It wouldn’t be wrong to say that any business, irrespective of size and type, needs equipment that has to be purchased, maintained or replaced regularly. For example, if you are running an IT company, you need computers and servers. If you are in the textile industry, you need huge machinery. If you are a dentist, you need high-tech X-ray machines.
The pain point doesn’t just end with buying equipment either. You need cash for the purchase, and then for a variety of potential issues like instrument breakdown, parts replacement, can have a severe impact on the hard-earned money you have on-hand to support business operations.
The good news is you don’t need to disrupt your cash flow. There’s another solution that ensures that you get the cash you need within days and prevents a cash flow problem – an equipment finance Australia loan. The cash amount that you get will help you in buying, maintaining, repairing or updating your equipment.
However, as with any type of loan, it’s advisable to go through the ins and outs of equipment financing because the terms and the process may vary depending on the business type.
The first step is to understand what an equipment finance loan is.
What is an Equipment Finance Loan?
An equipment loan is a cash amount a business gets from a bank or other lenders to purchase, replace or upgrade equipment used in the business process. The equipment can be anything from ovens, chairs, linens and medical machinery to printers, computers, vehicles, furniture and more. If this equipment is procured quickly, it ensures that business processes run smoothly with maximum efficiency. Additionally, the equipment loan also helps in meeting the cash requirements when the equipment gets old and worn out.
The key to getting the right equipment loan is to identify your business needs. Do not make the rookie mistake of over-estimating your needs. Instead, think about the types of equipment will really help you to make money. The finance you get from the lenders will then help you in achieving your dream.
The second step is to analyze how to finance business equipment.
How to Finance Business Equipment
Once you have figured out why you need that particular piece of equipment, start researching the prices. Compare prices from multiple vendors and scrutinize them to find the best deal. Once you’ve done this, you can look for loan options.
You can reach out to a traditional bank, a loan broker or a financial investor and ask them for a loan. You will need to make a business plan, which shows your potential to repay the debt in the loan period.
Your creditworthiness will be judged based on cash inflow, credit rating, other loans you have and more. If you are approaching an alternative lender such as UnlockB2B, they will assist you in finding a potential lender, help you determine how much you can apply for and what the terms and conditions for repayments should be. UnlockB2B also gives you an option of buy now pay later in order to meet your financial obligations quickly.
The third step is to understand the typical loan terms.
Understanding Typical Loan Terms
Generally, SMEs taking equipment loans put down a 5% deposit. Depending on the loan amount, UnlockB2B gives you a window of 60, 70, or 90 days to repay it along with interest. Some other things a lender may require include:
- A minimum credit score of 550 to 640;
- Minimum years in business from 6 months to 2 years;
- Your annual revenues of the past two years;
- Your business age.
Many alternative lenders only allow you to access a loan if you secure it with an asset. This process is known as a blanket lien, where the property you give as security for the loan amount is owned by the lender until the end of the loan term. This lien means that if you fail to pay back the loan amount as agreed, the lender has the authority to claim the asset.
In equipment finance, your equipment will be put on a lien, and if you fail to meet the terms, the lender can claim that equipment back for resale considering it your debt repayment.
The fourth step is to consider the equipment depreciation.
Considering Equipment Depreciation
The equipment depreciates over time. When it comes to resale value, you won’t be able to sell equipment for the same price you bought it for a year earlier.
But the good news is that you are allowed to include the depreciation in your overall tax bill. Say, for example, you have purchased equipment costing $25,000, but after a year that piece of equipment is worth only $10,000. You can show the difference of $15,000 in your tax bill and thus pay less tax.
If you think that the game is over once you are rejected by the traditional banks, then please rethink it. You still have the alternative lenders options like UnlockB2B.
UnlockB2B wants borrowers to keep talking about their business expansion, goals and achievements and stop worrying about financial help. The expert team at UnlockB2B has significant years of experience in connecting you with the right lender at the right time.
So, remember these key takeaways:
- Understand how the equipment will benefit your business model.
- Know the documentation requirements.
- Figure out the additional expenses that you will incur once you purchase the equipment.
Equipment finance Australia can be your smart move to get funds as quickly as possible and get your business moving.