Best Sources For Equipment Financing For Startup

In starting any business, there are some funds required, to act as capital as your launch the business. However, other than the starting capital, it is necessary for business owners starting their companies to look into financing the equipment they will need to run the business smoothly. 

More often than not, it takes a significant financial muscle to pull out some of the expensive equipment purchases that are necessary for a company to run. If you are a business owner just starting up on a new venture or looking for a business for sale, here are some of the best sources for equipment financing for your business:

Equipment loans

Equipment financing can be overwhelming for start-ups, which is why getting a loan for them makes perfect sense. Equipment loans are when you get a lender to give you the equipment you want for your business on loan, and you get to pay them gradually. 

With this technique, you do not have to worry so much about the collateral because the equipment themselves act as collateral for the loan.

The beauty of getting an equipment loan is that you can get up to 100% financing. Depending on the agreement you make with the lenders, you may be needed to have a down payment to get you started. 

Also, depending on your loan limits, your repayment periods can stretch to as far as ten years, or be as little as a couple of months. Besides, processing equipment loans are relatively quick, most times taking two business days.

Term loans

Term loans are the quick access to funds that start-ups can bank on to purchase their equipment. Since the funds have quick access, they come with a repayment condition. As per the name, the term loans have to be repaid over a set period. 

Here, you can use the equipment you want to purchase as collateral. If you don’t want that, you can offer another business asset in place of it. This kind of funding works best for financing the purchase of one particular item. Due to the time limit of repaying this loan, you may need to be consistent with your revenue streams.

A small business line of credit

As a start-up, you are looking for funding options that are quick to process, but more importantly, very flexible. Ideally, a small business line of credit is when a bank avails a certain amount of money for you, upon which you can withdraw to secure your equipment and any other financial needs thereof. 

For the best credit limit, you may need to have a solid track record for the few months you have been in existence as a business.

It also helps to have an outstanding credit score, simply because when working with a bank, you must have a sure way of paying them back. 

The good thing with the repayment methods is that they could stretch up to five years, giving you adequate time to scoop back the sums of money from the profits of using your equipment. The best news is that you can access a small business line of credit quicker than most funding options.

Business credit card

The business credit card funds are great for small equipment purchases. Although business credit cards are known to have the lowest credit limits, for a start-up, they are a great option to consider. 

When launching your business, you do not have too many production costs and needs. This means that you can identify selected items that are fundamental in running your business and use a business credit card to get yourself started.

Take-home point

For a startup, success might be dependent on the ability to have the proper equipment. Therefore, understanding the financing options available is critical to its long-term sustainability. For that matter, we have listed four options available:

  • Equipment loans
  • Term loans
  • A small business line of credit
  • Business credit card

It is important to note that debt isn’t the best option for a startup, as it is essential to keep growing organically. 

However, equipment is critical to the long-term success of small businesses and startups; thus the above options should not be overlooked.

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Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which he brought to reach about a million business students, professionals, and entrepreneurs in 2019 alone | Gennaro is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate and become profitable | Gennaro is an International MBA with emphasis on Corporate Finance | Subscribe to the FourWeekMBA Newsletter | Or Get in touch with Gennaro here

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