How to Qualify for Equipment Financing

How to Qualify for Equipment Financing

Business finance has many options to help your business grow. For your business to run effectively with maximum gains, you must ensure that all requirements of your business setup are fulfilled. This involves a proper cash flow, smooth running of day to day operations, and updated machinery. Whether you need restaurant supplies, or specific medical equipment, you need fund the upgrade of your equipment. So how do you do it? Equipment loan is an example of such financing. This allows you to take a loan for buying or upgrading all the new machinery necessary for your business’s growth. You cannot finance your equipment from your personal savings or the business profit because along with buying new equipment, you also need to maintain it on a regular basis. This will cost you much more than just financing the equipment. That’s why applying for an equipment loan according to your requirements is more advisable.

In equipment loans, there is no need of outside collateral, as the equipment you buy against the borrowed money is the collateral. However, there are a few cases where you don’t have to pledge the equipment as security against your loan. Such loans are called collateral-free machinery loans. It is always a safer option to select collateral-free Machinery Loans over secured machinery loans, as the former has an easy process of documentation and you will not lose your equipment in case you are forced to default. However, there are a few points you must check and assure to qualify for the loan. Given below are the points which will guide you on how to qualify for equipment financing.

  • Have a clear objective:

Often, the loan application gets rejected because the borrower fails to explain the objective behind taking a loan. Lenders are very particular about the purpose of your loan. So, before you apply for loans, ensure that you have a concrete business plan and explain to your lender that you need an equipment loan so that your business can run more effectively.  

  • Have an updated statement:

Lenders check everything about you before they sanction your loan. It is important that you have an updated statement of your previous transactions—both personal and business. Your account statement, tax return statement, growth report, and invoice statements should be accurate and updated. Your profit statement and sales strategy must be included so that the lenders know about their repayment security.

  • Maintenance of the equipment:

Before you apply for an equipment loan, you must calculate the amount of business income required for the maintenance of the machinery. This must be done to ensure that your maintenance cost isn’t higher than the equipment cost.

  • Check your credit score:

You must have a good credit score to guarantee smooth processing of your loan application. Your credit card payments must be clear and payments should be done on time. Lenders tend to reject applications where they find a low credit score. So, be careful with your credit score and keep the credit report updated.

  • Check eligibility:

Firstly you have to check your eligibility for Equipment Loans. Read all the terms and conditions properly and ensure that your documents are filed properly.

  • Check for an online lender:

Instead of going for traditional lenders, see if you can find an online lender. Online lenders might offer better interest on machinery loans for small business than traditional bank loans.

Check all points thoroughly before you apply for your equipment loan. These factors must be planned properly to ensure that you qualify for the loan. Apply with Bajaj Finserv’s Business Loans to get more benefits on your machinery loan.  

Category Business

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