You did it! You made the leap and started your new business! You're an entrepreneurial rockstar!
It's often difficult for start-up businesses to obtain funding through traditional means. And if your business needs equipment to run, your equipment loan is one of the most important loans you'll need. So it's time to think outside the traditional funding "box".
Keep reading to learn how to obtain equipment financing for your new business.
Check with the Manufacturer
Most equipment manufacturers have a financing program in place for those who buy their machinery. They often have better rates and more reasonable approval standards than banks.
Check with the dealership where you're purchasing your equipment. Even if the manufacturer doesn't offer a program, the dealer may work with a place that's equipment-finance friendly.
Of course, this option won't work if you're buying from a private individual. But you can check in with local dealers even if you're not buying from them. They're often happy to give you a financing referral.
Sign a Lease
Equipment leasing is one of the most common ways to finance business equipment. You'll find that leasing is often more flexible than a traditional loan. And you'll only need to use the purchased equipment as collateral.
Leasing companies are different than banks. They deal exclusively in equipment. Since they're more comfortable with the collateral, they're more willing to take a risk on a new business.
Leases work differently from loans on your business balance sheet. So check with your accountant before you sign a lease. It may, or may not, be more beneficial for you from a financial standpoint.
Get a Loan From an Online Lender
If you're not interested in signing a lease, there are still options. Check into term loans with an online lender.
Term loans are a great option for equipment financing because they pay the balance off in a specified amount of time. You'll make progress with each payment toward paying down the principal.
Also, you're the owner of the equipment during the repayment term. Versus lease financing where the lender owns the equipment until the end of the lease.
Online lenders are faster than banks. They require a lot less paperwork. And you can often get the best deals for rates and terms when you go online.
Opt for a Line of Credit
Want more flexibility in your loan? Consider a line of credit instead of a lease or a term loan.
A line of credit works more like a credit card. You're approved for a certain limit, say $10,000. And you can do whatever you want with that money.
The pay structure is usually set up for interest payments due monthly. But you can pay as much as you like on the principal too. This type of loan is often secured by receivables, inventory, and the equipment you're purchasing.
You may even be eligible for an unsecured line of credit. Check with your online lender to learn about the options available.
Need Equipment Financing?
If you need equipment financing, there are plenty of options out there. You just have to do your research.
Check with your accountant about leases and loans to see what's best for your business. Also, use your local equipment dealer as a resource to find financing options. And consider getting a line of credit for more flexibility.
Looking for ideas on how to build up your business credit? Check out this guide for building business credit when you have poor personal credit.