Use Equipment Finance for Big Purchases
Regardless of the industry that a business competes in, growing and staying competitive will almost always require having new equipment used to help produce or sell their products. While equipment is very important, it can be quite expensive. Luckily, there are many different equipment finance options available from banks and other programs that could help you to get the equipment that you need.
One option for equipment finance would be to take out a loan from a bank. Banks offer a wide range of loan options to businesses of all sizes. One option would be to take out a line of credit and use the proceeds to purchase equipment. Banks will almost always provide lines of credit to successful businesses. These lines of credit are typically secured by accounts receivables or some other collateral, and the proceeds could be used to buy any form of equipment necessary. You may also be able to receive an equipment term loan in which they will give you the money necessary to buy the equipment and you can then repay the loan over time.
Another option for equipment finance would be to look into government loan programs. The government has a wide range of loan programs available to small businesses that are looking to expand. These loan programs do include loans capital improvements, which can include equipment purchases. These loans are often ideal for a business because the interest rates are very low and could have a much longer repayment term, which would then reduce the overall payment.
The third option would be to seek an equity investor. Equity investors are individuals or entities that will provide you with the money necessary to purchase the equipment and usually provide many options regarding equipment finance. However, in return, they will retain a small percentage ownership of your company and will receive dividends going forward.
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The Need for Equipment Finance Methods
The businesses that operate in many industries rely heavily on specialty machinery and equipment. This equipment is often quite expensive. The more successful these small businesses are, the more they have to acquire new equipment. For many of the companies, the question of equipment finance comes down to getting financing at a bank or leasing the equipment.
Debt and Ownership of Equipment Finance
Assuming a small company can find a bank to lend enough for the equipment, the company has to consider several factors. Buying expensive equipment can put a strain on the cash flow of a small business. There is usually a large down payment to be made. The payments on a loan will represent a monthly cash amount that includes paying for the equipment and making interest payments. If the company owns the equipment through a loan, it immediately takes depreciation on the value of the purchased machinery. Additionally, the debt to the bank is shown on the company’s balance sheet. This may keep the company from qualifying for loans it needs for other purposes. As a final issue, a small business will normally keep purchased equipment for a long period of time. That means that maintenance can become a significant cost.
Leasing of Equipment
Many small businesses find leasing to be a preferred method of acquiring the equipment they need. There are specialty leasing companies, both private and owned by manufacturers of equipment. These leasing companies provide financing when a loan is not available. Even if a loan is possible, the choice of leasing may be preferable. Companies can avoid large down payments. Their monthly payments are often lower, and lease payments can usually be totally written off. There are other advantages depending on the specific equipment and situation.
Many small businesses choose leasing for their equipment finance method.
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Equipment Finance for Specialty Equipment
The Role of Specialized Equipment
Many businesses exist today solely because the specialized equipment they use is so complex and expensive. This specialty equipment performs many vital functions. There are a wide range of applications, including tree trimmers, screen printing, construction lifts and industrial cranes. The list is almost endless. The companies that create businesses around this equipment bear the costs of acquisition, training on and maintenance of the equipment. Their customers need the use of the machines once or periodically. That occasional use does not justify the purchase or ownership of such equipment, which is why equipment finance is important.
Equipment Finance for Small Businesses
The very advantage of the machinery that creates the business is also one of the disadvantages. Small businesses sometimes struggle with finding adequate equipment finance options to purchase enough equipment to grow their businesses. Oftentimes, banks are hesitant to lend on specialized machinery, unless a company is well-established with a long operating history. Some companies get started on the personal credit of the owners. Even if they are successful, they may face hurdles in finding sources to fund additional equipment. For some businesses, the SBA has loan guarantees that might make a difference.
The Equipment Lease as an Option
Many businesses find equipment leasing to be a viable option instead of equipment financing. Manufacturers of very expensive equipment will often fund a private leasing company to help sell their products. Other private leasing companies specialize in certain industries, such as industrial cranes and lifts. These companies buy and sell used and leased equipment and take a lot of risk out of offering leases to small companies. There are also certain tax advantages to equipment leasing. These tax advantages can attract investment from investors to fund leasing companies.
Many small companies are able to grow their business only because they have been able to establish a relationship with a leasing company. When the banks say no, a leasing company might be a good source for a yes.
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When to Take Out a Small Business Loan
One of the most significant challenges facing small businesses today is not knowing how to acquire a small business loan when it is needed, and when the right time is to take out a loan. Fortunately, there are many banks today that are looking to provide a variety of loans to small companies, and there are several situations when taking out a loan is the best decision that a small business owner could make.
One situation when taking out a loan from a bank would be if the business is looking to expand and needs more space or equipment to do so. While most people would think that it would be a better idea to wait until the expansion of equipment could be purchased with cash, using financing from a bank is often the best option. This will allow the Small Business Loan to expand while receiving a relatively low interest rate on the loan. Any additional cash could be used to reinvest in other business needs.
Another time that it would be a good idea to take out a loan would be when a business needs a line of credit. Many businesses are able to attract customers by offering competitive repayment terms that range from giving customers up to 90 days to make a payment. While this may increase sales, it can be a drain on cash because a customer may not make a payment for a long time after a product or service has been sold. With a line of credit, a business will be able to borrow money whenever they need to. Then, when they receive money from their customers, they will be able to pay down the loan balance. Banks typically will provide funds to a borrower equal to seventy or eighty percent of the business's accounts receivable balance.
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Considering a Small Business Loan?
In these tough economic times, many families, as well as businesses are struggling to make ends meet. Owning your own business may seem like an unattainable goal, but it is still a possibility, even in this economic climate. Opening your own business is rewarding, and gives you the flexibility to make your own schedule and be your own boss. With a little hard work and a smart business plan, owning a small business is a plausible option for many.
Whether you are a current or aspiring business owner, you may want to consider a small business loan. Of course, terms vary, but in general, these loans can be used for a variety of purposes, including the following ones: building a brand new business, expanding a current one, or buying supplies. Such loans are available from a variety of sources. The federal government, namely the Small Business Administration, has several programs that offer loans. Additionally, many states and communities have programs that supplement the funds offered at the federal level. Another option is your local bank. You may choose to rely on one of these sources, two or more of them combined, or find another fund altogether.
Regardless of which source you choose, there are certain requirements you will need to meet before you are approved. First of all, you are going to need a solid business plan. No one is going to lend you money if you do not have a clear breakdown of how the money you acquire through the loan will be used. A good credit score is another plus. If you have a poor credit rating, you may need to consider finding a cosigner to increase your chances of getting your loan approved. Whether you are building a business from scratch or simply want to expand one you already have, a small business loan can provide the capital you need.
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When to Consider a Small Business Loan
When should a business owner consider a small business loan? There are many circumstances under which a business loan may be in order. Sometimes there is a need to create more capital as a long-term solution or even to start up an endeavor. Sometimes a business owner may want to expand his or her business. There may also be a need to get rid of some debt in order to avoid suffering any losses when profits are not covering the losses.
One of the primary reasons for seeking a loan is when the owner wants to expand the business. Sometimes loans are easier to obtain in this situation because it is usually a successful business that needs to expand. Facilities may no longer be able to accommodate or the owner may want to open up the business in a new location. In either case, the owner needs to be able to show that the business will continue to be successful.
A small business loan owner may also seek a loan when more capital is needed for a small endeavor that may not be well-established. In this case, the loan may not be as easy to obtain as the owner may not have proven a stable or loyal client or customer base. However, if able to obtain the loan, then the endeavor may be able to continue operations with extra resources.
Another reason that one may seek a small business loan is to pay off debts such as payments for materials and resources needed to conduct business. In this case, the owner may be in danger of having his or her line of credit destroyed. However, this type of loan may be difficult because this can be a sign of an unsuccessful business endeavor but, if granted can buy the business some time.
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Merchant Store Loan Alternative : Alternatives to Traditional Business Loans
If you have applied for and been turned down for a traditional bank small business loan, you are not alone. There was a time when getting a small business loan was much easier than it is now. Today, it is next to impossible to get bank loans without a near perfect credit history.
What's the Alternative?
The merchant store loan alternative offers small businesses a way to get cash for capital now. The interest rate is much higher than the bank, but the terms to pay back is much more flexible than a bank.
How Does a merchant cash advance loan work?
Rather than looking strictly at your credit and FICO score like a bank does, a cash advance looks at how much the business makes. Typically, you need to have at least several past months of having a minimum of $5000 in credit card transactions.
Repayment of a Merchant Cash Advance
A bank loan requires you to pay a specific amount each month, but this is not how a cash advance loan works. Instead, the loan is paid back through a percentage of each future debit and credit card payment your customers make. Some months you'll pay less and some more depending on the sale volume for the month with Merchant Store Loan Alternative.
The Flexibility is Attractive
While the merchant cash loan has a higher interest rate, it is the flexibility of the repayment that makes it easier for most to manage. In addition, loan funds are typically made available to merchants much faster than a bank loan would be.
The merchant advance is becoming very popular as more businesses seek ways of getting capital to continue to grow as a business. The banks may never get back to lending small business loans to very many businesses, but there are alternatives available that has helped many companies.
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What is the Best Merchant Store Loan Alternative?
Every small business owner knows how difficult it is to obtain financing in the current economic climate. If you are in this position, you may have tried several banks without success, and be uncertain how to proceed with merchant store loan alternative. However, there are other potential sources of funding you can explore, depending on the type of business you run.
If your business is mainly concerned with supplying other businesses, who may not always pay on time, thus impeding your cash flow, one possible source of funding is asset-based lending, or factoring. The factoring company takes on your receivables or invoices, paying you a percentage up front and taking responsibility for collecting the payments. Another possibility is to approach the specialized companies which offer non-bank loans to small businesses. The repayments are not fixed amounts, but are based on a percentage of your monthly revenue, and in addition the company takes a small stake in your business.
Probably the best known merchant store loan alternative is the merchant cash advance. You can apply for one of these if you have a business merchant account, and the funds are provided as advances on future credit card sales. No collateral is required, and it does not show up on your credit report.
These advances can work out very expensive, so should not be used without careful thought. However, many businesses find the cost is outweighed by the benefits, the greatest one being that you only make repayments when you have money coming in. If you have a lean month, no payment is taken. In addition, if you go out of business before repaying the advance, the lender stands the loss.
During the current recession, the merchant cash advance has become the most popular avenue of funding for small businesses. The important thing is to weigh up the cost against the alternatives, and use the advances only for short-term funding. If used correctly, they can be an excellent way of overcoming a cash flow crisis, and keeping your business going until you can qualify for cheaper financing.
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Alternative to Normal Small Business Loans
If you are a new business and need more capital, you may have a harsh reality when the bank denies your loan even with semi-good credit. Banks and credit unions have made getting business loans harder than ever with more criteria needed in order to be approved.
This has left new business owners unable to continue with their small business loan dreams due to lack of cash. However, a merchant store loan alternative may be just what is needed to get the capital to continue business owner's dream.
A merchant advance is a loan that is easier to qualify for since it is not as strict about credit as it is how much the business currently makes and what the projected sales are. The loan is paid through future sales and whenever a credit card or debit card is run, the lender gets a percentage to help pay the loan off.
The interest is higher than a traditional small business loan, but since the loan payments are based on sales, it can be a better option, in many cases. Often the only thing standing in the way of a bank loan is a credit score, but with a merchant advance loan, this problem is removed.
While the interest may be higher on an alternative loan, for many small businesses, it is the best way to obtain the capital needed. A bank loan, while having less overall interest on the loan, is not flexible in the repayment. Flexibility is what small businesses need and why this type of loan has gained in popularity.
If you are just getting started in your business and have been denied a small business loan, do not feel bad, the majority are not approved. The almost impossibility of obtaining a traditional small business loan has left the door wide open for alternative solutions such as a merchant cash advance loan.
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The Advantages of a Merchant Cash Advance
Often, growing companies need a cash injection to fund their expansion, or to have some extra capital to work with. Regrettably, for many companies, it is impossible to access the cash for all their business purposes. Normal funding methods involve a great deal of admin before your request will even be looked at. Assessing your application can take even longer. Ultimately, there is a good chance that your request for financial assistance will be turned down for unclear, bureaucratic reasons.
Fortunately, a good substitute method exists for acquiring business funds. Merchant cash advance allows you to get hold of anything from $2500-$250000, based on your company's profile. If your business receives more than $5000 worth of credit card payments from clients on a monthly basis, then you might be eligible to obtain 100-200% of the monthly value of your credit card transactions as an unsecured business loan. Normally, a small percentage (of approximately 10-25%) of your company's credit card takings each day is used to pay back the merchant cash advance.
Only basic documentation is required to submit your funding application. There is no need to be worried if you have a bad credit rating that restricts you from getting a loan from other sources to fund your business goals. You might be able to receive up to $250000 in as quickly as two days, and be allowed to access that cash in less than three days.
This type of unsecured business loan has meant that numerous companies, both big and small, have been able to get the funds they need to enhance and grow their businesses. Neither application charges nor personal collateral are a pre requisite to get loan approval. Unlike repaying a standard loan, you are not required to make any fixed repayments that place extra pressure on you.
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