesses. Businesses that have good credit and that need quick access to financing would be best suited for this type of loan.
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Is It Hard to Get Financed for Equipment?
While it’s true that equipment can be expensive, and lenders may be hesitant to finance large purchases, there are a number of options available for business owners who need to finance their equipment.
From leases to loans, there are plenty of ways to get the financing you need. There are plenty of options available, and with a little research, you’re sure to find the perfect fit for your business.
Does SBA Do Equipment Loans?
Yes, the Small Business Administration (SBA) provides financing for a variety of equipment, including vehicles, office furniture, computer systems, and more.
To qualify for an SBA loan, businesses must meet certain criteria, such as having a good credit history and being in business for at least two years.
What Credit Score Do You Need for Equipment Financing?
As a general rule, you’ll need a minimum credit score of 700 to qualify for most equipment loans. Even if your credit score is above 700, there are other factors that lenders will consider when reviewing your loan application. These include your income, employment history, and financial history.
Which Alternative Lender is Best for Commercial Equipment Financing?
There are a variety of equipment financing companies out there that offer different types of loans, but working capital loans are a great alternative. Working capital loans are short-term, often have lower interest rates than other types of loans, and can be used for a variety of purposes, including equipment financing.