When you see a business opportunity, but you don’t have the equipment in house to capitalize upon it, you may be an excellent candidate for an equipment financing program. Equipment financing can allow a company to grow more quickly and take advantage of market opportunities that might otherwise not be accessible. When there’s a chance for a company to purchase a vehicle, upgrade computers or bring in other equipment that will enable the organization to meet client needs, passing up that opportunity can mean leaving money on the table – and none of us want to do that!
Maximum Financing Amount
Up to 100% of equipment value
1 – 5 years or expected life of equipment
8 – 30%
As little as 48 hours
Equipment financing can be arranged for any type of loan for business equipment. The type of equipment and its condition will dictate how much a company can borrow on an equipment loan. Just like a consumer car loan, equipment loans for a business will vary in their cost based on the equipment’s age, its new or used condition, and the length of time the equipment is expected to be in use. A rusted out old Yugo will not be financed at the same rate as a shiny new Lexus. Just as with a car loan, the equipment bought with the loan funds will be the collateral for the loan.
As with any loan, the lender will want to review the company’s credit rating. The history of the business’s cash flow, and the company’s balance sheet may also be requested as part of the loan application package. Some lenders will want to speak with a few different credit references for the business, including the company’s bank.
For newer companies which don’t have a long credit history built up, or established companies that don’t have a great credit history to reference, the equipment loan can be a good solution to access growth opportunities.
Unlike a signature loan, the collateral securing the note is the equipment, which means the lender can be more forgiving about approvals.
Interest rates for equipment financing programs are usually fixed, currently ranging between eight and thirty percent. The payments for the program stay the same over the length of the program. The term, or length of the program, will generally be set based on how long the equipment is expected to be in use.
It’s not unheard of for financing companies to charge a small fee for the program, the bulk of the cost of the program will be repaid as interest in the monthly loan payments. For instance, financing in the amount of $10,000 for a thirty six month term at twelve percent interest would be have a total cost of $11,957.15. The cost of the program is $1,957.15. Assuming that the business expects to gain at least that amount of business as a result of the financed equipment, there is no good reason not to finance it. Repaying the monthly payment of $332.15 should be within the reach of the company, assuming that the equipment creates or supports new business as expected.