Small businesses are often faced with financial challenges that only loans can solve. In 2012, three major reasons were cited by businesses seeking loans: cash flow, reserve funds, and inventory purchase. About 63% took out loans for cash flow purchases, 23% did so because of poor sales, and 38% needed them to maintain inventory. Another 49% of small business owners said that they use their own personal credit to finance their businesses. There’s no two ways around the fact that running a business is expensive. Equipment can especially add up, prompting a number of business owners to seek business equipment loans. These types of small business loans can be difficult to obtain, so here we’ll give a few pointers about gaining approval for commercial equipment financing or heavy equipment loans.
The key to gaining approval for business equipment loans is to prove that you’re a good risk.
- Start by thinking carefully about the amount you want to borrow. Choose a figure that is realistic and that will meet your needs.
- Plan on buying new or near-new equipment. That’s a safer prospect, and may be usable as security to support the loan. Because of low resale value, older equipment makes it harder to secure a loan.
- Be able to demonstrate stable credit history. If you can prove uninterrupted time in business and long-term employment, you’ll be in even better shape.
- Make sure your bank account and income demonstrate the capacity to make repayments. A savings track record and a high credit score will greatly improve your position.
Remember that shopping for the best deal is a good idea. Just like the new business market, finance is a competitive industry, and credit providers should fight for your business. Ask these questions before you decide on the best deal:
- Are there monthly administration fees?
- Are there ongoing bank fees?
- Will there be penalties for early payout?
- Is the loan daily reducible?
- Can extra payments be made in any amount at any time?
Preparing yourself to meet with lenders of business equipment loans will likely yield great results. Be ready to demonstrate that you’re a quality prospect and be prepared to ask important questions. Business equipment loans are nothing to trifle with.