Most businesses need equipment to function. Equipment is a part-and-parcel of every business’s life. Whether you’re running a small business online or a large-scale brick-and-mortar shop, you’re going to need equipment in one form or the other.
Getting the equipment you need can simplify your life. However, equipment is costly and you sometimes find yourself looking for reliable equipment financiers to cover that aspect for you.
What Is Equipment Financing?
As a business, you may not have access to the kind of money required to purchase equipment on a large scale. What do you do then? Do you miss out on important equipment just because you don’t have the funds for it? No.
You look for Equipment Financiers.
In Equipment Financing, lenders lend money to finance large equipment purchases. It’s like a loan that can be paid off over time and usually involves some percentage of interest.
Equipment Financing is a more agreeable alternative to equipment leasing. Unlike equipment leading where you have to either renew your contract or return the equipment once the time period is up, in equipment financing you benefit from having equity in the equipment.
Equipment Financing allows you to borrow 100% of the value of the equipment you require. It’s like a loan you pay off over time. This equipment loan allows you to access tens of thousands of dollars worth of equipment at practically no upfront payment from your business.
Options For Equipment Financing
Banks have a pretty lengthy process for loans in place and you may not even make the cut sometimes. With financing companies and lenders, your chances of getting approved are significantly higher.
To help you find the best possible equipment financing option for you and your business, we indulged in some thorough research. Here’s a guide on the options you have when looking for equipment financing:
Zero Down payment is one of the most lucrative options. It allows you to take equipment loans when you don’t have the cash savings to back them.
Zero down payment is a fan-favorite among businesses who need financing to take care of their equipment needs. Through the equipment, you can reap the benefits directly without parting with your capital.
Of course, when you pay nothing in down payment, the lender takes on significant risk. This is why approval for Zero down payment usually involves:
- Great credit score.
- High-interest rates.
- Higher and hidden equipment costs.
Just like traditional loans, you pay a certain amount over a specific period until your funding is paid off in full. According to the lifespan and usability of your equipment, a business should try getting a short-term loan to ensure they’re not making payments on a piece of equipment after it has long been dead.
Good to Excellent Credit
With great credit, you automatically climb to the top of the list of eligible candidates for equipment financing. Having good credit gives you an edge over all the others. It shows that you’re fully capable of paying the loan amount whenever required.
Having a good to excellent credit means you get access to:
- The best equipment lenders.
- Great options for equipment financing.
- Lower interest rates.
If you think you may not be using the equipment after a certain time period or are in a business where equipment gets outdated with time, it’s best to lease equipment instead of purchasing them.
In this way, you’re free to lease newer equipment and are not stuck with equipment you have practically no use for. That’s a loss of both space and capital.
Bad credit reflects poorly on a business. With bad credit, you may have to put in additional work to get approved. The best thing you can do is prepare beforehand, even when you don’t need equipment financing. Do your research so your business doesn’t have to take the brunt.
When you have bad credit, consider making up for it by:
- Equipment leasing.
- Working with banks or financing companies you have an existing relationship with.
- Offering additional collateral.
- Paying more down payment.
- Using a co-signer.
Getting equipment financing for startups is not easy. Banks and lenders tend to stick with applicants that have a history in business and a healthy flow of revenue. However, some lenders can hook you up with reliable equipment at a fixed monthly installment to be paid over time.
You may be eligible for a startup equipment loan if:
- You have a credit score of 600+
- No bankruptcies in the last 7 years
- Business license
When you’re buying equipment, it’s best to do your research. You don’t want to apply for a loan and then look for the options you have. This can result in you paying more for equipment than you would have if you researched beforehand.
The financing industry is competitive. Most businesses with a credit score or revenue can get access to premium deals and lower interest rates. Equipment financing is a cost-effective way of purchasing the equipment you want without putting in the capital required to do so.
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Ask Gareth Shaw: ‘I’m scared I’ll get rejected for credit card because of mistakes I made in the past’
Answer: Well done to you for getting back on your financial feet. Climbing your way out of debt is a marathon – it takes sacrifices and planning, so you’ve taken some really important steps in your financial journey.
The good news is that the negative information – the records of missed payments, defaults and even county court judgments – won’t stay on your credit report forever. Details of your late payments can be viewed for six years after they were settled. Searches and rejections of credit typically disappear after 12 months. So this dark cloud won’t hang over you forever.
Before we talk about applying for credit again, there are steps you can take to improve your credit health. Firstly, you should review your credit reports and make sure there are no errors that could be holding your score back. You can get your credit report for free from each of the three credit reference agencies – TransUnion, Equifax and Experian – and can ask them to investigate errors. Lenders and credit reference agencies have 28 days to respond to disputes.
Registering to vote by getting on the electoral roll can boost your credit score, while you may even be able to add the record of your monthly rent payments to your credit score by asking your landlord to report rental payments to firms like The Rental Exchange, CreditLadder or Canopy.
Experian has launched a new tool that allows you to share information about your banking habits and subscriptions – information which is not traditionally factored into your credit score – in order to increase your score. That means paying your council tax or even paying for Netflix and Amazon Prime could give your score a boost.
If you still want a credit card, your choice is likely to be limited to a particular set of cards designed for people with poor or ‘thin’ credit histories. These are known as ‘credit-builder’ cards, or sometimes ‘bad credit’ cards.
These cards have higher interest rates compared to the most competitive products in the market, to reflect the risk that a lender is taking in by providing credit to someone with a history of repayment problems. You can expect to find an APR of around 29 per cent. They also have lower limits, so when you apply, don’t be surprised to find that the lender will initially only give you £250 to £500.
However, these cards can be used to demonstrate that you are a responsible borrower, can repay on time and stay within your credit limit.
Here’s the golden rule – avoid borrowing money on these credit cards. Purchases tend to be interest-free for 55 days, after which you’ll be charged a considerable amount of interest. So limit the use of these cards, and when you do use them, try to pay them off in full. If you don’t pay on time, you will lose any promotional offer, be hit with a fee and your provider will report your missed payment to the credit reference agencies, reversing any good work you might have done. Set up a direct debit to ensure that your minimum payments are met in advance of the credit card payment date.
When you apply, use an eligibility checker first. This will ask for some basic information and carry out a ‘soft search’ on your credit file, returning a list of cards and the probability of your application being successful. That would be a helpful guide to find a card that is likely to accept you.
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