Being a business owner doesn’t come with an instruction manual. Forging your own path can be stressful, as you must manage employees, finances, and expand your business. It is possible to lessen that burden by finding the right equipment financing partner.
Small businesses that do not qualify for equipment financing may miss out on critical equipment and business opportunities. Knowing how equipment financing works makes it easier to identify the right lender who will approve you. After all, knowledge is power.
In this article:
- How Equipment Financing Works
- How to Find the Right Equipment Financing Fit For You
- Self-Evaluating Your Credit Portfolio
- What Financing Benefit Is Most Important When Selecting A Financing Option?
- Choosing the Right Financing Option with Beacon Funding
How Equipment Financing Works
Equipment financing is a type of loan used to purchase business-related equipment. When a business lacks sufficient funds or wants to conserve cash, this purchase method enables them to achieve accelerated growth! Instead of spending all their hard-earned cash upfront, equipment financing borrowers spread their payments over time.
When is the Right Time to Invest in Revenue-Generating Equipment?
Successful business owners use financing to afford the equipment they need now. The sooner the equipment is in action, the sooner they can use it to generate revenue.
Here’s an example: A small business owner wants to buy another tow truck to service more roadside assistance calls in their local area. If the buyer sees an opportunity to increase their revenue by hauling more vehicles (but can’t afford to buy the equipment outright), financing the new truck may benefit the buyer’s bottom line.
Don’t miss opportunities because you don’t have enough cash on hand. Find out how much your business could be approved for by talking to an equipment financing expert today.
How to Find the Right Equipment Financing Fit
When your business wants to grow fast, it’s essential to secure a monthly payment that’s custom-tailored for your situation and business goals. Whether your goal is to improve your potential earning power or have enough flexibility to upgrade in the future, there are equipment financing options that fit your goals.
If you are worried about wasting your time pursuing a relationship with the wrong lender, here are some tips to navigate the process.
1. Get an Equipment Financing Estimate – You’re not alone if you wonder how monthly payments are determined. A good first step is to speak directly with an equipment financing expert about your financial goals. Whether your goal is to have the lowest monthly payment or the lowest overall cost, get fast answers and realistic estimates. Schedule a time to talk today.
2. Learn the Lender’s Application Process - Getting approved for a loan depends on many factors, but applying for equipment financing should be simple and secure. Beacon Funding’s 100% digital application process makes applying fast and reliable. Depending on your credit portfolio, you could be approved for equipment financing within 24 - 48 hours.
3. Learn the Lender’s Qualifying Criteria - The more you understand their credit process, the more likely you’ll find the equipment financing lender that fits your business needs.
Beacon Funding considers multiple criteria to help businesses of all ages get approved for equipment financing. These criteria include:
- Time in business
- Personal credit history
- Business credit history
- Equipment you’re financing
- Transaction terms and conditions
You don’t need to have strengths in all areas, but the stronger your application is, the more favorable the terms may be.
How To Self-Evaluate Your Credit Portfolio
You can use the following questions to gain a general sense of your company’s credit portfolio strengths and weaknesses. If you notice some shortcomings, this article offers some valuable tips on how to improve your chances of getting your application approved.
What year was your business established?
Time in business is a measure of how long a company has been operating. Lenders use this metric to determine how successful a business has been or could likely be in the future. If a business operates successfully for 20+ years, lenders would be logical to believe that its success will continue during the financing agreement.
The longer a company has been in business, the more competitive their monthly payment may be. Businesses greater than two years old have more financing programs to choose from, while start-up companies may have limited options.
If you’re a start-up that doesn’t automatically mean you have low credit quality. It just means you have less pay history. To strengthen your chance of an approval, try providing your lender with:
- Additional collateral
- Personal financial statements
- Personal credit history
- Co-signers
- Industry experience
- Cash down
- A strong business plan
What is your personal credit?
Typically, credit underwriters use the personal credit history of the business owner as a measure of what the corporation’s pay practices will be.
Personal pay blemishes, bankruptcy, judgments, and/or liens may have an impact on your business’ perceived credit risk making it more difficult to obtain business credit.
What is your business credit history?
A strong corporate pay history improves the odds of obtaining 100% financing.
Because multiple factors are considered in the underwriting process, a poor corporate pay history can sometimes be overcome through other factors, such as:
- Strong personal credit
- Profitable financial statements
- Down payment
- Shortened term
If you are worried about having a less-than-perfect score, there are practices you can start today to improve your business credit.
What kind of equipment am I financing?
Typically, financing terms match the useful life of the underlying equipment.
Financing terms of 60 months or more are often reserved for assets that are anticipated to be producing profits for more than a five-year period. On the other hand, assets with shorter lifespans are often kept on short-term contracts due to their limited useful life.
What Financing Benefit Is Most Important When Selecting A Financing Option?
- Lowest Monthly Payment: If your business is like most, cash flow is king!
Consider the Buy Now, Pay Later program, which will allow your equipment to begin producing revenue before regularly scheduled payments are required.
- Lowest Cost: For those with ample cash flow, lowering the overall cost of financing may be the primary objective.
Shortening the financing term and reducing the amount financed with a down payment are two simple but powerful techniques for reducing your overall financing costs.
- Tax Savings: Consult with your accountant and they may tell you that a capital lease is in your business’s best interest due to a Section 179 tax deduction. It may allow you to write off thousands of dollars in equipment financing.
Alternatively, your accountant may advise that your business would benefit from an operating lease in which your business can deduct 100% of its monthly payment throughout the term.
Choosing the Right Financing Option with Beacon Funding
When searching for an equipment financing option for your business, you don’t have to do it alone. It’s important to work with a lender who not only works with established businesses but gives start-ups a chance too.
While other lenders might deny you because you don’t fit in their financing structure, Beacon Funding has a wider credit window than most. That’s how we’re able to approve 7 out of 10 applications.
If you’re ready to get the right equipment financing for your business, apply today. Applying takes a few minutes, has no cost or commitment, and you’ll receive a response from a financing consultant within 24 hours.