As a small business or startup owner, you’ll often encounter instances where you’re in need of
new or updated equipment. Products have a fixed lifecycle. Acquiring new gear is a
standard part of any business’s needs, but obtaining this gear can often be quite
costly. That’s where equipment loans come in.
Equipment loans are a quick and easy way to obtain the capital needed to purchase
fixed assets for your company.
What Exactly are Equipment Loans?
Equipment loans are a one-time cash advance by a lender to fund 100% of
the cost of business-related products. Depending on the lending party, these loans are given at fixed rates, typically between 8-15% percent.
The term of the loan is calculated based on the estimated lifetime of the product.
This is because the equipment itself actually serves as collateral. In the event of
default, the lender can take back ownership of the equipment and liquidate it in
order to recover losses.
When a fixed asset is used to ensure the loan given to fund the purchase of
that asset, it is referred to as a self-secured loan. Because of this, equipment
loans are more likely to be given out for products that do not rapidly depreciate in value.
What can Equipment Loans be used for?
Equipment financing can be used to purchase any fixed asset that a small business needs to operate its services. This could take the form of techs such as computers, software, or a printer. It could also
take the form of furniture like ergonomic chairs for employees or leather couches for a waiting area.
Equipment loans for startup businesses vary in nature based on industry. For example,
a construction company might need a fleet of new vehicles for an upcoming project while
a restaurant might need handheld i-pads to run payment transactions.
Equipment loans to purchase new or used equipment.
What are the Benefits of Equipment Loans?
These loans give you the ability to purchase expensive gear that you may otherwise
be unable to afford. This is especially important for smaller business owners, as rapid
growth in demand for your services may require you to obtain certain equipment quickly.
Let’s use a grocery delivery service as an example. A sudden influx in orders could
leave the company in need of additional delivery vehicles. Without the ability to
purchase these vehicles, it may be impossible to carry out all the orders on time. In
cases such as these, the inability to receive a loan quickly could result in a
detrimental loss of business and an irreversible blow to the company’s reputation.
Luckily, equipment loans require very little paperwork, so they give you the capital required
in as little time as possible. In addition, lenders will dispense these funds despite
poor credit history since the loan is self-secured. What alternative options are available?
Equipment Leasing
Although online lenders are the best option for obtaining funds quickly, their
high-interest rates are a drawback. One alternative option is to lease out the
equipment. Leasing equipment grants more flexibility and is a good route if you only
need the equipment for a short period of time.
After the leasing term ends, you will have the opportunity to purchase the
equipment if you need to. However, any leasing agreement might come with some
restraints regarding how the equipment can be used. Furthermore, any damages
that occur to leased equipment could prove costly.
SBA
The US Small Business Administration is a department to give out
government-backed capital to businesses. They have many loan programs, including SBA 7(a), which can be used for various business-related expenses, and CDC/504, specifically designed to fund the purchase of fixed assets. SBA loans will have
lower interest rates and grant very high amounts with repayment periods as long as 25 years.
The terms are highly favorable, but these loans are difficult to qualify for. Additionally, they are very paperwork intensive, and it could take weeks or even months just to approve.
Financial institutions
Traditional banks or credit unions are also an option for acquiring equipment loans.
With interest rates hovering around 3%, these terms are the most favorable of any
option. Consequently, these loans are also the most difficult to obtain.
Be prepared to fill out piles of paperwork, display extensive records of business
revenue, and provide flawless credit history. For most small businesses, especially
those in need of timely cash flow, this is simply not a viable option.
How to Qualify for an Equipment Loan
Qualifying for a small business or startup business equipment loan through an online lender
like BitX Funding is quick and easy. You will likely be approved even despite falling
under the category of high-risk.
Make sure that you meet these 3 criteria to consider
– 100,000 or more in annual revenue
– 550 minimum credit score
– Been in business for at least a year
As long as these criteria have been met, it should be an effortless process. You will first need a price evaluation of the equipment you are looking to purchase.
You must then be able to supply a down payment. Most lenders ask for down payments
anywhere between 5% to 20%.
The loan term will last for the product’s expected lifetime, 3-10 years on average.
Keep in mind that lenders won’t be willing to extend the loan term past the estimated time
of devaluation for the product. It wouldn’t make sense for a lender to still owe money
for something that no longer has any market value.
The equipment will serve as collateral, but some lenders may ask for additional
assurance based on your risk. A UCC blanket lien is a common example
of this. UCC stands for the Uniform Commercial Code. This is a set of laws involved
in regulating collateral between lenders and lenders. A blanket lien is an agreed-upon
set of items that will be used as collateral for a loan in the event of
default.
Get Preapproval for an Equipment Loan from BitX Funding
The process of acquiring the funds needed to make large purchases of equipment can be a daunting process.
But it doesn’t have to be. BitX Funding is here to serve as a tool to aid you in garnering the
funds you need to maintain or scale your business. We make the process as seamless as possible
because you shouldn’t have to wait to get the money you need.
Our loan specialists are standing by, eager to help. Apply for your loan now! You can
also, give us a call at 800-824-2407 or email us directly at [email protected]
Together we will figure out what equipment loan is best for your business.
Start the process below now!
Fill out the form below!
