Any business that utilizes physical Equipment can probably make use of equipment financing. That includes such things as vehicles, computers, and machinery used by your business.

An Equipment Financing Loan option is funded by a bank or non-bank lender to purchase equipment. Most equipment financing loans typically will not cover the entire cost for the asset, most lenders require a down payment. This will typically run between 10 – 20 percent of the total cost of the asset.

Considering the lengthy underwriting process involved with reviewing the business and the asset being purchased, as is the case with most long-term loans, expect that obtaining an equipment financing loan can be a time-consuming process.

The major difference between equipment financing loans and other loans is that the equipment itself serves as collateral. Therefore, if the business can’t make the payments, the lender will simply repossess the equipment. Please be advised that some lenders will also file a blanket lien on the asset and maybe even the business during the term of the loan. Once the loan is paid off, the equipment’s ownership converts to the business for either continued use, to rent out to other businesses, or to sell the asset.

The asset will remain on the company’s balance sheet. Equipment Financing Loans generally offer businesses a tax savings under Section 179 which is a tax incentive for businesses. This is meant to provide a benefit that is designed to help businesses purchase equipment and invest in business development. Section 179 allows the company to treat qualifying assets as business expenses and expense the costs of those assets immediately. Please consult with your tax professional to make certain that your business will be able to meet several qualifications to receive Section 179 benefits.

Businesses ranging from a main street single location to Fortune 100 companies have benefited from financing their equipment and retaining their cash flow reserves to advance other aspects of their company. 

• Companies that utilize Equipment Financing Loans are able to constantly add the necessary assets required to keep the businesses running.
  
  
• This asset based financing product can be a great source of alternative business funding that does not tie up or reduce lines of credit, in order to add the equipment needed to operate the business.
  
  
• Equipment Financing Loans lenders can work with businesses to customize a solution that is specific to each company’s unique budget. 
• If a company meets the qualifications and has their documents in order then the application process for this product can be quick and easy. 
• Equipment Financing Loans allows companies to stay on the cutting edge of industry trends and technological advancements within their industry. With this product providing the capital needed to obtain the latest equipment necessary  to meet a businesses goals. 
• This product provides financing for Up to 80% of the assets cost minus the 20% down payment by the business acquiring the equipment.
• The ability to balance a standard monthly payment like a typical term loan.
  
  
• With an Equipment Financing Loan the business will own the equipment, so changes and alterations if necessary can be made without permission from the lender. Also the company is in charge of maintenance, so if issues arise the company addresses it immediately, without waiting to make certain the problems get fixed.
  
  
• Once the term of this asset based product is finished the business has the option to sell the equipment, allowing it to recover some of the costs.
  
  
• Equipment Financing Loans provide the capital to obtain a physical asset, meaning unlike unsecured loans the asset that is being purchased serves as collateral. This is why this asset based financing product tends to be a more cost-effective and lower-risk way to acquire Equipment than other forms of financing.
• This asset based financing product works best for Equipment with long-term utility items that don’t typically depreciate quickly.
• It is also beneficial to companies that can afford a 20% down payment and companies that don’t need the equipment right away that can go through an application and underwriting process.

Each lender will vary in their requirements to obtain an Equipment Financing Loan. The following are just some of the general qualifications most lenders will look at when making an underwriting decision. Since underwriting standards vary per lender please verify if your business will have all of the items in place to ensure you meet their minimum requirements.

Most lenders may require that a company have at least two years in business with minimum annual revenues of over $300,000.

In order to qualify for Equipment Financing Loans business owners must have on average a minimum credit score (625-plus on average). 

In addition to credit score, most lenders may require a business plan that breaks down the company’s detailed future growth proposal. The most pertinent items that the majority of prospective lenders will desire to see on a business plan include but are not limited to a comprehensive business summary. Documents proving the company’s time in business. Business revenue statements as well as one to two years of full annual financial statements including the profit and loss and balance sheets. This comprehensive plan is intended to  help lenders assess the financial strength of a business and to identify the revenue and the expenses that are coming into and going out of the business. In order to determine upfront as best as possible a business’s ability to be able to manage the Equipment Financing Loan. 

Please be advised that since some lenders may also be interested in the personal finances of the owners of a business, then keep a personal financial statement on hand in case it is requested. 

The company must also showcase that it has the down payment on hand typically around 20% or sometimes more. 

In order to close out an Equipment Financing Loan an official quote from a vendor will be required.