Equipment financing means using a loan/lease to purchase/borrow hard assets for your business. This type of financing might be used to purchase or borrow any physical asset your business needs, such a restaurant oven or company car.
Businesses commonly get equipment financing under these situations:
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You need expensive equipment, but can’t afford to, or don't want to, purchase that equipment up-front with your own money
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You need to replace your equipment frequently because it has a short lifespan or you always need the latest in technology to stay up to date, etc.
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You need a combination of the above listed
Is equipment financing right for your business? If your business is in a situation similar to any of the ones above, the answer could be be yes.
Average Loan Amount
$10k - $2 Million
Loan Term
36 - 72 months/Monthly Payments
Rates
Starting at 2.99%
Time Needed
1 to 3 Business Days
How to Apply?
Equipment financing is distinct from equipment leasing, meaning you pay the owner of the equipment periodic rent for use of the equipment over an agreed period of time. At the end of the leasing term, unless you change the agreement with the owner on renewal terms or a buyout, the equipment is returned to the owner. Generally, the qualifications for leasing are less stringent than for financing; however, if the equipment is necessary to your business, the endless payments on leased equipment without the prospect of future outright ownership may prove to be even more costly.
As with all financing, rates and terms vary depending on an applicant’s qualifications and current financial conditions. The below are some sample rates and terms you can expect when looking into acquiring an equipment loan.
Documentation Needed:
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Application
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3 Months of Business Bank Statements
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Information Detailing Equipment (Year, Make, VIN, Miles, Etc.)
Qualifications:
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600+ Credit Score
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$100,000 in annual revenue
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12+ months in business
Equipment Financing
Lenders will vary in their requirements to obtain an equipment loan. The following are general qualifications a lender will look at when making a credit decision; however, underwriting standards vary and should be vetted before choosing a lender to ensure you meet their minimum requirements.
Your personal credit score will be an important factor in obtaining an equipment loan. If you are unsure of your current credit score, you can find your credit rating online. The higher your score, the more likely you are to get approved and the better loan terms you can anticipate.
In addition to credit score, lenders may require a business plan that describes your business and a detailed proposal for future growth. The basic goal is to give prospective lenders a comprehensive summary of your business. The number of years you've been in business and the annual revenue of your enterprise are important factors to include within your business plan. Some lenders may have thresholds requirements in this regard such as a minimum of two years in business with annual revenues of over $250,000.
Beyond a statement of revenues within your business plan, and a profit and loss statement, lenders' applications may require a balance sheet or cash flow statement. These should identify the revenue coming in to the business and the expenses going out. These statements help lenders assess the financial strength of your business. Since lenders are also interested in the personal finances of a small business owner, personal financial statements should be prepared as well. Preparation of all pertinent application documentation is important to help expedite the process.