Equipment Financing – Are You Bankable?

You have made it through the toughest 3-4 years of business; you have poured your energy, creativity and money into making your company sustain itself and grow. The start-up phase for any business is the most volatile time; lenders and creditors turn away from you when you feel like you need them most but the issue is, as statistics clearly support, your new venture is too risky to lend to.

Now it is 3 years later, you’ve survived, sales are being generated and you’re making money. You should be “bankable” right? Meaning, you should be able to approach a commercial lender for a loan or equipment finance at some amount and get approved. Most business owners would say “yes” but the real answer to the question is – it depends. It depends on how your business has operated during those initial years and what you plan to do with the money.

Here are 3 key points to consider when looking for business capital:

1) Are a majority of your sales coming from just a few clients? If so, that is a red flag and lenders will feel you are too vulnerable to the whims of your key customers. Focus on widening your funnel and servicing a broader range of clients; it will help stabilize your sales in the long run and make it easier to access money down the road.

2) Do you have tons of sales but little or no profit margins? Newer companies tend to sell at cost to promote goodwill or to penetrate a key market. Good sales strategy but not so good when you are in the early start-up phase. Make sure a certain component of your sales has industry-average type of profit margins so that a lender will consider you a player in the industry. If it appears you don’t know what you’re doing, you won’t get approved.

3) Are you requesting money from your lender for equipment which they don’t recognize as good collateral? Many commercial lenders are not “fond” of the newer green technologies like LED lighting and solar systems. Your company may be doing well by all measures yet get denied for a loan request to replace your lighting even if it saves you money each month. The experienced business owner or manager knows that different lending sources specialize in different types of equipment and collateral; make sure you are matching your request with the right source.

Being “bankable” really depends on several internal and external business and economic factors. Time in business alone will not guarantee an instant approval as many of us remember from years past. Lenders will evaluate and review your business operation, your objective for capital requested and the type of gear you intend to purchase as part of their approval process. Be aware of the factors involved so you can make changes where appropriate to increase the chances of getting funded more often.

Why Business Equipment Finance Makes Sense

if you are starting a new venture, or you are expanding an existing one, then you might be going through a menacing time to set things up. It is a complex undertaking when you have to spend a lot of money for more equipment, or else the new business won’t run. Equipment procurement is an essential part of setting up a business and you don’t have much choice but to buy new gears and paraphernalia to get things started.

First, you have to plan for the equipment needed and it is important that you know how to select the products that would address your needs. After you have determined the equipment needed, you have to create a plan on how you should be paying for the equipment. If you don’t have money to spend for it, then you probably need a business equipment finance company.

What is this company that would supply financing for your equipment purchase? Basically, this is considered a smart thing to do when you are short of funds to buy equipment. Or even when you have money, you can use the equipment loans to pay for practically any kind of business equipment you require. The amount you can borrow would vary and it would depend on the equipment you are procuring, and the state of the equipment such as if it is new or a used equipment.

You would normally need financing if you need a car loan. If you have already tried a car loan, then you have probably known how the financing system works. The equipment will serve as your collateral to the company that gives business equipment finance. The interest rates are fixed which can be from 8% to 30%, depending on the term. These companies also offer a fixed length for terms, and this gives the borrower ease in repayment through having the same amount of amortization every month.

The length of the loan term would also vary, depending on the nature of the equipment and how long it is expected to be useful. There is varying depreciation of different equipment and this is to be considered before the terms can be determined. Some equipment types are given 36 months or 48 months terms. But some terms provide only 12 months for loan to be repaid.

What type of business equipment can qualify for equipment loans? All sorts of equipment would be viable for this such as: IT equipment and computers, heavy machinery, medical equipment, scientific equipment and commercial vehicles.

Thus, you can get a loan for trucks, prime-movers, tractors, tankers, laptops, desktops, servers, factory automation, robotic assembly devices and many more. The list is long and you have to talk with the company’s representative to determine if the equipment you need can be financed.

You may get advised on having a lease on your equipment and not a loan. However, with a lease, you are only renting the equipment and it won’t be yours after the lease term is done. With a loan, you own the equipment once fully paid.

Commercial Equipment Financing Vs Equipment Leasing

When it comes to commercial financing, there are two main routes you can use to get the equipment your business needs: equipment financing and equipment leasing. Both options involve you paying for your equipment in increments rather than dropping down the full amount of the purchase price all at once.

Equipment Leasing

Equipment leasing might be the best way to approach your business commercial financing if you run a small or a new business without a great deal of access to capital. This is because standard equipment leasing does not require a down payment like standard equipment financing does. Rather, it involves regular, fixed monthly payments.

The major downside of standard commercial equipment leasing is that you never own your equipment. No matter how long you make regular payments on your lease, the equipment will still belong to the lessor. The lessor is the person or company that rents or leases the property or equipment to the lessee.

However, there are definite upsides to leasing. The startup costs are the main reason leasing is advantageous-not only is there no down payment, the equipment itself is collateral. This frees up cash and assets for you to develop other parts of your business.

Leasing also protects you from obsolescence, which is particularly important with high-tech gear like computers. If the equipment you are leasing becomes out of date near the end of your lease, for example, the lessor is stuck with it, not you. Finally, the payments on this form of commercial equipment financing are usually tax deductible.

Equipment Financing

Equipment financing is a good option for businesses with some cash available who want to buy large, expensive equipment that is not going to become obsolete in the foreseeable future. Examples of this might include chillers, trucks, and factory equipment. This kind of commercial financing is a good option for companies that either have been around for a long time or plan on being around for a long time; either way, it is for companies with a long term outlook in mind. This is partly because commercial financing in the form of a loan takes a large amount of startup money, as the down payment and collateral are both expensive and in the long run is generally less expensive.

This is also good option if the business equipment in question is key to the long-term growth and/or stability of your company. Commercial equipment financing takes high startup costs and the tax benefit is usually amortized over 15 years of the useful life of the equipment, which may or may not be greater than what you could deduct if the equipment were leased. A big benefit of equipment financing is that once the equipment is paid off the payments drop to zero. This is not an option for leasing.

How To Find Commercial Truck Financing

Heavy trucking equipment can be extraordinarily expensive. Trucking companies of all sizes often rely on commercial truck financing to lease or buy semis, dump trucks, and other equipment that they need to provide their services. However, finding financing for a commercial truck can be difficult in some cases.

Understanding how commercial truck loans work is crucial when trying to lease or find a loan, as this allows businesses to improve their chances of getting approved for affordable financing options.

This starts with understanding the credit issues that commercial trucking companies look at when issuing loans. There are numerous criteria involved which a financing company considers to try to accurately determine whether a business will pay off its loan in a timely manner.

These criteria include specific information about a loan applicant company, such as the amount of time that a company has been in business. Most financing companies will prefer to issue commercial truck financing to an established business, as this greatly improves the chances that a loan will be paid back. A good credit history and strong financial records will also improve a company’s chances of receiving financing at a preferable rate, so before getting financing on any type of trucking equipment, a company should prepare its financial records and be ready to present a great deal of tax and income info. A history of profitability can show a financing company that a business has a relatively low credit risk.

The other major factors are the exact equipment being financed and the type of loan that is being requested. Longer loans are more difficult to find, as they can carry a greater risk for financing companies.

It will be very difficult to receive commercial truck financing from an institution that is not familiar with the uses, benefits, and costs of the equipment that is being financed. Businesses should choose financing companies that specialize in loans for heavy-duty commercial trucks and related equipment, as these institutions will be able to accurately assess the risks of a loan and can often offer low rates to buyers. Many financing companies have lists of commercial trucks that they will finance or lists of equipment and brand types that they do not support.

When truck financing is needed, it’s often possible to improve the chances of loan approval by choosing used trucks or inexpensive models. Supply as much credit information as possible and look for loans that can be paid off as quickly as is affordable. First-time truck buyers and buyers with bad credit can look for special companies that specialize in commercial truck financing for these situations. Know the terms and interest of your financing agreement and work with specialized financing companies that understand the costs and risks of the trucks that you need. An organized approach will help any business to finance heavy trucks at an affordable rate.

Automotive Repair Equipment Financing

The very competitive automotive repair industry depends highly on sophisticated equipment which is very expensive. Automotive repair equipments like hydraulic lifts, alignment equipment etc play a vital role in the business operations of this industry. Although expensive, they are indispensable in various repair services. Therefore automotive repair equipment financing is assuming greater importance in the automotive repair industry.

The traditional lending institutions may not be willing to finance sophisticated automotive repair equipment due to their unique nature. However, there are a few genuine financing companies which understand your needs and requirements. They offer financial assistance under various categories and at better interest rates.

Commercial car wash requires lot of equipment and so an automotive repair industry needs to be equipped with all the essential equipments for the same purpose. Automatic car wash, In-bay car wash system, vacuum system etc are some of the sophisticated equipment required in car wash processes. But they are quite pricey especially in case of multiple car washes. Therefore, one can acquire the sophisticated equipments through automotive repair equipment financing.

Tire changer is another important component of any automotive repair shop. Nowadays people are particular about the tires they use and thus excellent tire changer equipment is indispensable for satisfying the customers. Automatic tire changer, PAX tire changer, manual tire changer are some of the equipments available in the market. They can be expensive and so the automotive shops need to look for automotive repair financing.

Auto body equipment plays a crucial role in making a wrecked vehicle to useful. This work however involves full line of auto body equipments like straightening equipment, painting bays and so on. In case they have to be worked on various types of vehicles, a full line of auto body equipment can be quite expensive. In such cases the help of automotive repair financing is much required.

Wheel balancer is another vital tool in an automotive repair shop which helps in assessing the potential problems in the wheel, quickly and accurately. Therefore this equipment helps in providing improved customer service. But the cost of wheel balancer is high and so wheel balancer financing provided by some reliable financing companies is essential.

Wheel alignment equipment is another valuable tool in an automotive repair shop. It saves time and helps the mechanic in easy and quick assessment and repair in any vehicle’s wheel alignment. Though essential, they are quite costlier and so many repair shops are not able to afford it. However automotive repair equipment financing provides valuable service to repair shops to acquire these essential tools.

A frame machine in an automotive shop helps to provide life even to severely damaged vehicle. It is also quite expensive, but some valid financing companies offer easy financial assistance to acquire a frame machine.

Automotive repair equipment financing therefore helps almost all automotive shop owners to acquire the valuable automotive repair tools. The financing companies provide straight forward approach in offering financial help. They provide fast approval with minimum application process. Even an online application is enough to get financial help from them. These companies offer help at better terms so that owners can pay their bills in low easy monthly installments.