Many businesses require equipment to operate and function. Whether it's heavy equipment for a construction company, machinery for a manufacturer, or kitchen equipment for a restaurant, these examples show that businesses rely heavily on equipment to exist. The cost of equipment can be quite pricey and overwhelm most small businesses without some type of equipment financing.
What is Equipment Financing?
Equipment financing is a loan or a lease to purchase a specific piece of equipment (hard physical asset) for your business. Examples of equipment include copiers, ovens for restaurants, and forklifts for manufacturing facilities, to name a few. The business owner borrows the physical asset and uses it as collateral for the loan or lease. Because of this, terms and costs can be stretched out further than business loans or business lines of credit, making it more payment cost-effective.
What Can You Do With Equipment Financing Loans?
Many businesses operate using expensive equipment or machines. However, when those machines break down, or technology standards move forward, current systems need to be replaced to keep up with the competition.
The most common kinds of equipment bought with funds from equipment financing loans include:
- Computers, Fax Machines, Copiers, Etc.
- Industrial Kitchen Equipment
- Manufacturing Equipment
- Vehicle Fleets
- Construction Equipment
- Medical Tools and Machines
- Manufacturing, Packaging, and Shipping Equipment
- And So Much More!
Small Business Equipment loans are used to finance used or new equipment, but there are many equipment financing options available to small business owners to secure equipment purchases other than an equipment lease or loan. Make sure you explore all options to determine what works best for you and your business.
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AdvancePoint Capital makes the loan application process a simple, straightforward experience.
Features of Business Equipment Financing
With equipment financing through AdvancePoint Capital, small businesses can be approved for a lease or equipment loan ranging from $500 to $150,000. In addition, the approval decision from your lender can happen within seconds when loan amounts are under $10,000. Yes, it is really that fast!
However, before applying for an equipment loan, you need to ensure you’re eligible. To find out if you qualify, all you need to do is complete the simple one-page application and provide information about the equipment you want to purchase for your business.
If you want equipment financing but have bad credit, we can help you find financing for your equipment without any credit check. Regardless of your credit, you can be approved for this type of business loan because the collateral is an automatic part of the borrowing process and provides protection from risk for your lender.
Below, we look at the basic features and requirements you need to know before applying for an equipment loan through AdvancePoint Capital:
Equipment Financing: Loan Amount, and Payment Terms
AdvancePoint Capital equipment loans are an excellent solution offering the lowest possible interest rate. Payment options are flexible, and lenders are far more likely to consider this option knowing that the risk is relatively low. In addition, you’re able to lease or own the equipment, which makes it one of the more flexible business funding options available to small businesses.
If your business relies on equipment to operate, financing business equipment can have a positive impact. Here are some of the incredible features equipment financing has to offer:
- Loan amounts from $500 up to $150,000
- Decisions in seconds for funding requests under $10,000
- Leases and repayment terms up to 60 months
Qualifying for Equipment Loans
Getting a loan through traditional lenders like banks can be a challenge. You have to jump through hoops and have excellent credit. Plus, these lenders want you to provide extensive documentation and wait weeks or even months for a final decision. That’s not going to work out when you need access to your money now for equipment repairs and purchases.
The requirements of conventional lenders can be demanding and may not work for you or your business. Unfortunately, during the time spent applying for an alternative small business loan, your business equipment may not be working cost-effectively or may not be functioning at all, cutting into your bottom line.
At AdvancePoint Capital, you can get quick approval through minimal paperwork if you qualify. Before considering applying for equipment loans, you should:
- Collect all information related to your business to fill out an application
- Review and repair credit if possible.
- Gather necessary documentation such as bank statements and an invoice or description of the equipment you intend on purchasing.
Qualifying for equipment financing isn’t necessarily complicated, but understanding eligibility is essential and should be considered before taking this route. While all lenders work differently, our qualifying standards involve three main components:
1. Credit Score
First, your personal credit can play a significant role in acquiring the equipment loan you need. With equipment financing, all types of credit are considered. However, where your credit lies can impact your loan terms. Online credit ratings help give you a better idea of where you stand and how high or low your credit is currently.
2. Time in Business
Second, you’ll also need to provide proof that your business has been in operation for at least six months. Before they approve you for an equipment loan, lenders want to know that your business is established with a clear objective for growth in the future. The best way to prove this is with a business plan.
A general summary of your business allows lenders to see how long you have been in business and provides an introductory look into your revenue figures. Here at AdvancePoint Capital, we require that your business has been established for at least six months, while conventional lending outlets typically require a longer time in business.
3. Financial Documentation
The last qualifying factor we require here at AdvancePoint Capital is documentation to outline the type of equipment you need, along with information about how the equipment you purchase will benefit your business.
Business owners commonly use profit and loss statements to illustrate how specific equipment can affect productivity levels, revenue influxes, and the overall success of your enterprise. Business owners must be prepared to show their lender how an equipment financing solution will continue to bring money into the door of their business.
Application Requirements for Equipment Financing
Each type of business financing has individual requirements, but in general, minimal paperwork is needed when you apply for an equipment loan.
To apply for equipment financing and get access to the cash you need fast, you may need to provide the following information to your lender:
- Business Bank statements (Typically most recent 3 months)
- Invoice or Description of Equipment you intend on purchasing
- Will need to fill out an application with the necessary business information and owner's personal information
- Both business and personal credit will be reviewed by the lender or funder.
The nice thing about small business equipment loans is that there are never any harsh credit requirements common with other funding options. So, even if your credit score isn’t great, you can still get equipment financing with bad credit to increase the cash flow of your business. All you need is a few financial statements mentioned above and a simple application to apply for the loan.
Is Equipment Financing Loan Right for Your Small Business?
As a small business owner, you may frequently find yourself juggling many financial responsibilities. Managing your working capital so that you can get through each day will require one type of business loan, while the funding for renovations or expansion will be entirely different.
The various loan products, payment terms, and lender options can add up — leaving certain business needs to fall to the wayside while you figure out what’s best for your business. However, the prospect of equipment financing allows you the freedom to separate business loans from equipment loans. You can also apply for used equipment financing for a business that is looking into getting used equipment second-hand.
Business equipment funding is a unique funding product that should only be utilized if industry-specific equipment is integral to your daily business operations or if it would be more cost-effective to invest in better equipment and save in the long run.
For industries like healthcare, manufacturing, agriculture, restaurants, or those that rely heavily on costly equipment or technology — an equipment loan offers the perfect solution.
Don’t let your equipment fall into disrepair, resulting in lost money and the trust of your customers. If your business can’t operate without equipment, it’s time to give us a call. Fill out our online form for your free quote for an equipment loan for your small business.
What Is Equipment Lease Financing?
Equipment lease financing is where a company or individual obtains equipment by entering into a lease agreement with a leasing company. The leasing company purchases the equipment and leases it to the lessee for a specified period, typically in exchange for regular lease payments. At the end of the lease term, the lessee can usually purchase the equipment, return it, or enter into a new lease agreement. Always read your lease agreements carefully for terms and conditions.
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What is the Difference Between Equipment Leasing and Equipment Financing?
The main difference between equipment leasing and equipment financing is the equipment’s ownership status.
Equipment leasing is the renting of equipment from a leasing company for a specific lease term, making monthly lease payments until the end of the lease term at which point you either return the equipment, renew the lease, or exercise a purchase option. In an equipment lease agreement, you do not own the equipment. Equipment loans involve borrowing funds from an equipment financing company to purchase equipment. The equipment loan is a financing agreement using the equipment you purchased as collateral to secure the loan against default. With an equipment loan, you own the equipment unless you default.
So the best way to acquire equipment for a fair market value is to either lease equipment or finance it. Let’s look at the differences between these equipment leasing vs. equipment financing options in detail.
1) Interest Rate and Payments
Here’s how an equipment lease works: you sign equipment leasing agreements with a leasing company that offers specific equipment for small businesses in your industry. This is a common practice in the construction industry, but it also happens in the restaurant industry, farming, and other sectors.
Lease agreements, otherwise known as equipment rental agreements, specify the lease term and lease payments. You have no down payment. However, you’re responsible for a monthly lease payment, which includes any interest charges (known as a factor rate) and other fees.
Financing, or a loan, means that you will have to get an equipment loan from a bank or another lender. Just like any business loan, you’ll pay a specific interest rate. With an equipment loan, you are purchasing the equipment upfront and financing the equipment over loan terms with the equipment used as collateral, until the loan is paid in full.
There are still flat monthly payments, but you pay them to the bank or online lender you took out the loan with.
Interest rates generally range from 5 to 18%, Factor rates for leases are 10%-35% depending on the piece of equipment, your credit history, and the down payment.
2) Overall Total Cost
A lease agreement will almost always be more affordable than equipment loans in the long run. The reason lies in the costs of ownership. With leasing companies, you rent equipment and can mark it as a business expense, but the ownership stays with the equipment lenders.
Once you’re done with your lease, you don’t have to take on any maintenance costs. And depending on your lease agreement, you might be able to avoid expensive repairs during the lease term.
Acquiring equipment through business loans is more expensive because you have to pay the entire cost of the necessary equipment plus interest, and you have to pay to maintain it over the years.
But, there are many cases where business owners would want to hold onto the equipment even after the operating lease has ended. If that’s the case, it’s better to finance equipment rather than opting for leased equipment.
When you own it, you have it for a longer period and can even resell it and use the money to purchase new assets.
3) Ownership of Equipment
You won’t own any equipment under a capital lease. Whether you have a finance lease for office furniture or the construction business, the equipment is rented property, and you make a monthly payment to continue using it.
When your lease period ends, you can renew the agreement. Also, you might be able to get lower monthly payments because the equipment is older. Or you can return the equipment.
But, if you finance equipment and make regular loan payments for the equipment purchased, you will be the sole owner and can resell it.
4) Risk of Obsoletion
Although there might be some tax incentives with getting a loan to obtain equipment, you risk owning obsolete equipment. On the other hand, when you lease the equipment, you might be able to return it if it becomes obsolete. You can then change your lease agreement and get new equipment.
