Top 10 Smart Small Business Equipment Loan Facts

Nothing is more essential to the day-to-day operation of your small business than the equipment you use and the vehicles you drive. With cash flow tight and lending conditions volatile, how do you manage to stay in business and stay competitive? It’s important to know the facts about small business equipment loans.

1. When you need business equipment, getting a small business equipment loan could be a smart financial move. You can use these loans to purchase virtually any type of business equipment. Since you may need multiple loans over a period of time it is critical to think through the lien and collateral requirements of your lender to make sure that when you’re giving up first lien position on some or all of your assets, you’re getting the best possible loan return.

2. How much you can borrow depends on the type of equipment you’re buying and whether the equipment is new or used. If you’ve ever had a car loan, you already have a basic idea of how an equipment loan works. Look for loans where the equipment serves as collateral to secure your loan, so you won’t have to put up additional collateral. Most equipment loans are usually made at fixed interest rates – usually between 8% and 30% – and offer a fixed term length so that your monthly payments are always the same.

3. How long you can extend the term of the loan depends on the nature of the equipment and its expected life. Few lenders would be willing to extend the term of an equipment loan beyond the expected useful life of the equipment itself.

4. Some business owners choose to lease equipment instead of getting an actual loan. There may be advantages to leasing, but with an equipment loan, you own the equipment after the loan is paid off. With a lease, you don’t own the equipment once the lease term is over and this can seriously cut into long term profitability.

5. Equipment financing prevents you from having to pay the entire cost of the equipment upfront – so if you’re tight on cash flow, this is the solution.

6. Although you will have to pay more to finance the equipment, you will be able to spread out the cost over an extended period of time.

7. Most businesses can qualify for equipment financing. How much you qualify for – and the interest rate you’ll pay – depends on the value of the equipment, your business history, and your credit rating.

8. Address the number one issue that often prevents small-business owners from obtaining affordable loans: Lack of collateral and low (or non-existent) profitability. Catch 22 – if your payments are too high then your profitability will shrink and the more difficult it will be to secure another business equipment loan. Make sure you do a ROI calculation for every piece of equipment you acquire, then share it with your lender – additionally choose the right equipment and use as the loan’s only collateralization.

9. Equipment financing can be a great option if your credit rating is less than perfect, as the equipment collateralizes the loan.

10. Use small business equipment loans to build your credit and increase your future access to larger amounts of capital. Scale your equipment needs, your loans, and your profits to higher and higher levels.

For more information, contact us at 714.988.6355 or visit us online at www.1businessloans.com