It is essential for every business, no matter how big or small, to invest in the vital upgrades, repairs, or replacements of the equipment they use to increase productivity. Thus, most business owners turn to convenient equipment loans to achieve their business goals and further develop their company. Investing in the equipment your business uses on a day-to-day basis can promote efficiency, leading to increased production and revenue.
Equipment loan rates and terms will vary depending on the lender you are borrowing from. A down payment or collateral is also usually necessary for most borrowers, especially small business owners. This is why most business owners scout for the top lenders through mortgage brokers or the internet. However, most of the time, a loan can fund about 80% of the total price of the equipment you’re going to buy.
Data shows that about 78% of businesses in America finance their equipment. Equipment loans have various benefits. One of these benefits is ownership since you actually own the equipment after fully paying off the loan. This is especially advantageous for bigger purchases.
On top of that, having additional equipment may lead to an overall increase in revenue without taking from your working capital. Other benefits would be having cash reserves, a competitive edge, low-interest rates, flexible payment methods, and many more. Take advantage of what this opportunity has to offer with this simple guide to applying for equipment loans.
Ensure an excellent credit score
Before applying for a loan, consider the state of your credit score and history first. Most lenders or financial institutions that give the best terms and rates will have to be strict regarding the qualifications they look for in a borrower. Having a record of late credit card payments or bad credit history will negatively affect your standing as a potential borrower. In most cases, these lenders will not extend any help towards a business that will seem unpredictable and risky.
It is best to do your research and prepare for the application. To ensure your eligibility, it is best to check out your current FICO score, which summarizes the current state of your credit report, through the internet. It is favorable to be prepared to show your business and personal credit history when meeting with potential lenders. Try your best to improve your credit and repair any existing credit errors since having excellent credit is one of the most crucial requirements when applying for loans.
Formulate a stable business plan
Financial institutions and lenders will sometimes consider your business plan when deciding whether they will lend you any amount. Your company’s business plan serves as a roadmap to your success and standing in the future. That is why it is best to proofread and enhance it. Make sure the services or products you are offering are described in your business plan in detail. Include your present-day cash flow system and a list of realistic business objectives necessary for your company’s future success.
Mention your target market as well as the ways your products or services will satisfy their needs. Lastly, you can add an executive summary at the beginning of your business plan written in a few paragraphs so that the lenders can fully grasp and understand what your business is all about.
Update your personal resume
There’s a common misconception that resumes are only good for job applications. In actuality, your personal resume can largely reflect how you are as a business owner. This is considered by a lot of financial institutions and lenders. Resumes are considered excellent additional resources where lenders can look for personal attributes to assure them that you can contribute to your own small business. The person behind the establishment of a business holds a lot of responsibility. Therefore, this can largely affect the lenders’ decision to let you borrow funds for your equipment.
Prepare the necessary financial documents
Important legal documents such as cash flow statements and other financial records can also affect the issuance of equipment loans. Even just as a business owner, it is crucial to organize and manage your finances well. This includes both business and personal finances. Aspiring borrowers with existing debt may not be seen positively by the lenders. Consider hiring an accountant or financial planner that can effectively sort out your financial records.
At the end of the day, applying for loans, even equipment loans, is not a minor decision that you can make for the sake of buying new equipment. Consider your options and figure out if this is the best step to promote your business’s development and growth. With the tips mentioned above, you can surely acquire a sufficient loan amount for your new and improved equipment.