What is an Equipment Loans?
Equipment loans are loans that allow the merchant to buy business equipment that is secured by the equipment itself. Instead of putting up collateral such as your house, or business assets, you use the item you are purchasing as collateral. If the loan is not payed back, the lender simply repossesses the item so nothing that you own is at risk.
Benefits of Inquiring an Equipment Loan?
- Require less documentation. Traditional business leans typically require at least two or three years of profitable operation. This can make for extremely difficult startup, even many thriving small businesses. Lenders will want to see to see substantial documentation before considering your application for a general business loan. Because equipment loans are secured by the piece of equipment that’s being financed, lenders are not nearly as concerned about your business’s history or credit rating. Therefore you will not need to provide as much documentation to get the equipment you need to start or grow your own business.
- They enable you to own cutting-edge equipment. If a crucial piece of business equipment breaks down and needs costly repairs, an equipment loan offers a way to replace it with the latest model. It’s a lot more efficient than spending money to repair the old item. This will also enable you to produce more products, accommodate customers faster and handle more business. In addition, many equipment financing programs offer trade-in options so you can trade in the equipment for a newer model after a set time period, ensuring you’ll always own the newest equipment, which helps your business stay ahead of the competition.
- They save you money. Equipment loans typically allow you to finance 80-100% of the cost of equipment, often with no down payment. In addition, flexible repayment terms are offered which can help you maximize cash flow. For instance, you might be able to defer your first loan payment for 90 days or choose whether you want to make payments monthly, quarterly, or annually. The payments on equipment loans may also be tax-deductible as operating costs (be sure to check with your accountant for your specific situation).
- You get an answer right away. In most cases, equipment financing companies make a decision to approve or deny your loan application very quickly. Time is of the essence if a critical piece of equipment breaks down. Getting the financing you need right away can hep you keep customers happy or profit from increasing demand or seasonal upswings.
- You increase the value of your business. Your business immediately enjoys the value of a new asset, adding to your business’s net assets without a big cash outlay.