Need equipment for your business but don’t have the cash to outright buy it? Then keep reading, this article is for you!
Having access to updated equipment, or even equipment in the first place is vital to keep your company operating nice and smooth. Whether you have a product or service based business, having outdated, or worse, a lack of equipment, is never a good look.
Upgrading your equipment is necessary – we know that. The problem is, it can put a serious strain on your cash flow. And that’s where equipment financing comes in, you can get your hands on the things you need without strangling your profits.
What are business equipment loans?
Whether it’s making sure your computers are working optimally, or that your trucks are burning fuel more efficiently and getting where they need to go without breaking down, upgrading your equipment is necessary.
So what is equipment finance? Hint, it’s in the name! It’s basically financing that’s specifically designed for the purchase of business equipment. It can be anything from new computers and software to an industrial dishwasher for a restaurant. If it’s a ‘thing’ and it’s for your business, then you can bet your bottom dollar it can be covered by an equipment loan. Here at Become, our equipment business loans can cover equipment up to 500k, it depends on the equipment that you need.
Each lender has different terms when it comes to equipment loans for small business but generally, you will be able to finance around 80% of the total purchase price of the equipment you’re after.
Secured or unsecured?
When it comes to your equipment financing options at Become, you can expect to receive a loan that is a little bit of both. Let us explain…the loan is actually fully unsecured but you, yourself will not need to provide any collateral. This is because the piece of equipment that you acquire will act as your collateral (making it an unsecured loan).
So for example, if you were to purchase a car with your equipment finance loan, you’d have to pay back your installments until the car is owned by yourself. But if for whatever reason you stop paying back that loan, the car will serve as collateral. Capiche?
Why do you need business equipment loans?
Small family owned businesses all the way to enormous companies finance their equipment, but what is equipment finance and why do they to that? Not all businesses have huge lump sums of cash to be spending on equipment and even if they did, they may choose equipment financing in order to better spread and manage their cash flow. On top of that, there are many benefits that come along with equipment financing, let’s take a look at what those are:
- Maintain cash flow – through equipment financing you can maintain your cash flow and spread your costs. This way you can keep hold of your working capital and cash so that it can be used in other areas of your business.
- You own the equipment – outright owning the equipment or machinery can boost the asset holdings of your company, as opposed to leasing. We should mention, however, that leasing may be better off for those who only need a certain piece of equipment for a very short time.
- Get the best equipment – even well-established businesses may not have enough lump sums of cash readily available to spend on equipment, with a business equipment loan you can borrow money to make those important, key purchases that’ll take your company further.
- Tax Deductions – now that’s a word pairing we like to hear! On the basis that the equipment is 100% for business use, you should be able to claim some nice tax deductions. If you are planning on using the equipment for both work and pleasure, you will only be able to claim tax deductions on the work element. For more information on equipment tax, check out the Australian Taxation Office.
- No collateral – we briefly touched on this earlier, but there will be no collateral besides the equipment itself, thus lowering your downside risk.
- Cash forecasting – having predetermined payments will allow you to prepare more accurate budgets and forecasts to better manage your cash flow.
- Quick and easy financing – the application process is very quick, allowing you to get your hands on the equipment you need promptly.
- Flexible payments – this ultimately depends on your lender, but you may be able to take advantage of flexible payments – make sure to check with your lender (don’t ask don’t get!). You may be entitled to pay back monthly, seasonally, quarterly, biannual or maybe even annually.
What can you use business equipment loans for?
In short, equipment loans for small business allow you to purchase just about anything, so long as it runs through your business. It should be noted that these kinds of loans are used for purchasing ‘larger’ pieces of equipment. So for example, you probably wouldn’t be able to get an equipment loan for purchasing one computer, but if you needed 50, then it would be a different story.
A few cherry-picked examples of industries that use equipment loans and the types of equipment they get includes:
- Shipping companies – expand the number of ships or trucks
- Agricultural – anything from tractors, to irrigation systems, plows, milking machines etc.
- Construction – there’s a tonne of examples here, but just about any piece of machinery including excavators and bulldozers.
- Hospitality – restaurants and hotels may need stoves, industrial fridges, furniture etc.
- IT and creative companies – servers, software, cooling equipment, computers etc.
- Healthcare – all forms of medical equipment for hospitals and dentists.
And the list goes on!
Is an equipment loan right for my needs?
Now, while an equipment loan may be the perfect solution for your company, it may not be for someone else. To learn more about what type of financing is right for your business, check out our Guide to business lending.
How to apply for business equipment loans
If you’re wondering how to finance equipment you’ve come to the right place, but first, let’s check you meet the requirements first. They are actually pretty lax when applying through Become, just know that requirements will vary from lender to lender. When applying through Become, there’s the added benefit that we have many lending partners, so it’s likely that there is one that’ll accept you.
Requirements for business equipment loans:
- At least 10k monthly business revenue
- Minimum of 6-9 months trading
- Credit score not relevant (seriously!)
To see your equipment financing options, simply apply online with Become. The process is quick and simple.
- Apply online – one simple application form
- Connect your online account or use an accounting software such as QuickBooks
- Receive loan offers from multiple online lenders (if you qualify)
- Choose the offer you want – specify with your representative that you’re after an equipment loan
- Receive funds in as little as 3 hours
Now that you have a pretty idea how to finance equipment, let us know if you have any other questions, or if there are any topics you’d like us to cover in our blog. Our ears are open!
*Please note, this process is available for our Australian customers.