Whatever your line of business, you will need to upgrade your equipment from time to time. Continuing to work with defective or outmoded equipment simply isn’t an option, and could mean your business goes to the wall. So how should you go about getting your equipment finance?
Have a look at leasing
Leasing equipment tends to be cheaper than purchasing outright via equipment loans and does not usually require a down payment. This makes it ideal if your business has limited capital on hand. With a lease, you can typically finance the full cost of the equipment plus up to a quarter of “soft costs”, such as taxes and delivery charges.
Leasing also makes it much easier to upgrade when technology moves on again, as you can return the item when the lease expires or purchase it for a small amount once you have paid off the loan. What’s more, the leasing company usually handles maintenance and will probably offer a collection and delivery service, which also helps to make life easier and cheaper.
Consider an equipment loan
If you prefer to buy your equipment rather than lease, you should be able to finance around 80% of the cost, with a down payment of just 20% and with the business loan secured on the equipment itself. Choose to acquire equipment in this way and ownership passes to you from day one.
However, you will generally need excellent credit to take out an equipment loan. If you have defaulted on loans or paid credit card bills late, this will count against you when applying for finance. In today’s economic climate, most banks won’t advance finance to small businesses that appear risky. You can protect yourself against a refusal by researching your credit score in advance and then evaluating whether it is worth your time to apply.
Give yourself the best chance of getting equipment finance
When meeting potential lenders, you should be prepared to discuss your personal credit history as well as that of your business. If you have an excellent personal record, that’s a huge asset. If you don’t, you should repair your credit score by paying off any overdue debts and resolving any discrepancies or misrepresentations immediately.
Some lenders will also want to see your business plan. This should offer a clear roadmap of the future, complete with realistic costings. In particular, your business plan should identify your target market, set out your goals and demonstrate how you will get there. It should be backed by an excellent CV, so the lender can see the calibre of the person behind the business and feel reassured that you are on the road to success.
Finally, you should be able to demonstrate a reliable cash flow, meaning that the revenue you have coming in exceeds the expenditure you have going out. This will reassure the lender that you are in a good position to make repayments and meet interest charges. However, many businesses have mediocre credit histories and marginal cash flows – in which case an alternative lender such as Cashsolv can be the answer.
When your bank won’t lend, Cashsolv probably will
Alternative lenders like Cashsolv have quite different criteria for granting loans, meaning that your credit history, your business plan and your cash flow are of little or no importance.
With asset-based finance, you can borrow against the value of your existing premises, plant or machinery to purchase new equipment. Since this is secured lending, interest rates are generally competitive, and we use a panel of lenders to get you the very best deal.
Your business could also benefit from invoice finance, which can free up your cash flow and assist you with investment for the future. Aimed purely at business-to-business companies, these services allow you to borrow up to 85% of the value of your invoices as soon as soon you issue them. With invoice discounting, you retain control of your own debtor ledger, whereas with factoring our credit control professionals chase your debts and deal with your customers.
Each option has its own advantages and disadvantages. Many companies prefer their clients not to deal with a third party regarding outstanding invoices, so opt for invoice discounting. Others prefer to outsource credit control and take the view that our diplomatic yet determined specialists will be able to secure faster payment, thus reducing the interest they pay. Either way, we could revolutionise your cash flow and make your life a great deal easier.