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Questions Before Applying For Equipment Financing – Q & A

Cranes purchased with heavy construction equipment financing

Do you need to borrow money to buy new or used equipment for your small business? If you’re like most small business owners, the answer is probably yes. And if you’re looking for an equipment loan, you’ll want to make sure you get the best deal possible. But before you do, make sure you ask yourself the following questions. They’ll help make the process easier and ensure you get the best deal possible.

Can you get a loan for equipment?

You may be surprised to learn that you can get a loan specifically for equipment. Equipment financing is designed to help businesses purchase the machinery they need. The interest rates on this type of loan tend to be low and have relatively shorter terms than other loans. 

What is an equipment financing loan?

Equipment financing is a great way to get the necessary machinery and equipment for your business with little money upfront and hassle. Financing equipment helps improve productivity and efficiency while not sacrificing too much cash flow.

What is medical equipment financing?

Medical equipment financing is a great way to finance medical equipment for a healthcare practice. Due to the nature of the healthcare industry, services are provided now but go straight to accounts receivable because it takes time to get paid from Medicare and insurance companies. These inherent circumstances make financing equipment much more feasible than spending a lump sum of capital to purchase the equipment outright.

What is construction equipment financing?

Construction equipment financing is a great way to get the money you need for your construction equipment without having any upfront costs. Because construction equipment is expensive, financing can be a great option to manage cash flow. A construction equipment loan is used for acquiring new or old worksite equipment, such as cranes and mixers. 

What is an equipment financing agreement?

An equipment financing agreement (EFA) is similar to an equipment financing loan in that you’re getting financing to purchase a piece of equipment. However, EFA’s are structured like a factoring or merchant cash advance product. The amount you pay back is determined by the cost of the equipment multiplied by the factor rate. For example, if a piece of equipment costs $10,000 and the factor rate is 1.10, the total amount you owe will be $11,000. 

Is an equipment finance agreement a lease?

No. At the end of an equipment financing agreement, the equipment will belong to the borrower, whereas with a lease, you are renting the equipment for a specified period.

What is the difference between a finance agreement and a loan?

Loans and finance agreements are two different terms for borrowing money. The main difference lies in the way interest is calculated and paid. With a loan, your purchase is amortized over a set term, so if you happen to pay it off early, you will save on interest payments. However, with an equipment financing agreement, since the fee for the financing is not amortized, you’re on the hook for the entire financing fee, whether you pay it off early or use the whole term to pay it off. 

What can equipment loans be used for?

Equipment financing is an excellent option if you need to purchase machinery and equipment. You’re not limited in what type of product or industry, so this could be anything from office furniture to medical devices.

What are the benefits of equipment financing?

When companies take out an equipment financing loan, they can get the equipment their businesses need without paying the entire cost upfront. This is a massive benefit to those businesses that do not have the cash flow to purchase the equipment outright. 

What are you supposed to consider before purchasing equipment?

Before committing to a purchase, you should always ask yourself these questions: What will I use it for? Who has access and control over this equipment once purchased? How much does my current solution cost me per month/year in operating costs (power bills, insurance, etc.) plus initial capital outlay? Who will maintain the machines if anything goes wrong with them? Does the business have the cash flow to keep up with loan payments? 

Why is equipment financing important?

Equipment financing should be an essential aspect of any business because it can help your company conserve cash flow and capital by allowing you to spread out payments over time instead of coming up with the entire amount of the purchase up front. With financing, you can tackle multiple growth objectives that you couldn’t do without it. 

What is a good interest rate for equipment loans?

Many factors can affect the interest rate when it comes to financing equipment. Your credit score and how long you’ve been in business, for instance, will determine what kind of terms are offered with each equipment financing company. Interest rates on equipment financing can vary depending upon the lender, your business’s qualifications, and how long you expect it to have value. The best interest rates start from 3.5% and range up to 30%.

What is the interest rate on construction equipment?

Depending on the business’s age, revenues, and credit score, the average range of interest for construction equipment financing can be anywhere between 3.5% and 30%. 

How are equipment loans structured?

Equipment financing works similar to term business loans with regard to payment options. You pay fixed periodic payments (including principal and interest) every month until the principal balance is paid in full. In the end, the equipment is yours.

How do equipment financing companies work?

To summarize, equipment financing is a loan used to purchase business-related equipment such as restaurant ovens or vehicles. The lender will require you to collateralize your debt with interest in the equipment itself – like how auto loans work.

How long can you finance heavy equipment?

There’s no one-size-fits-all answer when it comes to financing heavy equipment. The length of time you can fund an item will depend on how much money is being lent, but in most cases, loans last between one to six years. 

How long can you finance used heavy equipment?

Buying used heavy equipment could result in a great deal, but the financing options vary based on what you buy. You may be able to get an extended warranty, and terms typically range from twelve months up to six years. 

How long can you finance construction equipment?

There are many ways to finance construction equipment, including loans and EFA’s. In most cases, these financing products last between one to six years. 

How long can you finance used equipment?

You can typically expect to finance used equipment for somewhere between one and five years. 

Are equipment loans amortized?

Yes, equipment loans are amortized over the term of the financing.

Can you depreciate financed equipment?

The answer is yes! Section 179 & Bonus Depreciation allows businesses, including startups, to take advantage of these tax benefits by allowing them 100% write-offs during their operating period. This means that if you bought new office furniture last year but haven’t had time to use it yet because you’re just starting up, then all those costs are deductible against gross income right away without having any adverse effect whatsoever.

Is it hard to get an equipment loan?

Getting equipment financing is easier than you might think. You’ll need to have been in business for at least a year, have a 600+ credit score, and have revenue of $250,000 or more per year before applying. Because the loan is collateralized with the equipment, this type of financing is easier to qualify for and cheaper than an unsecured business loan.

Is it hard to finance heavy equipment?

Financing heavy equipment is not complicated if you work with the right equipment financing company.

Many businesses look at their budgets and decide they can’t afford new machinery. But this might be a mistake! Many lenders will give money with interest rates as low as 3.5%.

How do you qualify for equipment financing?

An applicant will generally need decent personal credit (a FICO score of 600 or higher), 1+ years in business, and solid annual revenue of 250K+. Applying for and getting approved for equipment financing will be easier if you have those qualifications under your belt. There are a few different ways to go about it.

How is heavy equipment financed?

Heavy equipment financing can be tricky to figure out, but it’s not as tough with some guidance from a professional. There are two main options for heavy equipment finance: financing and leasing.

Can you finance heavy equipment with bad credit?

Heavy equipment financing is complex for people with bad credit, but options are still available. A lease and loan can be an option if you’re willing to spend more money upfront or work together as part of a joint application process. In most cases, all you need is a 600+ credit score. That can include other borrowers who have better odds at getting approved by lenders than single applicants would otherwise have on their own.

What credit score do I need to finance a tractor?

A 600+ credit score would be a good starting point to qualify for most equipment financing programs.

Is financing equipment a good idea?

Financing your business’ equipment is a smart move that could help you meet revenue goals and avoid short-term cash flow difficulties. Consider working with established equipment financing professionals for competitive loan rates and flexible payment plan options to match any financial situation.

We will help you grow your small business.

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