Skip to main content

How Equipment Loans can help your Business Thrive

How Equipment Loans can help your Business Thrive
Image via gettyimages
Different companies enjoy common benefits from capital equipment. Machinery has direct and indirect effects on your bottom line. A new oven and forklift each make your business more productive. Meanwhile, interest and depreciation expense are tax write offs that indirectly improve business profits.

However, your business may not qualify for a general purpose loan to buy much needed equipment. Some obstacles include:

Lack of operating history: 2 years of profitable operations are preferred by most lenders.

Little or Poor Credit: A strong payment history under your business tax id may be required. Sole Props must rely on strong personal credit, which puts other assets more at risk.

Collateral: Many small businesses lack quality collateral coverage. A 1to1 ratio of collateral to loan amount is often needed. Lenders would prefer to not take tables, chairs and food supplies. Heavy machinery and financial assets are examples of higher quality collateral.

Delaying the purchase of new equipment is often not practical, either. Your restaurant may need to quickly boost capacity for lucrative events. Companies need to keep pace with competitors who adapt new technologies. In other cases, manufacturers must replace machinery to maintain production.

So, how can you buy capital equipment with minimal credit, business history or collateral?

Equipment loans are an effective solution.

Equipment financing has mutual benefits for the borrower and lender. These include:

Easy Collateral: 

Your new oven or stamping press serves as quality collateral. Lenders feel more secure making loans backed by specific and valuable assets. Equipment loans also help borrowers overcome collateral shortfalls. A new pizza oven or stamping press is quality collateral for the lender.

Borrower liability is lower with equipment loans, as well. If you default, the machine is simply taken by the lender. However, you may be responsible for a difference in loan balance and equipment value at the time.

Best Practice: Make sure to understand all terms of the loan. You should ensure that collateral beyond the equipment is not pledged.

Trade In Options

Technology is constantly changing. A recent breakthrough could make your production presses obsolete. Without liquidity, your business may be at a disadvantage to competitors.
Many equipment leases have trade in clauses to keep pace with tech upgrades. For lenders, trade in options improves the retention of borrowers.

Best Practices: Ask the finance company about prepayment penalties if you pay off the loan early. You should know if there are time minimums before equipment can be traded in.

Faster Approvals

Specialty finance companies such as Business Loans Direct have close relationships with manufacturers, which may include special financing offers.

Credit is a minimal or non-factor since the lender knows how the loan will be used. Conversely, general purpose loans pose greater risks for banks. Equipment financing limits collateral and repayment risks to the equipment. The result is easier qualifying and faster approvals.

Ask upfront for the approval criteria. Some lenders may still require certain credit levels or financial ratios. You will save time and money knowing in advance what is needed.

Entrepreneurs who anticipate borrowing needs maximize the ROI of their business loans. You should manage capital equipment for it's full potential. As equipment ages or becomes inefficient, the tax and productivity benefits of new machinery can also be appealing.

You can also check the SBA for special equipment financing opportunities.

Comments

Popular posts from this blog

Why it’s important to save for retirement

While retirement may seem far off in the distance for some, financial experts say you’re never too young to begin saving.  In fact, the earlier you calculate your retirement needs and start building your nest egg, the easier it will be to create a viable plan for the future. Many experts advise you begin saving a percentage of your income for retirement as soon as possible, no matter how little the contribution may be, as it’s possible the Social Security benefits millions of people currently depend on may be in jeopardy.

Low interest credit cards - how to make them work for you

Credit cards are borrowing instruments, unlike debit cards where you already have the money. Banks are there to make money too. Just like high street stores, they hope to maximise their profits within the rules. So it’s important to understand the basics and find a credit card that’s right for you – you can compare low APR credit cards here . Now you know the rules, let’s find out how to play the game. The financial services industry charges interest on the money that it lends out. Let us assume you borrow £100 on your credit card and keep it for exactly one year before you pay it back. For the purposes of this article, we will assume your loan attracts 8% interest per year, which is the Annual Percentage Rate, or APR for that particular transaction. Practical example

Basics of Stock Markets: The A-Z Quick Sheet for a Beginner-Level Investor

Several individuals wish to engage themselves in stock market and invest their money in stocks, but they don’t have an idea about Stock markets and how they work . In fact, there may be lot of info available to you, but they may all seem confusing without actually knowing the basics. This post aims at educating the beginners about the basics of stocks market. Read on to enlighten yourself about the A-Z of stock market. 

Looking For Ways To Finance Your Next Building Project? Look No Further

If you need money to start your next building project, you may be quite surprised by the number of different options you have. However, the options that will actually be available to you will depend on many different factors and these factors will decide how eligible for construction finance you are. In this short article, we will look at what you can borrow, how you can borrow, and what restrictions you might come across. Please note that while the information in this post is correct, your own personal situation will determine what the best course of action is for you. Speaking to an independent financial advisor will help you to see if you are eligible for construction finance and how to go about getting it. Different Types of Mortgages Let’s start with the different types of mortgages that may be available to you. Remember, whether one is better for your needs than another depends on many factors. Commercial Mortgages Let’s start with commercial mortgages because they a

Four factors that have fuelled city-centre living

Urban centres have become increasingly popular in recent years as both residential locations and as commercial space. This social change has been driven by a number of factors and has been reflected in the number of new property developments springing up in major cities around the UK. As space tends to be at a premium in urban areas, it has led to the construction of a greater number of apartments; potentially fuelling interest in block of flats insurance . So why have so many people decided that an apartment in a town is a better place to live than a larger house in the country? Here are four factors that are likely to have spurred on the rush for the city...

Manage Your Student Loan Debt Better in 2015

Image via gettyimages It is usually seen that most of the students fail to manage their student loan debts efficiently after their graduation. The reason is quite simple. Most of the students spend their earnings on comfort and luxuries instead of repaying their student loan debt. It has become comparatively easy to acquire student loans. However, each one of us should keep in mind the fact that repaying loans are not easy as borrowing it. This is why there arises the need of a proper strateg y when it comes to managing your loans. It is desirable to formulate these strategies while you are still in college instead of waiting until you get a good job. If you are one of this kind, here are some easy tips for you to manage your student loan debt better:

Learn how real estate agents value properties for sale

How do you get into real estate sales? Every owner wants to sell his property for its maximum value. And all too often they end up choosing a real estate agent simply based on who gives them the highest initial valuation. However, this will be a costly mistake. How your home is valued. If you make a mistake in the estimate, it is possible that it will be sold for a price that is less than the real value of the property. On the other hand, even overpriced homes will discourage potential buyers from viewing your home. Also, high selling prices can even result in a long wait before a good deal comes in or does not sell at all. Therefore, titration is recommended as a suitable agent. Here are some things that real estate agents consider during property valuation . But, few factors real estate agents consider when valuing a property. 1. Local services:   During property valuation, one of the main factors that can drive the sale price up is the actual area where the home is located. Aspects