How Do Equipment Loans Work? A Complete Guide
We know that when businesses do well, so does the economy, so it's no wonder banks and the government are only too happy to help with this. Whether it's for agricultural businesses or any other type of company or organization, taking out a loan is often the answer when it comes to increasing your profits and scaling up.
But how do equipment loans work? And how can you obtain one?
We're here to answer all of your questions. Keep reading to learn more
What Is an Equipment Loan?
When it comes to building a business, there are so many start-up costs it can be hard to even get off the ground in the first place. But even when you are up and running, if you're looking to expand, scale, or grow, it's often the case that you will require more equipment. Whether that includes computers, chairs, desks, tools, vans, or uniforms, those costs can add up.
So, what are the options? Is it a case of saving money and not growing your business, or making sacrifices to find the equipment costs from somewhere and reap the benefits? Well, we don't think you should have to choose.
That's exactly what equipment loans are for. When you take out a business loan for your equipment, the bank will use the assets purchased as security and collateral.
As long as you are repaying the loan as agreed, you can use the equipment you bought. Just note, if you fail to pay back the loan at any time, that equipment can be repossessed.
With the possibility of equipment loans helping you to finance up to 100% of your equipment needs, it really is a no-brainer!
Different Types of Loan Available
There are usually no rules on what you can buy with an equipment loan, but we've put together a few of the most common examples. When it comes to business budgeting, these are the assets that tend to be acquired using a loan:
The amount of equipment required for a restaurant is huge! From the actual cooking equipment such as ovens, grills, and hobs, to the food storage like fridges and freezers, it soon adds up!
And that's before even thinking about food preparation stations and dishwashers.
Similarly to restaurants, there are a lot of very important, very expensive moving parts that are needed to keep even the most basic farm up and running. Tractors are only just the beginning!
If there's one thing that's certain, it's that a method of transportation is going to break down. Be it a train, a van, or a helicopter, it's bound to happen. And they're not quick, easy, or cheap to fix or replace.
How to Apply
Research will be your best friend when it comes to applying for an equipment loan. Different lenders have different rules and requirements, so make sure you're looking at all available options and choosing the right one for you. That being said, there are a few things you are bound to be asked no matter which lender you choose.
You'll need to complete an application form, and then provide a tax return and bank statements to back it all up and prove your credibility. They'll then want to know what you intend to use the money for, i.e. what equipment you want to buy.
And finally, they'll need to run a background credit check on you (so make sure you only apply for one loan, not several).
Why Choose an Equipment Loan?
Equipment costs are high, but you shouldn't let that stop you from expanding your business! If you have the plans and are confident in your budgeting, there's no reason why you shouldn't give it a go. Besides, the better your business does, the better for the economy, so banks are happy to help when they can!
A good bank will ensure they are locally approved, work with you to meet your specific needs, and will need no loan origination fees, so it's a win-win!
Pros and Cons
So, the good things about equipment loans are how quickly they can be processed and arranged! And with very little paperwork. Sometimes, you don't even need a down payment, and both established businesses and startups are eligible.
That means you are very likely to be approved should you apply - which we think you should! When you have an opportunity to explore your dreams, you should take it with both hands!
For the sake of transparency, there are a few downsides. For example, unlike regular loans, these are limited to just equipment - it might not be a big issue for you, just bear that in mind! They also might have higher rates than typical loans.
But ultimately, as long as you have a good business plan in place, there's no reason an equipment loan won't work for you!
Help Scale Your Business With an Equipment Loan
Getting an equipment loan can seem a little daunting, but given the high chances of approval, it can be the difference between growing your business and seeing what you can really do, or staying where you are.There are very few downsides, and it can free you up to expand your business the way you want to! If you're looking for a reliable lender and want to know more about equipment loans, get in touch today!