Equipment Financing Loan - Best Business Loan Options

Equipment Financing - The Best Business Loan Options

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What is Equipment Financing?

Equipment financing is a type of small-business loan or can be equipment lease, which gives you an option to purchase the equipment at the end of the lease. The loan amount in which a business will qualify for depends on the value of the equipment being purchased. The equipment also serves as collateral for the loan, so the lender can seize the equipment in the event of a default.  Traditional banks are typically some of the best equipment financing companies, because they offer the most favorable interest rates and terms.  However, only premier borrowers with a good personal credit score, business credit, Paydex score, and at least 2 years’ time in business will qualify with a traditional bank.  The Paydex score compares your trade line payment history with the payment terms you agreed upon with your vendors and suppliers.  But if your business does not meet these qualifications, or you have bad credit, don’t get discouraged since there are many equipment financing lenders who will approve you.

What type of equipment can you finance?

Equipment financing helps you finance up to 100% of the new or used equipment that you need for your business. Applying for an equipment loan is typically a fast and easy way to finance the purchase of all types of equipment.  This includes computers, heavy-duty vehicles, machinery, restaurant equipment, yellow iron, farming equipment or whatever other type of equipment that your business needs. Online small-business lenders like Upwise Capital are another equipment financing option, especially if you need to purchase equipment quickly or if your personal and business finances are in poor condition.  Some lenders offer semi-truck financing, manufacturing equipment financing, business auto loans, start-up equipment financing solutions, leases with buyout options at FMV (fair market value), sale leasebacks and equipment lease line of credits. When your business needs equipment upgrades or technology to increase capacity or looking for a way to better serve your customers; Upwise offers access to fast solutions with quick payment options. 

Equipment Finance Options and Structure

Get the payment choices you are looking for with our flexible financing options:

$1 Buyout: Available as a lease or an Equipment Financing Agreement (EFA).

Fair Market Value: Get a lower lease payment. At the end of the term, purchase the equipment or return it.

Equipment Lease Line or Sale Leaseback Options: Get a lower lease payment or deferred payments. At the end of the term, purchase the equipment, renew the lease, or return it.

Net Terms: Buy now and pay later with financing over 30, 60, or 90 days.

Payment Options: Typically, monthly payments and a wide variety of deferred payment options and interest only schedules available.

Leverage Equity in Your Owned Equipment

(Sale Leaseback / Equipment Secured Loans)

With a secured loan against your equipment, you are able to take advantage of the equity in your existing equipment or use newly purchased equipment as collateral.  This helps to keep your payments low and leverages the cash value in your equipment to help the business grow.

Equipment Financing Interest Rates

Equipment financing loan interest rates are typically between 4% and 30%, depending on your credit score, time in business, Paydex score, amount of open trade lines, business credit history, and industry type. Established businesses with excellent financials could secure a rate below 7.99% with a small 10% or less down payment that is required on the equipment. While startups and business owners with bad credit (an Experian FICO score less than 550) or poor financials will likely yield a higher interest rate and will be required to come up with a larger down payment. Start-ups typically are 50-70% LTV (loan to value), which is determined by the borrower, equipment type, and equipment location.  Equipment leasing terms can range from one year to eight years or the expected life of the equipment (typical approved terms are three years to five years).  Equipment financing is a great option for all small businesses looking to expand their business. A variety of things can be considered equipment for a small business, so please make sure to ask your Upwise equipment specialist what items are considered equipment by our underwriting team.

Who Qualifies for Equipment Financing?

As it turns out, most businesses can qualify for equipment financing loans, even startup businesses. Equipment financing approvals are based on personal and business credit scores, industry type, positive trade history, existing trade lines, debt coverage service ratio, and the equipment quotes provided by the business owner.

How much you qualify for and the interest rate that you pay is determined by the value of that equipment, your business’s financial history, and your credit scores.  

Equipment financing or equipment leasing can be a great option if your credit rating is less than perfect, too, since the equipment acts as collateral. You can also leverage your existing owned equipment to get a loan using your equipment as the collateral.  

In fact, our underwriting team at Upwise Capital is just as concerned with what is securing the loan, as we are with your borrowing history. The type of equipment that you wish to purchase or lease is an important aspect in the approval process. 

So, if you are planning on investing in a high-value (and a value-retaining) piece of equipment, then we might be willing to work with you, even if your credit profile and finances are not pristine.  

Our equipment financing team will assist you in finding the right equipment and make sure your approval is custom tailored to fit your business needs.

Equipment Financing Pros VS Cons

The main benefit of financing large equipment purchases is so that you do not have to come out of your own pocket for a large business expense, freeing up business cashflow! But there are other things to consider.  The length of time that the loan covers, the loan to value on the equipment purchase, and whether or not you will need a down payment should also be considered.

PROS

  • An equipment loan is usually the financing option with the lowest interest rate and most favorable terms.
  • UCC on the equipment, some lenders will not require a personal guarantee.
  • At the end of the lease or loan term, you will own the equipment outright.
  • Your business can leverage existing unencumbered equipment.
  • New equipment is easier to finance and will yield a higher Loan to Value.
  • Sale leasebacks involve selling equipment to a lender in return for quick cash and then leasing that equipment back from the lender over a long term.
  • The interest paid is a tax-deductible business expense and you can take the depreciation tax benefit as the equipment depreciates over time.
  • Fast approvals, quick funding, sometimes deferred payments, and monthly payments.

CONS

  • Used and outdated equipment is hard to finance and will require a higher down payment.
  • An equipment loan may require a high initial down payment.
  • In a lease, you do not own the equipment until the end of the term and some leases require a buyout option.
  • Numerous Types of Leases (True, EFA, FMV, $1 buyout, sale leaseback, equipment lease line, etc.) for all businesses.
  • Cost can be expensive contingent on multiple credit factors.

An Example of the Pricing on Equipment Financing

Let us just say that you have a piece of construction equipment you would like to purchase, and it costs $10,000.

Upwise offers to front you the cash in order to purchase that equipment, but they will charge you a 12% simple interest fee over a three-year (or 36-month) term.

With a 12% APR, your business equipment loans will make it so that your $10,000 piece of equipment will actually cost you $11,957.15, with a monthly payment of $332.14 over the next three years.  

As a business owner, it makes more sense to pay a $332.14 monthly expense for the equipment rather than having to go in your own pockets for the $10,000 upfront.  

Some Questions to Ask Yourself About the Cost

At this point, you may have come to realize that you need to decide whether a business equipment loan or equipment lease is right for you, then you will have to take a look at your business’s finances and ask yourself whether an equipment financing loan makes sense for your business plans.  

Can you actually save some money by shelling out $10,000 upfront for the equipment and avoid interest payments, or will that huge expense hurt your businesses cash flow too much?

And if you cannot afford it now, should you choose to wait until you are able to save up enough money and buy the equipment later?  

This could mean lost profits because you could have using that equipment during all of that time by simply financing it with a business equipment loan! You must weigh your opportunity costs.  

Through indecision, opportunity is often lost. Fundamentally, you need to figure out whether the opportunity cost of waiting and saving outweighs the interest payments you would make to have that equipment right now with an equipment financing loan from Upwise.

How to Apply

Equipment can be considered one of the largest purchases a business owner makes in the life cycle of their business. If you plan your business finances well, the right piece of equipment should bring in a lot more revenue for your business and be worth the interest for the equipment loan. 

At Upwise we offer equipment financing program with terms that range between one to eight years.  Most top equipment financing lenders only offer up a maximum of five years.

Our equipment financing team at Upwise Capital is here to assist you with every step of the way to secure whatever equipment is needed to help your business grow. If you have any questions regarding how equipment financing works, we welcome you to call our team at 77-55-UPWISE or email funding@upwisecapital.com.  You can also apply online for equipment financing, so you can get back to work and running your business.

Get Started today, Applying won't impact your credit score

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