No matter your industry, you’ll eventually need to purchase new equipment and upgrade to suit your business needs. Most often, businesses seek equipment financing to grow.
Here’s everything you need to know about applying for an equipment finance loan and making the most of it.
What Is Equipment Financing?
Equipment financing allows you to access funds and get the equipment you need to run your business.
Even if some businesses have cash flow challenges, there are dedicated loans to help obtain the necessary equipment and continue serving their clients.
The office equipment you secure is considered an investment for your business. They help improve your customer service and help your business stay in the game in your industry.
By applying for a financing solution, you don’t have to worry about how you’ll get capital for your equipment. There are dedicated equipment leasing and financing available to address them.
How Does Equipment Financing Work?
Some lenders tailor your financing options based on your industry and expertise to help you determine what you need.
Whether you borrow from a bank or an alternative lender, your leases and financing usually rely on the assets you acquire for security.
They can be combined with other financing options such as small business loans or business lines of credit, depending on your needs.
Once you’ve received approval, you’ll get the funding for the purchase. All you’ll have to worry about is your monthly payment schedule.
Ensure that you properly repay your financing or leases. Once your term is done, you can refinance it or get full ownership, depending on your terms.
Whether it’s trailers or equipment for your office, these financing options can help you improve in different industries, especially if you partner with a trustworthy lender.
How Can Equipment Financing Help Your Business?
Equipment finance comes with many benefits and advantages for businesses and their success. A few of them include the following:
- No additional collateral is needed for investment in equipment finance.
- Equipment purchases can be eligible for tax deductions.
- No spread out large capital costs.
- Improve your customer service & experience.
Types of Equipment Loans
These are the most common equipment financing options you can look into for your business needs.
- Business term loans – these are the most straightforward types of loans that give you a specific lump sum. Depending on your needs, it can have different terms and help cover large expenses.
- Business line of credit – lines of credit give you a specific lump sum you can withdraw or pay off whenever you want. They’re usually compared to credit cards, which are great for minor expenses.
- Equipment finance – these are specifically used to purchase business equipment. You can rent, lease, or buy outright using this financing option. There can be specific loans for different equipment types, providing the funding you need for ownership.
- Invoice finance – these are based on your outstanding invoices representing future payments. A cut of your outstanding invoice is paid to the lender.
- Business vehicle finance – these cover purchasing your business vehicles, including cars and trucks. Many options exist, from leasing vehicles to buying them outright from dealers. They also include trailers and specialty vehicles requiring specific manufacturers for acquisition. These vehicles are your assets and should be financed to prevent equipment from being taken.
- Business credit cards – these are flexible funding that provides a specific amount to help cover your costs, including equipment financing and the like. These transactions are subject to credit approval based on your score.
- Business overdraft – this helps you borrow beyond the limit of your business bank account. It can cover shortfalls that aren’t viable enough for other loan options. They’re also great for acquiring the equipment you need to upgrade your services.
Some of these can be more flexible than others when providing loans, leases, and purchases for your used or new equipment.
How to Apply for Equipment Financing
These are the typical steps to apply for equipment financing:
- Fill out your application. Most lending companies allow their customers to apply for equipment financing online. Submit an application along with the necessary documents.
- Get approved. Once your lender goes through your application, they can provide you with the options you can get approved for—factor in elements like monthly payments and if it’s flexible enough.
- Get your funds. After signing your equipment financing agreement, you can easily withdraw the money to purchase your equipment. Take note of the monthly payments and fees to secure your equipment lease or loan.
- Repay your loan. Take note of your monthly payment and repay your bank or lender accordingly. This will help ensure that you can get better loans in the future.
Choosing the Best Equipment Financing Options
These are the IMPORTANT FACTORS to consider when looking for an equipment loan or lease.
- Eligibility – most lenders would require businesses to operate for 1 to 2 years (with financial records during its operation) before providing approval. It helps them examine cash flow projections, conduct credit checks on the company directors, and business activity statements.
- Loan type – some loans can provide a single lump sum, which you can pay over time during your loan term. Business overdrafts also give you more flexibility by letting you spend beyond your limit or lines of credit.
- Interest rate – you can get fixed or variable interest rates based on what will benefit you most. Secured business loans tend to have the most competitive rates.
- Security- secured loans have lower interest rates compared to unsecured funding. However, they require collateral or assets to qualify.
FAQs
Let’s discuss the common questions about equipment finance and how they can help your business grow.
Is It Difficult to Get Equipment Financing in Australia?
You can find many options for urgent small business loans, which can be combined with other loans. But experiences in applying may differ.
Be prepared to provide the essential paperwork, annual revenue, and other information that helps speed up the process.
What Are the Cons of Equipment Finance?
While it’s normal to focus on the benefits of equipment finance you’re interested in, remember that it also has limits and cons for industries, including:
- Down payments – some equipment financing requires around a 20% down payment.
- Limited use – most equipment financing options are limited to only the purchase, lease, or repair of equipment and soft costs.
- Costly – equipment financing can have a higher interest rate than term loans from banks and credit unions. You’ll need to partner with a lender that can have your loan appropriately financed.
- Outlasting equipment life – long-term loans can outlast your equipment and won’t have enough fair market value once you repay your lease or loan.
Conclusion
Business success heavily relies on improving your services and equipment over time. It shows your expertise in your industry and how you can improve people’s transactions.Applying for equipment finance is one option to get the funds you need to improve your business and grow.
