Lendio is an online lender marketplace with lenders in their network offering equipment financing to allow small businesses to purchase, replace, and upgrade equipment quickly on a budget.
Whether you require simple office equipment or high-performance food preparation machinery, time and budgetary restrictions are critical to keeping your business up and running. If you’re operating on a tight budget, getting the equipment you need can be especially challenging.
Luckily, there are various equipment financing options available to help you procure the equipment you need while operating within your budget and time frame. Let’s also review how Lendio can help with securing equipment financing for your small business.
What is Equipment Financing?
Equipment financing is a loan used to obtain equipment related to your business, such as a bakery oven, a printer/copier, or a company van. With an equipment loan, you can procure the equipment you need immediately and then make periodic payments overtime to pay off the value of the equipment, plus interest. Once you have paid your loan in full, including the interest and the principal, you will own the equipment free and clear of any liens.
If your business does not have sufficient collateral, your lender may place a lien on the equipment you are purchasing as collateral. If you default on your loan terms, the equipment would then belong to the lender. Depending on the equipment’s value, the lending institution may also require collateral in the form of other business or personal assets. This reduces the risk for the lender while it increases your risk, as you have more to lose in the event of a default. It is therefore essential to thoroughly review your financing contract to ensure that the risk is worthwhile.
Although they are sometimes used interchangeably, equipment financing is not the same as equipment leasing. With equipment leasing, you make periodic payments to the equipment owner for an agreed period of time. Once the leasing term is complete, you either return the equipment to the owner or negotiate terms to continue the lease or purchase it. Although it can be easier to lease equipment, you do not necessarily gain any ownership rights. Also, consider that long-term leasing of equipment critical to your business can be much more expensive than financing your own.
Lendio can also help you with other business financing options, like:
- SBA Loans
- Short-term loans
- Business Lines of Credit
- Merchant Cash Advances
- Term Loans
- Commercial Mortgages
- Accounts Receivable Financing
- Start-up Business Loans
- Business Acquisition Loans
How Long Can You Finance Equipment?
Terms for equipment financing contracts vary widely depending on the type of loan, amount of the loan, and lender. Repayment periods may be as short as one year or as long as ten years. Typically, repayment terms range between 1-3 years, with interest rates anywhere from 8% to 30%, depending on current market rates, the amount you are borrowing, and your repayment term length.
How Do You Typically Get Equipment Financing?
The requirements for obtaining equipment financing for your small business will differ depending on the lender. In general, lenders will require the following:
- Credit Score: Your personal and business credit scores will be an important consideration when applying for business equipment financing. Be sure to check your credit score before applying to verify whether your score will meet the lender’s requirements. With a higher credit score, you are more likely to get a higher loan amount, better interest rates, and more flexible repayment terms.
- Business Plan and Projected Growth: Lenders will want to know how you plan to pay back your loan, including your business plan and projected growth. With this information, the lender can determine whether financing your business equipment is a risk they should take. You can improve your chances of getting an equipment finance loan by providing a detailed business plan with a summary of your business goals and a timeline for projected revenue growth.
- Number of Years in Business and Annual Revenue: In addition to projecting your future growth, your lender will also want to know that your business is stable. They can determine this based on the amount of time that your business has been open and your annual revenue. Some lenders will only offer equipment finance options for companies that have been open for two years and can show an annual revenue of at least $250,000. To verify this information, the lender may ask for a Statement of Revenue, Profit and Loss Statement, Cash Flow Statement, or Balance Sheet. They may also ask for your personal financial statements as the business owner.
Remember that underwriting standards and requirements differ depending on the type of equipment loan and the lender. Be sure to thoroughly review your application requirements before you submit, to save time and unnecessary stress.
What Can You Use Equipment Financing Funds?
Small businesses come in all shapes and sizes, so it is no surprise that equipment financing can be used for an extensive array of equipment. For example, if you are a construction company, you can request financing for construction equipment, tools, office computers, company vehicles, lighting fixtures, and office furniture.
In essence, equipment financing is there to help you cover the costs of just about any equipment you need for your small business.
How to Get Equipment Financing with Lendio
There are many ways to finance your business equipment, including equipment finance loans through more traditional national banks and credit unions or even non-traditional specialized providers. With so many options available, it can be challenging to find the right equipment financing for your business.
Fortunately, Lendio offers you a way to apply to several lenders with a single application, so you only have to compile and submit your credit and business information once. Once complete, Lendio submits your application to a network of more than 75 lending institutions. You can then compare offers and choose the perfect loan for your needs.
To obtain equipment financing in general, you will need to provide documentation showing how long your business has been open and your annual revenue. Your business will generally need to have been open for 12 months or more and have an annual revenue of at least $50,000. Check your credit score before applying, as most lenders will require a score of 650 or higher. If your score is lower, you still may qualify if you can verify your business’ stability with proof of consistent revenue and cash flow for 3-6 months before your application.
Whether or not you meet the above requirements, remember that each lender and loan type has different qualifications, so don’t be discouraged. The application process with Lendio is simple enough to make it worth the time. Even if they require additional paperwork, you can complete and submit your application online within about 15 minutes. After that, it’s just a matter of comparing the offers and selecting the equipment financing your business needs.
If you are a small business owner looking for equipment financing, you can’t go wrong with Lendio. The online lending marketplace offers a user-friendly, streamlined process that reflects their dedication to facilitating easy financing for small business owners across the U.S.