Equipment Financing2022-09-08T17:27:22+00:00

Equipment Financing

Clear Skies Capital offers equipment financing from $5,000 to $1,500,000 with monthly traditional payments.

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Clear Skies Capital | Business Loans

What is Equipment Financing, and How Do You Apply for Financing?

What is Equipment Financing, and How Do You Apply for Equipment Finance

Equipment Financing

Equipment acquisition is a crucial component of business growth. You can streamline organizational efficiency, automate your systems, and expand your operations by making new investments. However, businesses might not have the financial capability to keep pace with the ever-changing industry. Fortunately, equipment financing will bridge the funding gap and help you meet your business goals.

But What is Equipment Financing, and How Does it Work?

The term refers to a financial instrument or a line of credit for a company to purchase tools and machinery to meet its evolving needs, boost productivity, improve workers’ safety, and reach new markets. This type of loan is a solution to purchase new equipment if you have no means to pay in cash.

Most businesses take advantage of improved productivity to cover the regular payments for online equipment loans. In that regard, it’s even more strategic to apply for this type of credit rather than take out a loan from a national financial institution or a bank.

The typical banking practice requires you to present your personal property as insurance for commercial loans. And the collateral value is usually worth more than borrowed cash.

In contrast, this type of business financing is collateral-free, so you avoid pledging your assets to grow your business while you take on a line of credit. Instead, the lender essentially owns the equipment while you pay the monthly payments for the right to use it. The terms vary monthly, quarterly, bi-annually, or any other pre-arranged schedule you have made with the lender.

Meanwhile, the lender is still protected. The asset serves as insurance that it can possess if the business defaults on the payments of its loans small business.

As a company with limited capital, business equipment financing is a crucial first step to kickstart your business while giving your options for other lines of credit.

For example, even if you already received financing to obtain equipment, it does not limit you from applying for a merchant cash advance, business loan, or additional funding for working capital.

Key Difference Between Funding vs. Leasing

People use these credit terms interchangeably even if they are not technically identical.

While they have the same goals, the way the loans are structured differs between financing and leasing.

Equipment leasing is simply a rental agreement with the lender. To illustrate, the agency will buy an excavator and lend it to the business for a specific period. Like any lease, you pay the lender a fixed monthly fee for the right to use the heavy equipment. The lender will take back the equipment when the long-term rental period ends unless the business renews the contract.

Equipment finance is essentially a rent-to-own plan. Similar to equipment leasing, the credit agency remains the owner of the machinery until such time the business fully pays the agreed value for the equipment purchase. The lender may pay the total cost of the equipment or only a portion, with the borrowing covering the difference. However, you do have to reach the minimum credit score to be eligible for these kinds of loans.

Typically, the fixed monthly fee includes the interest, principal loan, and other charges. Since the business will eventually own the machine, it’s sensible that equipment financing companies will command a higher rate compared to equipment leasing.

The SBA also has a similar program. The 7(a) package covers SBA equipment loans, allowing you to purchase tangible assets using the funding guarantee you receive from the government.

When Do You Need Funding for Your Equipment Needs

There are three ways why equipment finance may be a viable option for you.

Equipment upgrading

The main reason to upgrade your equipment is when it is no longer adequate to sustain your operations. For instance, if your printing press can only print a maximum of 5,000 pages a week, you need to buy a piece of more modern equipment that fulfills your personal needs. Unfortunately, some businesses have to endure limited productivity since they cannot afford a new machine.

Equipment replacement

Replacing your machines and tools allows you to operate optimally. One way to know is if your repair costs already eat into your overhead budget. Equipment replacement differs from upgrading since you are essentially buying the same brand.

Your mechanic may recommend that you should replace the broken-down machine with a new one. If not, you are bleeding money on downtime while waiting for the experts to repair your equipment. Also, you are exposing your workers every time you use the equipment because it might cause injury due to wear and tear.

Equipment acquisition

Purchasing the latest technology is critical for businesses in high-demand industries, such as construction or manufacturing. There are too many advantages of investing in equipment, such as automating their systems, minimizing human error, boosting productivity, and keeping costs down.

In most cases, our clients need help purchasing additional equipment for expansion, notably if their business goals have already outpaced their output.

But the question is: should you wait while you save up cash to buy equipment or apply for financing to obtain the machine right now?

Top Reasons Why Equipment Financing Rates Are Better Than Paying in Cash

Loan vs Equipment Financing

You can manage your budget better

Even if you can pay in cash for the equipment, you will blow a massive hole in your budget. Instead, paying a fixed amount for the credit at regular intervals will help you manage your personal finances better. And as already mentioned, you can cover the payments from the additional income you may earn from modernizing your systems.

Savvy business owners understand wealth management, so they spread their exposure rather than putting all their money into one investment. The option also allows you to hedge vs. inflation since you pay a fixed amount at regular intervals. Finally, it means you do not have to scramble for new sources of income during the loan term.

You can improve your business score

These loans will also help boost your min credit score by ensuring that you pay monthly obligations diligently. In addition, it’s advantageous for your business to have a good credit score to access more long-term loans at more favorable rates from the bank. In the future, you may need a personal line of credit to expand your operations.

The rate is lower compared to cash loan

Ultimately, you want to keep your expenses as low as possible if you take in new credit. Historically, these loans have lower accrual rates than securing loans from a bank. So, the equipment financing rates give you some financial elbow room to maneuver. As a result, you can use the money you saved and redirect it elsewhere instead of securing a credit loan. For instance, if it costs 10% to finance your equipment purchase and it yields a return of 15%, you still save about five percent each month.

You can potentially gain tax breaks

Since you own the equipment, you can deduct the purchase price from your gross income. You won’t have such a luxury when you take out credit loans. Sec. 179 lists the qualifying equipment eligible for deductions. These include:

  • Heavy equipment and machines that you acquire for business use
  • Transportation not exceeding 6,000 of gross vehicle weight
  • Computer hardware and software
  • Personal property that you use for business
  • Office equipment and furniture
  • Printing press and manufacturing tools
  • HVAC
  • Fire alarms
  • Roofing
  • CCTVs and security systems
  • Warehouse
  • Office Furniture
  • Office Equipment

Please refer to the IRS page for the complete list of equipment you can deduct from your taxes.

Your credit score may not be as important

Since the requirements for equipment financing are not as stringent as commercial loans, your personal credit score will not always work against you. For instance, at Clear Skies, we are less worried about your past financial history than your ability to pay in the future. We also have a bad credit loan option, which is perfect for your needs, especially if you encounter difficulties securing cash loans from the bank.

You get full ownership of the equipment

In equipment leasing, ownership reverts to the lender or the bank when your contract agreement lapses. Meanwhile, you will own the machine under equipment financing once you fully pay your obligations.

Ultimately, it’s the best option if the equipment is integral to your operations. In addition, you do not have to renew your contract with the leasing party after your agreement lapses.

Quick Processing

The required documentation for equipment financing is typically fewer than other credit instruments. It means you do not have to waste time preparing the documents to support your application for the bank loan. Meanwhile, our hassle-free procedure is one of the most attractive features of Clear Skies, and you can finance your plan to purchase more assets.

Those are some benefits of equipment financing for individuals that you should seriously consider rather than applying for a credit loan from the bank.

Ultimately, you need to be competitive in your industry to survive. For example, suppose your competitors secure a bank loan to invest in new technology while you are still stuck with your old machines. In that case, you are severely handcuffing yourself from delivering a more efficient service to your customers.

Challenges of Small Business Financing

However, there are disadvantages when choosing these types of credit loans as another way to finance new tangible assets.

After all, every financial instrument has its respective pros and cons. There’s no perfect system that will address everyone’s needs.

  • The initial cash downpayment might be a challenge for some companies already strapped for cash to finance their asset upgrading plans. But our friendly officers will help design a solution to address your needs for more loans.
  • As mentioned, construction equipment financing is more expensive than equipment leasing. Renting a piece of equipment may be the best route if you do not plan on making the machine a perpetual fixture of your operations.
  • The credit terms are highly restrictive since you cannot use this instrument for purposes other than to finance your equipment purchase. You also can’t liquidate the machine until you fully pay your obligations.
  • The business will shoulder repair costs, so you must learn how you utilize the machine to extend its lifespan. Nevertheless, it’s easy to project repair costs depending on how the equipment has been performing while you are using it.
  • Additionally, you may incur storage and maintenance costs, which go into your overhead budget.

You need to know the potential barriers and terms to help shape the ideal decision for your company. While Clear Skies is always ready to partner with you when you need a boost, you still have to decide whether or not the benefits outweigh the costs.

Don’t believe equipment financing is right for you? Then, try Clear Skies’ other loan options!

Who is Eligible to Apply for Loans

Almost any business can apply since there’s also equipment financing for startups. For instance, we have diverse clients from newly opened companies, retailers, single proprietorships, partnerships, non-profit organizations, and corporations.

Generally, the industry has the following minimum criteria for applicants:

  • 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

We have diverse clients that avail of our loans as they acquire new machines and tools to compete in their respective industries. We have a significant presence in manufacturing, construction, transportation, retail, healthcare, agriculture, and other sectors.

Like any bank, we will evaluate each business and assess if they are able and willing to settle their accounts with us.

Improve Your Rating With Our Bad Credit Business Loan!

How Much Can I Get if I Avail of Financing for My Equipment

The terms of our loans will depend on your capability to pay. For example, clear Skies may approve a package lower than the initial requested cost. In the same vein, we may recommend that you are eligible for a higher rate to obtain a machine.

Not many people know that we also purchase heavy equipment for construction industries or delivery vehicles for businesses with limited capital.

Our package will give you access to as little as $5,000 to as much as $1.5 million per approval. Sometimes, our clients need multiple machines, so we customize the terms of our equipment financing loans to suit their needs. We also tailor our term lengths and repayment options to make them more affordable for them. Our primary aim is to help a business grow and not add to its burdens.

We also have our equipment financing calculator to help determine how much you can receive.

In short, we will fund any machine or tool you need to improve your business. But, of course, the interest rate also varies according to your credit score and the term repayment length.

The equation is simple: the greater the risk, the higher the rate.

But do not let that discourage you. Talk to our officers, and you will realize it’s easier than you think. Just prepare your documents, and we will find the most affordable package for your needs.

Ultimately, when your business grows, we grow with it.

How Much Can I Get if I Avail of Financing for My Equipment

The terms of our loans will depend on your capability to pay. For example, clear Skies may approve a package lower than the initial requested cost. In the same vein, we may recommend that you are eligible for a higher rate to obtain a machine.

Not many people know that we also purchase heavy equipment for construction industries or delivery vehicles for businesses with limited capital.

Our package will give you access to as little as $5,000 to as much as $1.5 million per approval. Sometimes, our clients need multiple machines, so we customize the terms of our equipment financing loans to suit their needs. We also tailor our term lengths and repayment options to make them more affordable for them. Our primary aim is to help a business grow and not add to its burdens.

We also have our equipment financing calculator to help determine how much you can receive.

In short, we will fund any machine or tool you need to improve your business. But, of course, the interest rate also varies according to your credit score and the term repayment length.

The equation is simple: the greater the risk, the higher the rate.

But do not let that discourage you. Talk to our officers, and you will realize it’s easier than you think. Just prepare your documents, and we will find the most affordable package for your needs.

Ultimately, when your business grows, we grow with it.

How to Apply for Small Business Loans

The terms of our business loans are one of the best in the industry. We can sign the seal of approval just four hours after your application as long as all the documents are in order. In addition, we have simplified the process of our online term loan to ensure that you get the help you need quickly.

What do you need to submit to avail of loans?

  • Your business plan
  • Your marketing strategy
  • Income tax returns
  • Your monthly gross earnings for the previous periods
  • Your upcoming orders

Also, you need to have a credit score of 600 or more. However, the bank may have even more stringent rules regarding the track record.

We may also ask for additional documentation regarding your track record, especially the repayment rate on previous loans. For instance, you must be trading in the same industry for eight months or longer. Nevertheless, our documentation process is not as complicated as other companies or the nearest bank near you.

You have two ways of applying for equipment financing loans:

Physical Application

You complete all the necessary documents and visit us at our address at 11858 Bernardo Plaza Ct Ste 110, San Diego, CA 92128. Our financing officer will discuss your application with you. You may also call us at 1 (800) 230-9822 if you have questions.

Digital Application

Since we aim to make it easy for our clients, you simply have to fill out the digital form. However, we are aware that you are too busy running your company to be bothered with dropping by our headquarters.

Our digital application will send you all the contracts electronically once your application gets approved. In turn, you mail us back the signed copies before you receive your financing. We also accept digital signatures.

Clear Skies can help you obtain almost any type of equipment you need for your business. We also accept all major cards in our transactions.

Quick and Flexible Financing Construction Equipment Loans

Clear Skies is one of the premier financing providers in California, with over a decade’s worth of experience in the industry in providing all types of loans. We leverage this experience to be creative in our packages to offer services and solutions to as many clients as possible.

We are a fully licensed lender, which means that you are protected. Unlike other fly-by-night operators claiming to offer loans with friendly terms, we comply with California laws and standards. As a result, we are more careful with each transaction, knowing that our clients can get legal relief.

What if this Equipment Loan is Not Right For Me?

If equipment financing is not suitable for you, check out our suite of loans such as Business Loan, Bad Credit Business Loan, Working Capital Loan, and Merchant Cash Advance. We have a team of accomplished experts whose primary marching order is to assist you in coming up with the best option for your needs.

The first step is to apply here, and we will do the rest.

Read more about Equipment Financing here:

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