Equipment Financing

We assist you in navigating through all the available options for equipment financing that your business requires.

Introduction to Equipment Financing Loans

Are you a small business owner looking to acquire expensive new equipment with minimal or no down payment and without high interest rates? You no longer need substantial cash reserves or extensive financial documentation. Business Equipment Financing and Equipment Leasing provide numerous loan options beyond traditional bank loans.

With business equipment loans, you can enjoy manageable monthly payments similar to equipment leasing. Additionally, once the loan balance is paid off, you will own the equipment outright.

Here's the deal:

Many small business owners encounter challenges related to equipment costs, whether for upgrades, maintenance, or unexpected breakdowns. Purchasing equipment can strain cash flow, making financing essential.

Approval rates for small business equipment financing are among the highest across various funding products, with online lenders and traditional banks like Wells Fargo and Bank of America typically boasting approval rates around 80%. The application process is straightforward, requiring minimal paperwork. Small business owners can secure funding within days, often with low or no down payment and competitive rates starting at 5%, which may also qualify for tax deductions.

In this guide, we’ll explore:

What is Equipment Financing and Who is it For?

Equipment financing is a specialized form of business loan designed specifically for acquiring equipment. Unlike general term loans, equipment financing is tailored solely for funding equipment purchases. This option is highly beneficial for small business owners, offering low or no down payments, favorable repayment terms, and competitive interest rates.

Typically, alternative lenders and most equipment financing providers allow borrowers to use the equipment itself as collateral. This security helps reduce interest rates and may enable borrowers to access higher loan amounts. These benefits contribute to improved cash flow management when financing equipment needs.

How much can you borrow with business equipment loans?

Small businesses can typically secure up to 100% of the required loan amount for purchasing or leasing equipment. Depending on the lender, a down payment and minimum credit score may be necessary for equipment financing. Since the equipment serves as collateral, businesses often benefit from lower interest rates compared to alternative financing options like unsecured business credit lines, invoice factoring, merchant cash advances, or other types of small business loans.

MAX FUNDING AMOUNT

Up to $5M per piece

FACTOR RATES

Starting at 3.5%

TERM

1 - 10 years

SPEED

3 - 10 Business days

How Does Equipment Financing Work?

Business equipment financing operates similarly to traditional term loans in terms of payment structure. Borrowers make fixed periodic payments, which include both principal and interest, until the principal balance is fully paid off. At the end of the term, the business owner owns the equipment outright.

Equipment financing options allow businesses to borrow substantial amounts, up to $5 million per piece of equipment, making it ideal for financing heavy machinery. Interest rates with equipment finance companies typically start as low as 5%. Qualifying for equipment financing usually requires a minimum credit score of 600 or above, making it accessible for many businesses.

Examples of equipment that businesses can purchase using equipment financing include computers, printers, office furniture, farm equipment, industrial machinery, vehicles, construction equipment, and various specialized equipment like medical or restaurant equipment.

The equipment itself serves as collateral for the loan, which helps secure a lower interest rate and ensures quicker approval times. When applying for equipment financing, businesses may need to provide details such as purchase price, age, seller information, and manufacturer details to determine the equipment’s value and ensure adequate security for the lender.

Additionally, equipment financing offers potential tax benefits through Section 179 Tax Deductions, which can significantly reduce a business’s tax liability for qualifying equipment purchases. Business owners are advised to consult with their accountant or tax professional to understand and maximize any tax implications related to equipment financing.

Example of How Business Equipment Financing Works:

Equipment financing provides businesses with the opportunity to expand and enhance operations without needing lengthy savings periods. This strategic advantage allows businesses to gain a competitive edge.

For instance, imagine you own a bakery and aim to triple your cupcake production. To achieve this, you need an industrial oven priced at $75,000.

By opting for equipment financing, you can secure a five-year term with a competitive interest rate starting as low as 5%. Since the oven serves as collateral, you benefit from lower interest rates and potentially higher loan amounts compared to other financing options. Additionally, equipment financing typically does not require a personal guarantee.

Over the five-year term, you make regular payments towards the equipment financing loan, ultimately owning the oven outright once the balance is paid off. This makes equipment financing an optimal choice for acquiring costly machinery essential to your business’s growth and efficiency.

Equipment Financing Options Are the “Go-To” Source for Growth

In 2021, the equipment finance industry reached a record high of $1.16 trillion, as reported by Monitor Daily. Approximately 80% of companies purchasing equipment or software opted for various financing options.

According to the Equipment Leasing and Financing Association, 60% of U.S. small business owners rely on equipment financing and leasing to support smooth operations and steady growth.

As of 2023, equipment financing boasts one of the highest approval rates among small business loan types, standing at 87%. This marks a notable increase from 76.3% in 2020, according to the 2023 Report on Employer Firms based on findings from the 2022 Small Business Credit Survey. This means nearly nine out of ten applicants successfully secured equipment loans from equipment lenders.

The Equipment Leasing and Financing Association also reported a 6.3% increase in new business volume in 2022, highlighting the growing popularity and accessibility of equipment financing solutions.

What Are the Advantages of Equipment Financing?

To secure larger loan offers with lower interest rates and longer terms, small businesses often need to provide collateral. Equipment loan finance companies minimize risk by using the purchased equipment as collateral. This approach allows them to offer favorable terms even if the business’s credit score isn’t stellar or its annual revenue isn’t high.

Unlike traditional term loans, which typically require higher rates and shorter terms without collateral, equipment financing allows businesses to leverage the purchased asset to mitigate risk. This means that businesses with imperfect financial profiles—such as subpar credit ratings, irregular cash flow, or less than two years of operational history—can still apply for equipment financing.

Another benefit of equipment financing is ownership of the asset. Unlike leasing, where businesses only rent equipment, financing allows them to own it outright after completing the payment terms. While leasing has its advantages, purchasing often proves more cost-effective in the long term.

Moreover, interest payments on equipment financing are usually tax-deductible, which is a significant advantage for businesses. While lease payments may also qualify for deductions, owning the equipment outright provides more financial benefits in the long run.

What Are the Disadvantages of Equipment Financing?

While equipment financing offers numerous benefits, there are also several drawbacks to consider.

One concern is the potential for new equipment to become outdated over time. Industries evolve rapidly, and technological advancements can render equipment obsolete before the loan is fully paid off. This could mean that the asset loses significant value or becomes less useful, especially if it’s financed through a traditional equipment loan rather than leased.

Another drawback of equipment financing is the responsibility for maintenance and repairs. When you own the equipment, you’re also responsible for its upkeep and repair costs. In contrast, with equipment leasing, these responsibilities typically fall to the leasing company, reducing the burden on the business owner.

Finally, financing equipment involves paying interest on the loan amount. Over time, this can increase the total cost of acquiring the equipment compared to purchasing it outright. Businesses need to weigh these additional costs against the benefits of owning the equipment and potential tax advantages.

In summary, while equipment financing can be a suitable option for businesses seeking ownership and comfortable with the loan terms, it may not be ideal for all situations due to these potential drawbacks.

PROS
CONS

Equipment Financing Compared To Other Products

LOAN TYPES
MAX AMOUNTS
RATES
SPEED

Who Qualifies For Equipment Financing?

Approved businesses generally met the following criteria:

ANNUAL REVENUE

$250K+

CREDIT SCORE

600+

TIME IN BUSINESS

1 year+

How To Apply For Equipment Financing

The equipment financing application process is efficient and streamlined, supported by our highly-rated customer service. Here’s a straightforward guide to applying:

Step 1: Assess if Purchasing is Ideal

Before proceeding, consider whether purchasing the equipment is the best decision for your business. Evaluate factors such as the equipment’s potential obsolescence, long-term necessity, and cost-effectiveness compared to leasing. Assessing these aspects will help ensure that your investment aligns with your business’s strategic goals and financial capabilities in the long run.

Step 2: Gather Required Documents

Prepare the following documents for your equipment financing application:

Step 3: Complete the Application

You can easily complete our online equipment financing application, which usually takes just a few minutes. Alternatively, feel free to reach out to us and speak with a dedicated account manager who can guide you through the process.

Step 4: Consult with a Representative

Once you submit your application, a senior account executive will contact you to discuss your equipment financing options. We prioritize transparency, providing clear information on loan offers, rates, and terms, ensuring there are no hidden fees.

Step 5: Approval and Disbursement
Upon credit approval and meeting underwriting criteria, your equipment financing loan will be established. Funds will be disbursed directly to the equipment vendor. You can choose to set up automatic payments or arrange payment via check or electronic transfer.
Utilizing Your Equipment Financing

Your equipment financing isn’t just about acquiring equipment; it’s also an opportunity to enhance your credit profile. To secure favorable terms and interest rates for future financing needs, it’s crucial to prioritize timely and complete payments. If you have a revolving credit line, maintaining a low balance can also positively impact both your personal and business credit scores.

By diligently following these steps, you’ll optimize your equipment financing experience and set the stage for future financial opportunities.

What If I’m Declined For Equipment Loans?

If your application for business equipment financing is not approved, we may recommend alternative small business loans and financing solutions customized to your specific needs. While these options allow business owners to acquire equipment, they may come with terms that are less advantageous compared to equipment loans. This could include slightly higher interest rates and shorter repayment periods. Examples of alternatives include term loans or other types of small business financing.

If your equipment financing application was declined due to factors like poor credit scores or cash flow challenges, you might explore alternatives such as business credit cards or personal loans. These options generally have more flexible eligibility criteria than traditional small business loans. Improving your credit score through credit repair services can also improve your chances of securing favorable financing terms in the future. Additionally, investigating offerings from local credit unions could provide viable financing solutions tailored to your specific requirements.

Contact us

175 Great Neck Rd # 206, Great Neck, NY 11021, United States

info@60daycapital.com