When you start making plans for a new business, you must consider many things. There are many things like; having a place to set up the business, hire employees, purchase different inventories and most importantly buy equipment. However, when it comes to buying equipment for your business many options come in the mind including small business loans but equipment financing should be your choice.
What is Equipment Financing?
As the name suggests, businesses can use this type of loan to purchase new equipment, or replace the old equipment. You do not need anything as collateral to the lender, as the equipment itself will be a guarantee. This will help the small businesses to flourish and grow and the payment can be over time, months, or years, depending on the money borrowed.
Requirements to Apply for the Loan:
You need to provide some required documents to satisfy the lender. These must be prepared in advance. It is better this ways as you may not have to rush for things at the time of applying.
Many banks have the policy of requiring a certain amount as down payment. The minimum rate can be 5% of the total amount. However, it can be higher depending on the borrower, how much he can pay.
Various lenders do not request down payment. They simply give the borrower the whole amount. Nevertheless, it can increase if you have a bad credit history.
- The credit score very much matters. An average score should be 550+, but many lenders can demand higher. So keep a good track record by paying your loan on time. This will increase your chance of applying for the loan.
- Information regarding your business, as well as personal, is required for the application form. Name, home address, phone number, social security number, business location, and NTN are to be filled on the form.
- Submit the equipment invoices along with the form so that the lender may know what type of equipment you are going to buy.
- Bank statements related to your business must also be there with the application. Also, attach three years of tax return.
- You should have proof of your existing or new business. Show the business license to the lenders so that they can give you the money without keeping you wait.
- Several lenders demand to see profit and loss statement and business balance sheet for existing ones so that they could know if the borrower is sincere in his demands or he is a fraud.
Who Can Provide This Loan?
Where to go to apply for the small business loan? You can visit several places to get the loan. You must know about them before you decide to apply through them.
Many websites are available which form a bridge between the lenders and borrowers. The lenders provide information regarding the loan details and the borrowers can search for these options and choose the best ones. Orumfy is a platform to visit, which helps you use your loan amount better.
Different Financial Banks:
Various banks are a good source of applying for the equipment loan. They have different installment plans, repayment methods, and interest rate. You need to have a good credit score to qualify for the loan. This is necessary because they cannot risk their money on anyone who is a defaulter.
Variety of Dealers:
Several dealers can help with direct finance upon contact. The options that they offer will vary from one dealer to the other. These dealers may also assist you in many different occasions such as; give you with advice on the equipment to purchase.
Advantages of Equipment Loan:
You may think that equipment leasing is a better option to choose but if you look at the benefits that equipment loan will give you, your mind will fix on this loan.
The most important of all advantages is that the equipment you buy from the loan amount is yours. You are the owner of the purchased machinery once you have fully repaid the loan.
- As the interest rate and the small business loan amount is fixed, you have to pay an equal amount of money each month, unlike other loans in which the amount to repay goes from high to low and low to high.
- The paperwork is very less. You need to just give proof of your existing business and other details for confirmation. The whole procedure can take about a week to process. Other small business loans can take months to mature the amount but in equipment loan, you can have the amount in your bank account within a week.
- Many industries benefit from this. These businesses are; creative agencies, farming businesses, shipping companies, auto body shops, construction companies, breweries, restaurants, healthcare providers, IT companies and manufacturers. However, you must keep in mind that it very different from small business loans.