Technology is always evolving, and equipment and machinery is always being improved and upgraded to make things faster, more productive, and efficient. No matter what industry you are in, there is going to be a time when you need to upgrade or replace the equipment you use. Unfortunately, improvements and replacements can be expensive and long waits get new equipment costs businesses even more if they can’t do their jobs. When a business needs to buy new equipment, sometimes a business equipment loan is the best way to pay for it.
Business equipment loans are an especially good option for small or online businesses. Because banks often don’t want to approve these businesses for traditional loans because they consider them too risky. If you have a good history of sales, but run into problems with traditional lenders due to little or poor credit, a business equipment loan with a non-traditional lender may be the best choice for small, midsized, or online businesses.
How an Equipment Business Loan Works
Though terms will vary depending on the loan agreement you sign, typically, a business equipment loan allows you to finance about 80% of the item’s total purchase price. This means you will need to put up a 20% down payment. When you enter into this type of agreement, you take ownership of the item on the day you buy it. The equipment you purchase is used as collateral for the loan. Due to this, you often can expect to pay a slightly better interest rate on your loan.
To Buy or To Lease
Small business owners often think that leasing equipment may be a better option than buying, but that is not always the case. In many cases, you will still need to put down a deposit with a lease, as well as the typical monthly lease fee. Your credit score also impacts the interest rate you pay on the lease. Also, after the lease ends, you have to return the equipment and pay for any damage it may have sustained or you could buy it at the end of the lease. In the end, it is best to compare the costs for a lease and a business equipment loan. In the end, you may be surprised to learn that, in the long term, the loan is the most cost-effective option.
Types of Equipment that Can Be Purchased
Business equipment loans are ideal for companies that want to replace old, outdated, or broken equipment or to buy new equipment to add to your inventory. Loans can be used to buy equipment, such as:
- Phone systems
- Office furniture
- Tables and chairs
- Medical and dental medical machinery
- Restaurant ovens
- Computer monitors and printers
- Specialized machinery
- Industrial equipment
- Vehicles for commercial use
The Advantages of Business Equipment Loans
There are many benefits to getting an equipment business loan. They are approved quickly, which means you can get back to work sooner than later if your equipment quits and you are unable to do your job. Since you will be able to replace the item sooner, you reduce any potential money losses.
Also, getting a loan to purchase equipment, which is usually a pricey expenditure, allows you the freedom to get what you need without cutting into your business savings. Preserving working capital is important, especially to a small business. By obtaining a loan, you are preserving your business revenue for daily operating expenses, like payroll, utilities, and advertising.
When It’s Time to Apply
When you are ready to apply for a business equipment loan, be sure your credit is in good standing. Review your FICO score and be sure to address any mistakes and make good on any late payments or outstanding debts. Also, we able to provide clear information about the equipment you plan to buy, as well as how your business will use it.
Whether it’s to buy a new delivery truck, updated computer software, or cutting-edge tools, a business equipment loan will get you the funds quickly. Equipment is vital to not only maintaining your business but helping it grow. This type of loan allows you to maintain key equipment, expand upon it, or improve it, so you can fulfill all of your product and service commitments, fine-tune your processes, and maintain your competitiveness.
If you are a startup, a business that works exclusively online, or a small business, you are likely have more success getting approved for a business equipment loan if you apply to a non-traditional online lender, such as First American Merchant. It caters to these types of borrowers and works to find the best solution for every business owner.