Your Quick Guide To Equipment Financing
If you’re looking to get new equipment for your business, there are a lot of ways to access the machines you need. While traditional business loans are widely understood, they aren’t the only game in town. For small companies, they aren’t even usually the best deal you can get, and they can have long application review periods. That being said, they’re popular because they have some great terms and they serve the companies they are made to serve very well. Let’s talk first about how to get a traditional loan.
When you apply for long-term financing for an asset purchase, you typically deal with fixed interest rates and amortizing payments. The down payment has to be substantial, between 25 and 35% of the total cost is common. You also need to include financial disclosures and a business plan highlighting how your company works, what it currently does for business, and how the new purchase is projected to help you expand your volume of business. That means explaining what new options it brings your company, whether that is simply increased capacity for the work you already do or new work to add to your menu of services for customers.
Traditional loans can take a few weeks to process, and sometimes as long as three months. They’re also usually not available to companies with less than two years of operating history. SBA loans are another option that works similarly, but they are designed for the companies traditional loans don’t service. Small companies whose financials don’t quite clear the risk hurdles banks impose but who are otherwise healthy find them very useful, and the rates are among the best you will find. They can take even longer to process, and there are some limitations to the prepayment of your equipment financing loans if you take this option.
Another possibility is to skip purchasing altogether. By embracing a lease with terms that suit you, it’s easier to move into a return on the investment. You also don’t have to worry about equipment disposal when you are done, and you can upgrade whenever your lease is up for renewal by simply letting the old lease lapse and taking a new one out on an upgraded piece of equipment. That makes it easy to rotate your machines so you’ve always got up to date, competitive tools at the disposal of your staff. There are a number of efficiencies you pick up when you work with the right equipment financing company, the key is finding the ones that offer you a deal you just can’t resist.