Equipment loans are a great way for businesses to finance new equipment purchases without using up all of their working capital. These loans can be used to purchase a wide variety of equipment, including machinery, vehicles, and computer systems. When it comes to choosing the best equipment loan options, there are a few things to consider. We spoke to the experts at Funding Circle, Charter Capital, and Callaway Bank — here’s what they had to say.
Equipment Loan Basics
A business owner will seek an equipment loan when they need to purchase an expensive piece of equipment. This is to save them from using their working capital so they can keep operations running smoothly.
Typically the max an equipment loan will be is $250,000. If a business owner needs to borrow more than that, they may seek an SBA or a general business loan.
What Can an Equipment Financing Loan Cover?
An equipment loan can cover the cost of a wide variety of equipment types including but not limited to:
- Heavy equipment such as semi-trucks, compactors, etc.
- Construction equipment such as bulldozers, cranes, etc.
- Healthcare equipment such as imaging machines
- Landscaping or agricultural equipment such as tractors, mowers, etc.
- Office furniture
- IT equipment such as servers
- Retail items such as mannequins, display shelves, etc.
- Industrial machinery or factory equipment such as bag-filling machines and granulators
Finding the Right Equipment Loan Option
Finding the right equipment loan for your needs is vital as a business owner. It doesn’t have to be complicated and time-consuming but there are some things you should know when searching for the best fit.
Secured vs. Unsecured Financing
First, it’s important to understand the different types of equipment loans available. There are two main types: secured and unsecured. Secured loans require collateral, such as the equipment being purchased, while unsecured loans do not. Secured loans typically have lower interest rates, because of the collateral, but unsecured loans are easier to qualify for. Many loan providers offer both types of equipment financing options.
Another important factor to consider is the loan term. Equipment loans can have terms ranging from a few months to several years. Shorter-term loans have higher monthly payments but can help businesses get the equipment they need sooner. Longer-term loans have lower monthly payments but may take longer to pay off. You will also need to consider the repayment terms, any penalties, or other special considerations.
Interest rates are also an important factor to consider when choosing an equipment loan. Interest rates can vary widely, so it’s important to shop around and compare offers from different lenders. Some lenders may also offer variable interest rates, which can change over time, so be sure to understand how the interest rate is determined and what the potential risks are. The interest rates you receive may be based on your time in business, annual revenue, and business or personal credit score. If you have bad credit, don’t fear. You can still get an equipment loan.
Lender Reputation/Customer Reviews
When looking for the best equipment loan options, it’s also important to consider the lender’s reputation and customer service. Look for equipment financing companies that have a good track record and are known for providing excellent customer service. This will help ensure that you have a positive experience throughout the loan process. Look for customer testimonials that share what their experience working with the equipment financing company was like to discern if they are trustworthy.
Consider Your Options
Overall, the best equipment loan options in 2023 will depend on your specific needs and circumstances. By understanding the different types of equipment loans available, the loan term, interest rates, and lender reputation, you can make an informed decision and choose the loan that is right for your business.
You can also work with a financial professional or adviser to help you decide what type of equipment loan is best for your business. Don’t be afraid to ask for help. This is an important decision and you want to make sure you are well-informed before signing any contracts.