Many small businesses will run into the need to finance heavy machinery at some point in their existence –– and this is especially true of companies in the construction, medical, or technical industries. And rather than shelling out thousands, and potentially hundreds of thousands, of dollars on costly and highly specialized equipment up front, it may prove most beneficial for your company to apply for equipment loans. But first, you should ask yourself these four questions before you submit any applications just yet:
Do I Really Need it to Finish a Project?
Before you apply or even consider applying for an equipment loan, you should determine if it’s necessary to your operation. While a piece of equipment might expedite something you’re working on, you shouldn’t spread yourself too thin bringing in equipment that isn’t essential to the job. Prioritize what you need, and compare it to what you’d like to have and make a judgement call. It might be tough, but the last thing you want is to pay for expensive machinery that you barely use.
Loan or Lease?
The next step is to determine whether you should lease equipment or apply for a loan. Leasing doesn’t require a down payment, so if your company is strapped for capital, or if your cash flow is less than it usually is, you may want to consider this option. And once you’re finished with it, you can return it and stop paying interest on it. This may be the best way to go for a specialized piece of equipment that you won’t be using very often.
How Long will I be Making Payments?
You’ll need to do your homework on this one, because it can vary from item to item. However, for typical construction equipment, the loan may last for as long as five, or sometimes even ten years. Whatever the length of payment though, you should give it due diligence before entering into a long-term agreement.
Where Should I Apply?
Once you’ve identified exactly what you need, and you’ve decided that you’re comfortable financing your equipment with a loan, you can start to look for the best place to apply. Traditional banks are a good option –– and a fine place to start –– but they often require very high credit scores and the extensive process means it can be six months or longer before you receive funding. If your credit is less-than-spotless or you need funding quickly, you may want to consider an alternative online lender.
Had trouble getting financing from the bank in the past? Contact the National Business Capital Team today! We have the experience and the resources to make your next project a reality. And download our free ebook to see how to get business funding when banks say no: