Both product-based and service-based businesses require some equipment to run smoothly. However, equipment can be costly, and it can be quite difficult for small businesses to pay for them. That’s where equipment financing comes in. Financing your equipment can really help you avoid a dent in your cash flow and bottom line.
What Is Equipment Financing?
Equipment Financing is specifically for business equipment. Your company pays for what you borrow, and once the debt is repaid, you own the equipment. However, in such cases, the equipment is usually kept as collateral, so if you default the loan, your lender keeps the equipment.
Equipment Financing Options
There are quite a few equipment financing options available to small businesses. Here are a few:
Equipment Loans: Equipment loans are loans you can avail specifically to purchase equipment, with the option to get 100% financing. The equipment you’re purchasing will be considered as collateral and the repayment periods can extend up to 10 years. Both banks and NBFCs like Bajaj Finserv offer this type of loans. They also come with quick disbursal periods of just 24 hours, making them a good option for when you require the equipment quickly.
Term Loans: Term loans, as the name suggests, are loans availed for a specific repayment term. They can be secured or unsecured, based on how much you’re borrowing, and often have higher credit standards than equipment loans. Bajaj Finserv, for example, offers term loans with a flexi loan facility, which allows you to borrow the amount you need (from within the loan limit) as and when you need it.
Factors That Affect Your Equipment Financing
There are several factors that you need to consider before deciding the equipment machinery loan for you. Here are the top 5:
Your Credit Score: Your credit score tells the lender about your likelihood of defaulting on the loan. The higher your credit score, the better your chances of getting approved.
How Long You’ve Been In Business: If you’ve been in business for a long time, you’re likely to have availed a loan before and repaid it, improving your chances of getting approved.
Also Read: Grow Your Business With Bajaj Finserv Machinery Loan
Your Cash Flow And Revenue: Your cash flow and the revenue you generate, shows your ability to repay the loan. Therefore, you should always be honest about this while applying for a loan.
The Amount You Require: Based on the amount you require; your lender will be able to tell you which type of loan would better suit your requirements.
Your Repayment Plan: It is important to have a repayment plan in place before you apply for the loan. If you can show a good plan to repay the amount, your loan application is more likely to get approved.
Thus, equipment financing is easy to avail. Just be sure to research your vendor options and check your eligibility for each, before you apply online!