Equipment financing or loans are the money you borrow from a lender to buy equipment for your business. Most businesses require different kind of equipment to manufacture, produce, or process their products. These equipment include things like computers, printers, specialized machinery, industrial equipment, medical and dental machines, cookware, catering supplies, and many more. Businesses seek equipment financing when they are in need of money to either purchase, repair, replace, or upgrade their equipment. For running an efficient business, one needs to have maximum productivity which only comes with the best equipment. And, to have access to those equipment, banks help you in getting your finances in place by giving out loans.
How to Apply For Equipment Financing?
The business equipment financing application is a simple process. Most equipment lenders require information about the equipment you will be purchasing with the financing, for which they ask you to quote the price of equipment or submit an equivalent cost documentation. How smoothly your process goes, it depends on your equipment lender, but the basic thing every lender will look at is your credit score, financial health of your business, bank statements, and tax returns.
Even after submitting all the required documents, many business owners’ financing applications are rejected. There is not one reason why this happens, but here are few tips which can help you in making your application better and improve the chances of you getting your equipment financing application approved.
- Have a Substantial Business Plan
Whether a traditional or a non-traditional lender, all of them will look at your business plan. It will allow them to analyze where your business will be standing in the near future. It will also ascertain if you will have enough cash flow to be able to pay back the loan in time. To assure the lender you need to show a substantial business plan, one that describes your services or product, and the goals of your business. A business plan does not have to be based on several pages, you can summarize the entire thing in one paragraph and attach it with your loan application. You can also write about your target market and how your service or product fulfils the need of the market. For securing your equipment financing, you need to have a well-structured business plan in place.
- Have a Good Credit Score
The most important factor for the approval of a loan application is your credit score. If you have got some defaulted loan payments or late credit card payments, then all of this will negatively affect your financing application. What a lender requires is an excellent credit score to approve the financing. You should do your research before applying for equipment financing. Look up your credit score and see if it meets the requirements of a good score. It is even better that instead of just showing your business credit history, you also attach your personal credit history with the application. Start working on your credit score from day one, make sure to pay all your business and personal bills on time, and avoid any loan default. Excellent credit is an essential condition of new business equipment financing requirements.
- Have an Updated Personal Resume
When the word resume comes, what most people believe is that it is only required when applying for a job. But, attaching your personal resume with your equipment financing application is always a great idea. This is because when a lender looks at your application and finds your personal resume attached, they get an idea about your character traits and learn about your professional experiences. This helps them in analyzing whether you are responsible enough to pay back your loan in time.
- Have Cash Flow Statements Attached
Before you apply for any kind of loan, you have to make sure that all your personal and business financial statements are in order. Your cash flow statements play an important role when applying for equipment financing. Most lenders want to see the flow of your money, and if you are able to show them how your money is coming in and going out, the chances of your application getting approved are increased a great deal. Have an accountant at work who makes sure to keep all your financial records in an orderly fashion.