Financing equipment is a big deal. Unlike financing the actual business or a building, equipment wears out and depreciates. You do not want to be stuck with a high interest rate loan and have the equipment stop working. Get a great interest rate and awesome terms to make equipment financing make sense. This is not easy. Here is what you need to know.
The Age of Your Business Counts
If your business is less than 2 years old, lenders are going to consider you a startup. This means you are going to be seeking equipment financing for start up business, which carries with it a higher interest rate and less favorable terms. This is a risk mitigation tactic on the lender’s part, as a young business has not yet established itself. Many new businesses fail in the first two years.
Credit Makes a Difference
Despite the age of the business, you can score better rates and terms if your business has a favorable credit rating. A poor credit rating will, of course, result in less favorable terms and rates. Keeping credit in good standing is much easier than repairing it, but repairing credit is not out of the question. It simply takes time and effort.
Collateral Requirements are Variable
Collateral requirements when it comes to equipment financing for new business are highly variable. Requirements vary greatly from lender to lender and business to business. One business with a good credit score may need 100% collateral for brand new equipment and a business with a fair credit score may need 25% collateral for equipment that is 10 years old. This high variability can make it difficult to know what t7140687o expect.
Equipment Type Makes a Difference
It is easier to convince a lender of the need for a well-known type of equipment rather than a new experimental piece. Still, the degree of difference that the type of equipment makes in obtaining equipment financing for startup business is also variable.
Whenever you decide to pursue equipment financing for new business, Biz2Credit is on your side. Our extensive network of lenders offers various types of financing, including financing for equipment. Visit Biz2Credit.com today to get started.