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Everything You Need to Know About Equipment Financing

There are a lot of reasons to consider becoming a small business owner. If you’re ready to quit the 9-to-5 life, who could blame you? You get to set your own hours, chart your own path forward, and enjoy all the benefits of your success.

There’s a reason small business owners are some of the happiest and most satisfied individuals out there.

However, that doesn’t mean running your own business is a walk in the park. There are plenty of obstacles to face, many of them financial in nature. You’ll need to get familiar with equipment financing and similar strategies if you hope to make it to a place where you’ll be generating a profit.

What is equipment financing and how can it benefit your business operations and bottom line? Read on and we’ll walk you through the details.

What is Equipment Financing?

Your business likely relies upon a few large pieces of equipment to do the work that you do. Almost all businesses rely on some amount of automation these days. If you run a restaurant, you need an oven. Perhaps you need a fleet of vehicles for your delivery service or a massive scanner at your new office.

No matter what the equipment in question might be, it is likely one of the more worrying elements of your current budget. Paying for these machines outright might not be an option.

However, that doesn’t mean that you can’t secure them. After all, you’ll need them to get your business up and running. What you might need is to embrace equipment financing: the process of using a loan to purchase business-related equipment.

Most equipment loans are established with periodic payments, including interest, that is paid back over a fixed term established at the beginning of the loan.

Often the loan is connected directly with the piece or pieces of equipment it is being used to buy. The loan owner might be able to put a lien on the equipment in question and can seize it if the loan is not being paid on time.

Once a loan is fully paid off, the equipment becomes the rightful possession of the owner. You’ll own it fully and outright at that moment.

Equipment financing makes it easier for small business owners to get all the equipment they need to function without having to be able to afford everything upfront. This is one of the only ways equipment-heavy businesses, such as restaurants, can get started.

How Equipment Financing Companies Work

It can be hard to secure equipment financing at a standard bank. As you’ve likely experienced, it’s harder than ever to get any kind of loan from a large banking corporation as they’ve become increasingly risk-averse.

Today, banks require mountains of paperwork and potentially months-long processing times. In many cases, it just isn’t possible for the average small business owner to get the money they need in the time they need it.

This is why many business owners turn to companies such as Intrepid Finance in order to secure the financing they need. Companies such as these are more engineered to handle such requests and can proceed through the application process at a much faster rate.

You’ll want to shop around and see what company might be willing to offer you the best rates for the kind of financing you’ll need.

Often, you’ll find interest rates for this kind of borrowing range anywhere from 4% to 15%. The term period of these payment plans can range wildly. Some lenders will set up plans that have the full extent paid back with a few months, others will be willing to have it paid back over many, many years.

It will all depend on your own needs and preference and how much the lender will be willing to go along with you.

Applying For Business Equipment Financing

The benefit of working with companies that specialize in equipment financing will mean that you can get the cash you need within a few days. Speed of transfer is the main advantage these companies provide to clients.

When applying, there are a number of requirements you may need to adhere to. These requirements will likely vary from outlet to outlet, meaning shopping around might provide you with a company that seems like a better fit for your borrower profile.

Some lenders might have credit score minimums or want to see a history of success as a business owner. As you would imagine, the higher your credit score, the easier it will be to secure this kind of loan.

Others might simply want to see a strong business plan in place and believe that a path to success is possible.

A money lender might also request profit-and-loss statements from your business and paperwork that shows cash flow. The longer your business has been operating successfully, the easier it will be to secure this kind of financing.

If you’re looking to get a new oven after years in business, it will likely be easier to secure a loan than it would be if you were trying to get started for the very first time.

Understanding Equipment Financing

If you’re looking to bolster your small business, you’ll need to do so with the proper equipment. In order to afford this machinery, you might need to turn to equipment financing. The above information lays out how this kind of money lending works and why it can be so helpful to your business.

Need more financial advice and information? Keep scrolling our blog for more.