How to Get Equipment Financing Fast
Equipment financing lets you support up to 100% of the cost of new or used machinery for your business, like ovens for a kitchen, systems, or company cars. Different Types of Equipment Financing
Equipment Financing vs. Equipment Leasing: What’s the Difference?
There are two common ways to finance equipment: through loans or a lease. While both achieve the same ends — giving you access to the equipment needed to run your business — there are plenty of differences between the two methods. Here’s a rundown on each:
An equipment loan is a loan taken out with the express purpose of purchasing equipment. Typically, the equipment secures the loans — if you can no longer afford to pay the loans, the equipment gets collected as collateral. These loans are useful for business owners that need a piece of equipment long-term but can’t afford to make the purchase outright. A lending institution might agree to extend most of the capital so that you can pay in periodic increments.
There are a few downsides to this arrangement. Most lending institutions will only agree to pay 80%-90% of the cost, leaving you to cover the other 10%-20%. The other downside is that, in the long term, the arrangement will ultimately cost more than if you had just bought the equipment outright. The cost of borrowing changes depending upon the amount borrowed, interest rate, and term length.
For this reason, it’s essential to do the math before accepting equipment loans. Equipment loan interest rates can vary wildly depending on your lender (7% – 30% is an extremely rough range for what you can expect), your credit rating, the amount of time you’ve been in business, and any number of other arcane formulas a specific lender decides to apply to your case. In most cases, equipment loan interest rates are fixed rather than variable.
Leasing equipment is a popular option if you need to trade out equipment frequently or don’t have the capital to pay the down payment required for loans. It’s also more likely to cover additional soft costs associated with shipping and installing the equipment. Instead of borrowing money to purchase the equipment, you’re paying a fee to borrow the equipment. The lessor (the leasing company) technically maintains equipment ownership but lets you use it. Lease arrangements can vary depending upon your company’s needs.
Most commonly, merchants enter a lease agreement if they periodically need to switch out their equipment for an updated version. If you want to own the equipment, some lessors offer the option of purchasing the equipment at the end of the term. Leasing generally carries lower monthly payments than loans but might be more expensive in the long run. In part, leases tend to be more expensive because they carry a larger interest rate than loans.
There are two major leases: capital and operating. The former functions a bit like a loan alternative and is used to finance the equipment you want to own long-term. The latter is closer to a rental agreement, and, in most cases, you’ll return the equipment to the lessor at the end of the lease. Both types have numerous variations. Here are a few common types you’ll come across:
Fair Market Value (FMV) Lease:
With an FMV lease, you make regular payments while borrowing the equipment for a set term. When the term is up, you can return the equipment or purchase it at its fair market value.
$1 Buyout Lease:
A capital lease where you’ll pay off the cost of the equipment, plus interest, throughout the lease. In the end, you’ll owe exactly $1. Once you pay this residual, which is little more than a formality, you’ll fully own the equipment. Aside from technical differences, this type of lease is very similar to loans in terms of structure and cost.
10% Option Lease:
This lease is the same as a $1 lease, but at the end of the term, you have the option of purchasing the equipment for 10% of its costs. These tend to carry lower monthly payments than a $1 buyout lease. A lease tends to be more expensive in practice, though their (usually fixed) interest rates fall within a similar range to equipment loans. Depending on the arrangement, you might be able to write off the entirety of the cost of the lease on your taxes, and leases do not show up on your records the same way as loans. How leases affect your taxes is too complicated to cover within the scope of this article, but the type of lease you select will determine what you can write off and how.
How to Qualify for Equipment Financing?
Although every lender has different specifications, here’s the standard pricing most lenders have.
- Business must be in business for one year
- Have a minimum of 600 on your credit score
- Revenue $100,000 > annually
You can still qualify for the small business equipment financing if you don’t meet these requirements, as we have already mentioned that the lender’s terms and services vary. Typically, getting equipment loans is easy as compared to equipment financing.
How to Get Equipment Financing Fast?
You’ll find several options while searching for equipment funding solutions like banks, traditional national lenders, and online lenders. At least a bank must not be your favorite option if you have an average credit score and business history. Also, you inevitably go for the option that provides full support with loan repayment terms and conditions. Here’s BitX Funding can be the right option for equipment financing as they’re experienced in their game and have already helped thousands of small businesses in need. If your business has the potential to increase, then their great support can help you achieve your dreams.
How Fast Can You Get the Money?
While working with BitX Funding, you can receive money as fast as 24 hours after qualifying.
How Much Can You Borrow?
While working with BitX Funding, you don’t have to worry about the number of loans. You can get a minimum of $5k to a maximum of $5M!
Equipment Financing Pricing
You’ll experience different pricing (depending on the lender), but typically they charge you 7% interest over a 3-year (or 36-month) term. Standard APR is 12% so your $10K piece of equipment will cost you $11,957.15, with a monthly payment of $332.14.
BitX Funding is the online marketplace for small business owners looking to fund a project. We specialize in connecting small business owners with lenders who will compete for your business. We believe small business owners drive the economy and are passionate about helping your company reach its full potential.