What You Need To Know About Equipment Financing
Your company needs the proper equipment to keep the goods and services flowing to your customers but buying everything you need outright can put a serious dent in your cash flow. With equipment financing options, you can save your cash flow and buy what you need to operate. The best type of financing for you depends on factors like how established your business is, what your personal and business credit scores are and your preferred repayment terms, so learning about each type can help narrow your choices down.
Equipment Loans
This type of financing often comes from online private lenders, so the approval process is streamlined with funds disbursed in days with your equipment as collateral. You can choose terms between three and ten years, depending on how much funding you need. While most lenders will finance the full cost, some require a down payment of twenty percent. Companies established for at least a year qualify, but your credit does not have to be perfect.
Term Loans
These loans are good for established businesses with consistent revenue. They can be taken out for up to a million dollars and will have fixed terms. The higher your credit scores, the lower your interest rate is likely to be and the requirements are usually tougher than other financing options.
SBA 504 Loans
The Small Business Administration offers equipment financing through the 504-loan program. The administration is not a lender but a guarantor on part of the loan to make your application more appealing to approved lenders. You can take up to five and a half million through this program with a term of up to twenty years, but you must meet the SBA program requirements.
Business Line of Credit
A line of credit is like a credit card in that you will have a set amount you can use before you repay the line and interest on an outstanding balance is compounded each month. This is best for smaller equipment purchases which can be paid off quickly because the interest is generally higher for credit lines than for loans, especially if your scores are low. They can be easier to qualify for than other financing types if you have not been in business long.
When you need to purchase new equipment for your company, but do not want to deplete or ruin your cash flow, equipment financing options can help you spread the payments out on a schedule that better fits your business. You can choose from a variety of loans or credit lines and narrow your options down to the terms, interest rates and qualifications which meet your needs.
