What Is a Business Equipment Loan?
A business equipment loan is a financing product used to purchase equipment for your business. These loans are usually secured by the equipment being financed and don’t require a personal guarantee.
Advantages
- Funds quickly
- Equipment itself serves as collateral
- Does not disrupt cash flow
Disadvantages
- Restrictive
- More expensive than buying equipment outright
Financing Amount
Up to 100% of value
Estimated Repayment Term
1—5 years
Interest Rate
Starting at 8%
Speed of Funding
As fast as 2 days
What Is a Business Equipment Loan?
A business equipment loan is a financing product used to purchase equipment for your business. These loans are usually secured by the equipment being financed and don’t require a personal guarantee.
How Do Business Loans for Equipment Work?
Receive up to 100% of the Equipment’s Value
Like most loans, the amount of funding being received is determined by what your business qualifies for as well as the price of the equipment you’re planning to purchase.
With most equipment loans, the equipment itself is used to secure the loan. This means if your business fails to make its payments, your lender can reclaim the financed equipment to help cover its losses.
Replace Damaged or Outdated Equipment
Equipment financing allows your business to replace damaged or outdated machinery without tying up too much of your business’s working capital at once.
An equipment loan is ideal when your business needs to purchase an expensive piece of equipment. Equipment financing lenders can offer up to 100% of the capital needed to make the purchase.
Flexible Terms
Equipment loan terms can range from 1-5 years, with payments that can be made either monthly or weekly depending on the length of the loan and your business’s current financial situation.
Equipment Financing Qualifications
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Time in Business: 2+ Years
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Annual Revenue: $160,000
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Credit Score: 620+
Is Applying for an Equipment Business Loan Hard?
Online applications make applying for the funding your business needs simple. It’s common for most business owners to use a loan at some point during their career, just as it’s common for a business to need to purchase new business equipment over the years.
Applying for equipment financing makes sense for a variety of business owners. Whether you’re financing an expensive piece of equipment that falls outside of your business’s price range or the majority of your capital is currently invested elsewhere, this type of loan is a valuable tool used across many different industries.
Some other documents you need are:
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Profit and Loss Statement
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Balance Sheet
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Voided Business Check
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Driver's License
Should I Lease or Buy My Business Equipment?
Business equipment loans are used to purchase new machinery outright. Owning your business equipment makes sense when it’s a durable machine like a cash register, fridge or vehicle. Leasing business equipment is another option many business owners consider.
It makes sense to lease when you work in an industry where technology is rapidly advancing and the equipment you plan to purchase could quickly become outdated.
Leasing also may not require a down payment. This makes it a favorable option for business owners who aren’t in a position to put money down immediately or would prefer to invest elsewhere.
When deciding if new business equipment should be purchased or leased, consider the following:
- • How long will you need the equipment?
- • What is your business’s current financial situation?
- • Will the equipment become outdated quickly?
- • Will you be able to maintain the equipment on your own?
Deciding to lease or buy your business equipment can be a difficult decision to make. Consider all of your variables and weigh your options before making your choice. Be sure to consider how each will affect your company’s cash flow in the long run.
How Much Will an Equipment Business Loan Cost?
To give you a better idea of what equipment financing might cost, let's use an example. In this scenario, your company is looking to buy a new oven.
The oven you want to purchase is $10,000. Your lender is willing to offer 100% of the equipment value with a 15% interest rate.
If you’re paying this amount monthly over 3 years, you’ll make 36 payments totalling $319.45.
By the end of your loan, you'll pay an additional $1,500.
This is just an example and interest rates will vary from lender to lender, but this should give you an idea of whether your business can afford to take on an equipment loan or not.
If your business needs funding now to purchase or repair important business equipment, Fast Capital 360 can guide you in the right direction today.
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