You started a bakery business, but you need more equipment. You apply for a bank loan, but the rep denies your application. You opt for loan companies, but they also reject your application. You become frustrated as you keep applying for loans, ruining your credit in the process. You wonder about asking family and friends for money, but you know that they don’t have much money to offer. Then, a friend tells you about online lenders. And, you learn that you can get an equipment loan as a startup. But you wonder how to get one. How can companies get start-up equipment loans?
Startups can get equipment financing from alternative lenders that offer them. You can get a loan from lenders who are more lenient than traditional banks. This article will show you how your business will benefit from equipment financing. Let’s explore.
How are Equipment Loans Important?
Equipment loans allow you to finance up to 100% of new or used business equipment. Equipment financing companies are a better option than equipment leasing companies because you can keep the equipment under an equipment finance plan.
Equipment loans will also save you the hassle of paying out of pocket for your business needs. Further, you’ll find that many equipment loans have reasonable interest rates that will suit your budget.
Overall, you can buy the following types of equipment:
- Ovens or kitchen equipment for your restaurant Tools for your auto business
- Machinery for your manufacturing plant
- Fleet vehicles for your plumbing business
Business equipment can cost thousands of dollars, which is upfront money that many starting business owners don’t have. An equipment loan allows you to get the items you need to ensure your business thrives in the long-term. Going without vital business items can place your business in peril.
Startups must take risks to establish a firm base of success. That risk may include procuring expensive business items that are beyond your current budget. However, you can minimize the risk by getting an equipment loan that gives you access to the best equipment.
Through alternative financing, you can get prime equipment without settling for cheaper variations that may hamper your business operations. At a time when your business is just starting, you’ll want the latest equipment that simplifies your enterprise and provides impeccable customer service.
More importantly, the new equipment can generate more revenue for your business. You can use the additional revenue to expand your business.
Expanding your business could mean buying more equipment, buying more company vehicles, or opening new store locations.
And, that additional revenue will mean more profits for you.
Also, equipment loans can help you stay competitive against businesses that offer the same products and services. You can remain competitive in the following ways:
- Offering better products or services using high-quality equipment
- Buying office equipment that helps you stay in touch with customers via fax, social media, or email. Purchasing business vehicles that mobilize your business
Moreover, equipment financing can give you a fighting chance if you’re competing with larger businesses or corporations.
How Do Equipment Loans Work?
Equipment finance companies allow you to apply online, and you can get funding in as little as 24 hours. Before applying, however, you must know the various types of equipment loans at your disposal:
- Line of credit
- Term loans
- Equipment loans
A line of credit allows you to draw funds when needed and without borrowing a lump sum. And, a line of credit is an unsecured loan, meaning that you don’t have to pledge personal assets to get the loan. You can use the funds for equipment or other aspects of your business.
Also, a credit line has a variable APR instead of a fixed one. It also comes with easier approvals, but this depends on the lending standards. The credit amount will vary on your credit score and how much you intend to borrow.
However, max of $250K is suitable for business owners who need short-term funding. If you need more money, consider a business cash advance or a term loan.
Term loans for equipment have a fixed interest rate. You’ll borrow an upfront sum and pay it back over time. With a term loan, you can buy equipment and use the funds for other aspects of your business.
- Example: In addition to equipment, perhaps you want to use the funds to expand your marketing efforts. Or, you may want to use the money to hire more employees.
A term loan gives you enough leeway to expand to other areas of your business. However, special equipment loans only allow you to buy business equipment.
It has the same fixed interest rate and payment structure as a term loan. Typically, the borrowing range is between $25,000 to $4 million, with rates as low as 7.5%. You’ll also find that online lenders offer flexible terms as long as eight years.
The term of the loan will depend on lending preferences, but you can talk to the lender if you want a particular payment structure. A longer payment plan provides lower monthly payments. And, you’ll have more money for your business.
However, you’ll pay more interest as you pay back the loan.
With a short-term plan, you’ll pay a higher payment each month, but you’ll become debt-free much sooner. Also, you’ll pay less interest throughout the lifespan of the loan. Many online lenders allow you to tailor a loan package to your needs and budget. Talk to a loan representative regarding the best option for you.
Start-Up Equipment Loans with the Right Lender
Choose a lender who offers start-up equipment loans with a reasonable interest rate. As a startup, you don’t have to pay a higher interest rate to get business equipment. More online institutions are offering competitive start-up equipment loans. Beforehand, startup companies had a tougher time getting loans, but alternative lenders have made the process easier than established lending institutions.
Interested in getting a startup equipment loan for your business? Click here to learn how you can get an equipment loan from Strategic Capital.
Checking for pre-approval will not affect your credit score.