From the Author

We often get this question with our new (and sometimes returning) vendor clients. In the following article, we break down the process for getting equipment financing and answer some common questions that come up about it.

Introduction

Equipment financing can vary from one transaction to another. In some cases, it may not be ideal to generalize the equipment financing process. The good news is that even if each transaction differs from one to the next, you can follow a process to get the best financing for you. A simplified process will help you understand a lot of the nuances and intricate details of equipment financing.

Simplified Step-By-Step Equipment Financing Process

v  Step 1 – The Need to Finance a Project

First, determine whether or not you can finance the project and establish if your purchase is eligible for equipment financing. Most purchases will qualify for financing, and you won’t have to worry about the limitations of financing options. In fact, there are endless financing options in software, hardware, tech, storage, and manufacturing.

v  Step 2 – Review of Quoted Project

Once you establish the basic parameters of the project with your financing partner, you can apply for equipment financing. Information you need to provide can differ from lender to lender, and from one financing source to the next. In any case, the finance company will review your quoted price of the project, and help you to find a financing term that fits your needs.

v  Step 3 –Evaluation of Financial Information

Once the lender meets with you to understand your needs, the financial institution will review and analyze your financial information. After assessing the financial data of the buying company, the financial institute drafts the proposal for financing.

v  Step 4 – Signing the Proposal after Approval

After the review and approval from the finance company, the buying company just needs to sign the proposal for financing. Once signed, the finance company will collect final documentation and send it to you for review.

v  Step 5 – Returned Documentation Leads to Funding

After the return of the final documentation, the finance company allocates funds for the required equipment and the fixed payment period starts for the buying company. Note that this funding happens once the equipment has been delivered to the purchasing company.

Approval of Equipment Financing

Remember that equipment financing comes with periodic payments for a fixed period. In terms of approval of equipment financing, each lender has its own criteria and application process. The essential factors include revenue, profitability, good credit, and the nature of business.

What about Equipment Financing Rates?

There is no one financing term and rate that you have to follow. Instead, terms and rates of the equipment financing boil down to buying the company’s qualification and existing market conditions. On average, you can expect a fixed interest rate between 0% and 12%. Similarly, payment terms can range from seven months to ten years, depending on the circumstances of the purchase.

Equipment Financing Timeframe

If you’re wondering how long you can finance equipment, the answer depends on more than one factor. For instance, key factors are the equipment value and its potential value for the foreseeable future. These are the main reasons that equipment financing periods can range from just one year to ten years straight. The “standard” agreement lengths are 12, 24, 36, and 60 months.

Sum Up

If you intend to invest in brand new equipment, you can look into various options to drive business growth. Ideally, you should make sure to compare various small business loans and stick to a simple application. Finding the most suitable equipment financing options allows businesses to move forward in the right direction.

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Blue Street Capital

Here at Blue Street Capital, we aim to provide you with the most up to date information on the financing industry so that you can become an educated buyer. Should you have any questions about this article, or any other information related to the equipment financing industry, please feel free to reach out to us using the contact form below. You may also give us a call at 714-316-1180.