9 Things You Should Know About Equipment Financing
Equipment financing, aimed at large and expensive but high-value business assets such as trucks, vans, production and manufacturing equipment and business furnishings and shop fittings, is set up a little differently from other types of loans. Here are the 9 most important things to know about business equipment finance before you apply!
1. Equipment Finance Can Be Set Up in the Same Ways as Car Financing
If you already have car financing arrangements for your business vehicles and know that they are set up ideally for your business structure and profitability level, you should initially investigate equipment financing arrangements of the same type. Standard and novated leases, commercial hire purchase agreements and chattel mortgages are all available for equipment finance.
2. A Minimum Percentage Business Use Applies
Equipment financing is generally available only to businesses. A secured personal loan would be used for private individuals looking to finance equipment. The minimum percentage of business use for the item would be 50%.
3. Pre-Purchase Approval is a Good Idea!
Business equipment finance brokers can arrange pre-approval for the anticipated amount of your loan. This pre-purchase approval helps you explore avenues for purchase that might not be available without a set plan for finance, and can provide bargaining power when you're purchasing your equipment.
4. Approval Can Take As Little as 3 Hours
In the simplest of equipment loans approval can be gained in as little as 3 hours.
5. The Business Owner's Financial Credentials Are Important, Even for Business Loans
If you as the business owner have ever filed for bankruptcy, if you have a poor credit rating, if you have not lived at your current address very long or been in your current employment position very long, it may impact your chances for business equipment finance approval.
6. Equipment Doesn't Have to be New
You don't have to pay a premium price for new items to be able to obtain financing for your equipment. Most equipment finance arrangements can cater for second hand items and private sales without a hiccup!
7. Many Equipment Finance Options Allow for Deposits
If you have some spare liquid assets available within your business, you should consider using them as a deposit within the appropriate types of equipment financing. This will offset your future debt by paying off some of the purchase interest free.
8. And Also for Extra Repayments
Very few equipment financing products do not allow for extra repayments to be made over their term. If unexpected cash flow becomes available within your business, you should consider using it to service your equipment finance (especially if this is your highest-interest debt).
9. Equipment Finance is Available for Those With Bad Credit
The terms are not always as competitive as for 'preferred' borrowers, but your business may still secure an equipment loan if you have poor credit. You'll never know until you get in touch with your equipment financing broker, after all.
If you have any particular questions about which equipment finance is right for your situation or your target equipment, an equipment finance broker may be able to help you make a decision.