Equipment financing is a specific loan or lease designed to help businesses invest into heavy equipment, machinery and vehicles. The purpose of these loans is to spread out the initial bulk payments into multiple smaller payments in an effort to make equipment more affordable.
How to qualify?
Gross Revenue - You must meet minimum revenue standards of $500,000/year. Requirements may vary by industry type. Our specialists can help you find out if your business meets this requirement.
Time In Business - The business must be established and active for at least 1 year. Some businesses may get approved without meeting this requirement if they excel in other areas.
Credit Worthiness - Both the owner and their business should have a strong credit profile. A strong history of credit repayment goes a long way in securing equipment financing. Judgements and collections trigger an instant decline.
Debt to Income Ratio - Lenders will asses the amount of debt the business is currently liable for as compared to the total income it brings in on a monthly basis.
Financial Stability - Lenders will look for stable revenues across the last year of business. Massive fluctuation in revenue will hinder the application process and result in a decline.
Equipment Type - The equipment that is purchased must be relevant to the industry. The business must outline exactly how the equipment will be used and how it will improve the business.
When is a Term Loan the right solution?
Equipment financing is self explanatory. This solution is only available to businesses that have specific machinery or vehicles in mind. However, sometimes, you can achieve the same goals with a different product - such as a term loan.
Expert’s Insight
Business owners should think carefully before applying for equipment financing. Sometimes it is better to buy out the equipment outright. It is also difficult to navigate the amortization process as the equipment ages and a replacement is needed.
Fundela can help you decide whether equipment financing is the right fit for you and your business. Our team of experts will guide you through the application procedure and submit all the proper documentation to maximize your chances of securing the funds you deserve.
