As with other loans, you’ll need to make periodic payments that include interest and principal over a fixed term. The lender usually requires a lien against the equipment being financed. Startups can improve their chances of approval by providing a strong business plan and revenue projections and by having a creditworthy owner personally guarantee the loan. A personal guarantee legally requires the individual to repay any unpaid business debt with their personal money.
It has forced us to adapt to a new normal, perhaps changing the way business gets done in the future. While things remain fluid, there are some steps companies should consider to keep payment processing moving forward and efficient. For many small businesses, surviving today’s economic uncertainty means that being conservative with working capital is a necessity. Some can get by with hiring freezes or finding ways to cut down on operational costs. For those who need to purchase or upgrade expensive equipment to remain competitive, however, cutting down on costs may not be enough.
Can I Use the SBA 7(a) Loan for Equipment?
Broker specializing in equipment financing for small businesses in a variety of industries. Often, you’ll put down less money than if you were buying the equipment. This is helpful if your equipment is something like a computer, which can quickly become obsolete. Among other things, Michael writes about trends and tips in retail for KORONA POS. His focus is on bringing small business owners a more holistic approach to growth.
- The most popular methods of equipment financing are equipment loans and equipment leasing.
- Whatever your lending needs, we’ve got a lending solution that makes sense for your business.
- If you’re conditionally approved, we aim to contact you within 1 business day to finalise your approval and documentation.
- Equipment financing is a type of business loan that’s specifically meant for purchasing or upgrading machinery and equipment that is essential to the running of your business.
The requirements for an equipment-specific loan are often more flexible than conventional, all-purpose business loans. With both options, the fact that you can obtain equipment without the need to put your business line of credit or working capital on the line is a great benefit to many. Business equipment financing can be used for new or used equipment and loan options are generally quite flexible. More favorable rates – If you ever need another loan to help the business grow or raise capital, the purchased equipment can act as collateral. This is deemed a less risky investment for lenders and can lead to more favorable rates or terms.
Reason 3. Maintain your working capital
Getting an equipment financing loan can bring significant benefit to your business. Secondly, if you choose equipment leasing, you are effectively paying for goods that you’ll never own outright . Shire Leasing has the appetite to fund almost anything business-related, with a multitude of leasing options from hard assets such as plant machinery, or soft assets such as IT software.
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People often assume that the SBA lends this money directly to businesses, but that’s not how it works. Instead, a bank or financial institution provides the loan, and the SBA guarantees it up to a certain amount. The money from the SBA 7 loan can be used for equipment, but also for real estate and other business purposes. Focus on your key priorities and use your newly acquired funds from your business equipment loan where they’ll have the greatest impact. Upgrades can provide improved productivity and customer service, but they also require a substantial investment.