Equipment Financing

Take your Business to the next level with Equipment Financing

Do you need new equipment for a job, or are you tired of paying someone else when leasing equipment? Well, equipment financing may be the answer for you. By getting an equipment financing loan, you are able to purchase the machinery you need outright with affordable monthly payments.

Get Equipment Financing that is right for your business!

  • Finance up to 100% of the equipment’s cost
  • Terms up to 5 and 6 years
  • Interest rates between 4% and  40%

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What is Equipment Financing?

If your business needs to make large purchases of equipment, then it will need equipment financing. These loans allow you to purchase the machinery you need for your business and pay for it over a long period of time. Equipment financing is an installment loan that requires monthly payments over a set period of time. A loan typically lasts 5-6 years, making them a long-term loan. The amount you can borrow is limited to the cost of the equipment you are purchasing. Because equipment financing is asset-based, it will also require you to use the equipment being purchased as collateral. You can expect interest rates in the range of 4% – 40%. Keep in mind that lenders will base the loan on the machinery’s expected useful life. Therefore, you will not be able to get a 20-year loan on equipment with a useful life of 5 years.

Why is Equipment Financing right for me?

The distinguishing characteristic of equipment financing is that it makes acquiring income-producing machinery or equipment possible. There are also some equipment financing options that serve as a lease. This gets you the equipment needed but with the tax benefits of a lease.

Equipment financing is available with or without collateral. However, interest rates are more favorable than they would be with a loan that is not collateralized. Equipment financing is right for you if you need to purchase business related equipment to run your business.

If you are considering equipment financing, you should also consider the equipment’s return on investment (ROI). It may be easy to calculate ROI for something that will see a direct return, but for other pieces of equipment, it may be difficult to calculate its total financial benefit to your company.

For many businesses, equipment is necessary and can speed up productivity or even make your employee’s jobs safer and easier. It may be hard to attach a dollar amount to these factors, but it is important to ensure that your purchase’s benefit will outweigh its financial cost.

Pros & Cons

Purchasing your own equipment may seem like a great idea, and for many, it is. But you should also be aware of some pros and cons of equipment ownership before making a final decision. The most important of which will be the financial implications.

In some instances, purchasing new equipment may actually cost more than renting or leasing. The increased cost is because you will need to cover all maintenance expenses and will only be able to write off depreciation, maintenance and interest on your taxes instead of the total lease cost. Therefore, you will want to carefully review your options with an accountant.

Pros

  • Own the equipment
  • Equipment can help growth
  • Affordable rates
  • Use equipment as collateral
  • No need to rent or borrow
  • Tax deductible interest
  • Build business credit

Cons

  • Fixed useful life
  • Large down payment
  • Need to maintain equipment
  • Interest may be high
  • More expensive than buying outright
  • Must be able to make payments

Common Uses of Equipment Financing?

Equipment financing may sound like a relatively limited type of funding, but there are actually a wide variety of uses for this kind of loan. Even though you may picture heavy machinery when you hear “equipment,” many smaller purchases also qualify. These small items may really add up if you are trying to start a business or make improvements.

Because there are so many industries where equipment financing is needed, you may want to seek out lenders who specialize in your industry. The reason is that they will be better able to assist with specific needs. There is a big difference between a business purchasing gym equipment from one purchasing heavy machinery. Here are just some examples of what you may consider equipment financing for:

  • Restaurant equipment
  • Construction machinery
  • Office equipment
  • Medical devices
  • Automobiles
  • Gym Equipment
  • Manufacturing machinery
  • Film equipment
  • Restaurant equipment
  • Construction machinery
  • Office equipment
  • Medical devices
  • Automobiles
  • Gym Equipment
  • Manufacturing machinery
  • Film equipment

What Factors Affect Equipment Financing Rates

There are some factors that you should familiarize yourself with that will affect the rates of an equipment loan. These are based on the business’s ability to repay the debt and the level of risk associated with it.
  • Down Payment - Equipment financing will typically require a down payment which varies based on the loan amount. However, increasing your down payment above the required amount may help lower your interest rate. Talk to your lender about how your down-payment can affect the loan’s interest rate.
  • Cashflow - Lenders will base your interest rate on your ability to repay the loan. Therefore, they will look at your company’s financial documents to ensure it has the revenue to make its payments. Businesses that do not have high positive cash flow will have a higher interest rate.
  • Creditworthiness - A business’s credit score is an important factor used to determine its ability to repay an equipment loan. A business with an established credit history will be able to secure equipment financing much easier and with a more attractive interest rate than a younger business with no credit history.
If the business does not have established credit, you may need to use your personal credit to secure the loan with a personal guarantee. This may also help lower your interest rate if you have excellent credit.

Requirements of an Equipment Financing Loan

There are some things you should know and consider when looking into equipment financing. Firstly, you must use it to buy some type of business equipment because the asset you purchase will serve as collateral.

Secondly, the loans limit the purchase price to that of the equipment. You will not be able to finance an amount greater than what you are purchasing. Although you may be able to add in costs such as tax and shipping. Keep in mind you will also have to pay a down payment when accepting the loan.

Because equipment financing is used to purchase physical property that will be used in your business, you may need to provide a business plan and an explanation of how the equipment will benefit your business. For instance, you probably will not get approved if you are in the construction industry and are trying to purchase a tanning bed.

Be prepared with the following documentation when applying for a loan:

  • Business documents
  • Details on item being purchased
  • Personal ID
  • Tax returns
  • Bank statements
  • Accounting records
  • Voided business checks
  • Personal tax return

How to Apply for an
Equipment Financing Loan

If you need equipment financing, reach out to Lendnow. With a network of over 50 nationwide lenders, we are able to help your business get the equipment financing it needs in as little as 24 hours. Whether you need to purchase new equipment or get funding for another need, Lendnow can help.

Our application process is quick and easy. Simply submit your business details, and we’ll get back to you as soon as possible with financing options that best suit your situation.

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FAQ

You can use an equipment loan for any physical property that your business needs.

 

If you’re ready to kick-start your business, one of the best ways to do that is with an equipment loan or equipment lease. Both options are ideal for businesses of all sizes—from Fortune 500 companies to mom-and-pop shops. And both can help you get started quickly, allowing you to generate revenue. A loan is better if you have cash for a down payment and if you intend on using the equipment for a long period. Whereas a lease is better if you don’t have money to put down or if there is a risk of it becoming outdated. Some leases do have an option to purchase at the end of the term, but they are much more expensive than if you otherwise choose to finance.
An equipment loan is likely the best option if you are purchasing equipment because it uses the equipment as collateral. Thereby allowing you to finance larger amounts with a lower interest rate.
Equipment loans can only be used to purchase equipment and is limited to the purchase price.
Because interest rates are determined based on risk factors, you can increase your down payment or provide collateral to help lower your interest rate.
Depending on the business’s financial situation and credit score, a personal guarantee may be necessary. A personal guarantee may also help lower the interest rate if you have good credit.

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Few entrepreneurs get it right the first time – it takes resilience to continue when banks say “no”. Don’t let access to capital keep you from advancing!

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