Industrial Equipment Financing Options | Nav

Small manufacturing companies, machine shops, and other small businesses rely on equipment such as milling machines, lathes, forklifts, and other expensive equipment to serve their customers and meet their business needs. Industrial equipment financing is a specialized way to lease or purchase the equipment they need. Read on to learn more about this type of equipment financing and equipment leasing.

What is industrial equipment financing?

Industrial equipment financing is a means of financing the purchase or rental of industrial equipment that a construction company, manufacturing company, transportation company or waste management company could use to do business. This can include equipment such as milling machines, lathes, presses, heavy construction equipment, or vehicles.

Often, equipment dealers offer leasing services or have recommended lenders to simplify and streamline the buying process. That being said, there are other options besides what the deal might offer to finance your industrial equipment.

How do you finance industrial equipment?

Funding for equipment is fairly straightforward and relatively easy for businesses that have a healthy business and can demonstrate the ability to make periodic payments. This also applies to an equipment rental contract. The key is to demonstrate that your business not only has the ability to make periodic payments, but that you have a proven track record of it.

Many industrial equipment financings depend heavily on your personal credit history. In other words, the quality of your offer (or even of an offer at all) could depend on the strength of your personal credit score. While a high personal credit score does not guarantee financing for your heavy equipment loan, it will give you a wider choice of offers, repayment terms, upfront costs, and interest rates than a borrower with bad credit will find it.

Fortunately, in addition to dealer financing, there are a number of financial solutions when purchasing this type of professional equipment:

  • An equipment finance company
  • Online lenders
  • The SBA
  • A general finance company
  • A traditional bank

Depending on the lender or financial institution you choose (and the types of equipment financed), set-up costs, a down payment, and whether or not you buy new or used equipment can be factors that will help make decisions about whether to buy or sell. credit approval.

Financing of used or new industrial equipment

There are many factors that go into deciding whether to buy new or used industrial equipment. While there is always an argument to be made in purchasing new equipment, depending on the nature of the equipment purchased, expected longevity, market value, and even expected maintenance costs, it may still have some value. sense of buying (and even of financing). used industrial equipment.

Since industrial equipment is inherently expensive, many businesses rely on financing to purchase the equipment they need. Fortunately, while some finance companies don’t offer industrial equipment loans on used equipment, there are some that do. In fact, some lenders even specialize in financing used equipment.

In some cases, the cost of financing could be higher if you buy used equipment, but if the equipment is less than 10 years old, the additional cost will be minimal. On the other hand, costs can increase a bit as the material ages. The better your credit profile, the better when buying used equipment.

Also, the older the equipment you are considering, the less likely you are to get a lease for that equipment, if you decide you don’t want to finance a purchase.

How long can you finance used equipment?

The expected longevity (of the life cycle) of the purchased equipment will play a role in the lending terms you can expect from a number of equipment finance solutions. Typical durations will be 2 to 7 years, with some equipment up to 10 years. You should expect that older equipment funded will have shorter loan terms.

Industrial equipment financing options

In addition to some of the other options available to you, TimePayment and LendSpark are both lenders that specialize in equipment finance.

TimePayment

FUNDING AMOUNT N / A

COST Rate of the factor 0.0219 – 0.0626, depending on your credit profile and the length of the lease.

REFUND CONDITIONS N / A

FUNDING SPEED In just a few minutes depending on the amount of financing and delivery of the equipment.

  • Advantages and disadvantages
  • Our recommendation

Benefits

Ability to finance a wide range of equipment for different business credit profiles. This includes start-ups and perfect credit is not necessary. The application process is straightforward and requests under $ 10,000 can be approved in seconds.

LendSpark

FUNDING AMOUNT Up to $ 2 million

COST 6% – 35% APR

REFUND CONDITIONS Monthly payments up to 60 months

FUNDING SPEED 12 weeks

  • Advantages and disadvantages
  • Our recommendation

Benefits

High financing amounts and potentially low interest rates. Can be used with a startup.

The inconvenients

Slower financing speeds than other equipment financing options.

What it takes to be eligible for industrial equipment financing

Since your financed industrial equipment will likely be fully secured (the equipment you buy will act as collateral), sometimes it is easier to qualify for this type of financing compared to a traditional small business loan. You should expect the lender or finance company to require:

  • At least one year in business
  • $ 50,000 (preferably more) in annual income
  • A personal credit score of 650 or better (but some lenders will accept a lower score if you can show cash flow for 3-6 months that would support the loan or lease.

Depending on the lender, you may also need to provide:

  • financial state
  • Cash flow reports
  • Bank statements
  • An up-to-date report
  • And your current business tax returns

Financing the industrial equipment you need can be a good strategy to free up cash flow that you can use in other areas of your business.

How to apply for industrial equipment financing

The process for applying for an industrial equipment loan will largely depend on which lender you choose. This can be a simple online application from an online lender, like Nav or another online finance company, or it can include a more complicated application and underwriting process with a traditional bank, a finance company or the SBA.

The company you choose can also make a difference in how quickly your loan or lease will be funded. Although equipment financing usually doesn’t take as long as a traditional small business loan, even if you choose to go with a more traditional lender.

Taking Nav

Financing or leasing equipment is a good option to acquire the equipment you need. It’s also a good way for many small businesses to leverage borrowed capital with strategic financing that allows business owners to access cash for other things that are more difficult to finance.

This article was originally written on May 20, 2021.

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