What is an Equipment loan and why do I need one?
It’s often very difficult grow and purchase much needed equipment.
Traditional lenders are often times the first course of action, but not usually the best choice. They often have outrageous qualifications and require many a hoop to be jumped through. They usually auction your application and sell your business to the highest bidder, which in the long run proves disadvantageous in a variety of ways. Another mistake is often made by using online sources for such loans. There is a distinct lack of person ability and absolutely no relationship with which to work through difficult situations and assist in tough decisions.
To grow it is necessary to refurbish or even update by purchasing new equipment.
In order to stay ahead of market demand, meet product quotas, or any type of new product innovation, there has to be a concerted effort made to invest in your equipment. You can’t expect to stay in business long if you are not growing and improving.
Simple purchases such as office or accounting equipment may seem small and mundane, but, when your fiscal growth is subject to limiting factors such as construction downtime, reduced restaurant hours of operation or limited market penetration, the costs are great and far reaching.
How should I approach equipment loans?
Simply put, all equipment has an expected life span. Once it is determined that a piece of equipment is warranted, the loan should be matched to that piece of equipment’s lifespan. In other words; a delivery vehicle may have an expected lifespan of five years, so the loan should be established to run concurrently. This eliminates the risk of draining your operating capital if the term is too short and eliminate having to continue to pay for something that is outdated or in need of replacement.
How does Equipment financing work?
Whereas traditional loans require such things as a credit history and score that is respectable and documentation, equipment loans are not as concerned about those things since the equipment itself acts as collateral and secure the loan. In addition, there are very favorable tax incentives available for purchasing new equipment.
There is a large diversity of loans that can be acquired which depend on a couple of criteria. One is the type of equipment needed, and the other is the cost of that piece of equipment. Terms can vary from 1- 5 years, or longer for higher price tags, and rates are just as volatile, ranging greatly. As with any loan you have to be an educated consumer to ensure you are getting the best of both worlds.
Another factor that greatly affects both the term and the rate is a personal credit score. The higher the score the easier it is to get the best rates, which also makes it easier to get the loan in less time.
At Dynamic Capital, we offer the widest array of products to keep your business running and your equipment up to the task. Don’t let your equipment dictate your potential, check out our amazing assortment of business loans by completing a simple app with a “soft credit pull” to see all of the packages available to you.