If your business requires a good deal of equipment to operate, you may want to consider looking into equipment financing as an alternative to paying upfront for everything. If you think equipment financing is a pipe dream, you are incorrect. Everyone’s situation is different, so decisions will be made on a case-by-case basis, but simply being a young business is not going to mean alternative lenders won’t listen to your needs and try to help.

 

Equipment Financing Pros and Cons

As with many of the decisions you will be faced with as a business owner, there are some pros and some cons associated with equipment financing. The three biggest pros are having the ability to scale your business by adding equipment, being able to spread out large capital costs and not needing additional collateral since the asset itself serves in that capacity. What are the cons? The top two are the fact that the funds must be spent to purchase equipment—nothing else—and there may be a higher interest rate associated with equipment financing.

 

How Equipment Financing Works

Unlike most other types of business lending, which are heavily based on the owner’s credit score, equipment financing is a type of asset-based lending. Since more emphasis is placed on the value of the equipment itself, and as noted above, the equipment serves as the collateral, credit approval is more flexible than a new business owner might think.

 

What Are The Benefits of Equipment Financing

Perhaps the biggest benefit of equipment financing is having the ability to procure the equipment necessary to operate—and hopefully grow the business—without depleting working capital. It can be a godsend to be able to gain access to equipment, especially for a startup, without dipping into funds earmarked for operating expenses like rent, salaries and materials.

 

What Kinds Of Equipment Can Be Financed

Equipment financing can be used to purchase anything that falls under the heading of equipment. This includes vehicles, heavy machinery, restaurant appliances, medical equipment, office furniture and technology systems.

 

What Do You Need To Qualify For Equipment Financing

The industry’s minimum criteria equipment financing applicants is as follows:

  • The applicant should not be younger than 21 years old during the application.
  • The age of the borrower must not surpass 65 years old when the loan matures.
  • The applicant should have the ability to pay loans.
  • The borrower’s company financials must be stable.
  • The company must belong in the same industry for at least two years.

It should be noted that there may be some additional flexibility in some areas when it comes to equipment financing for startups, but as would be true for any loan, each business will be evaluated and assessed regarding its ability to settle the account.

 

The Takeaway

As the owner of a startup, securing equipment financing can be part of a great strategy to rise to success. Unlike traditional lenders like banks, whose application and approval process can be cumbersome and often end unsatisfactorily, alternative lenders are in your corner and focused on helping you make your business dreams come true.

If you have any questions about how to apply for equipment financing for a startup, give Clear Skies Capital a call at 800-230-9822. You may be pleasantly surprised at what you qualify for.