Business Loans Guide
A guide to applying for business equipment finance
For many businesses a variety of equipment and machinery is necessary to carry out everyday operations. Whether your business relies on vehicles, machinery or IT equipment, we have access to a variety of lenders which specialise in business equipment finance. This guide will take you through the various steps involved in searching and applying for competitive equipment finance.
The benefits of business equipment finance
In many situations purchasing new equipment is essential to ensure your business is able grow and make a profit. Whatever industry you operate in, equipment can be quite a costly investment which many businesses will struggle to pay for up front.
If like many other companies you are unable to afford new equipment, business equipment finance could provide the solution you need. Businesses of all sizes can benefit, from start-ups who do not yet have the working capital to larger companies who need to invest their cash in other areas. Equipment finance will provide you with affordable set repayments, which can make managing cashflow a much easier task.
There are some forms of business equipment finance which can improve tax efficiency, such as equipment leasing and sale and leaseback. Instead of purchasing an item which sits as an asset on your balance sheet, you will be paying out an affordable monthly expense. This flexibility in the business’ finances will enable you to take out other lines of credit alongside the lease arrangement.
The flexibility offered by some forms of equipment finance means that you can scale your equipment to meet changes in the demands of your business. Whether you need to quickly increase production with more machinery, or expand your logistical operation with more vehicles, leasing provides the means to quickly and easily grow your business.
What forms of business equipment finance are available?
There are a variety of business equipment finance options, with the most popular being; equipment leasing, hire purchase and plant equipment finance. In general, all equipment finance is provided to purchase an asset, your business then repays the loan with fixed payments and once the debt is cleared you own the asset. Many lenders will be able to cover 100% of the equipment cost, although depending on the circumstances you may be required to pay a 20% down payment.
An equipment leasing arrangement will ensure your business benefits from the latest equipment, without having to pay a lump sum to purchase anything. Equipment leasing is available as either operating leases or finance leases, which provide different lease lengths and commitments.
A hire purchase arrangement is similar to equipment leasing, as you will still make regular payments for the asset. However, instead of hiring the equipment you will be paying off a loan in instalments with the option of you owning the asset at the end of the agreement. As the equipment will be listed on your balance sheet, it can make sense to use a hire purchase arrangement for assets which are likely to maintain their value or be in use for a long period of time.
Plant equipment finance is designed for large items of machinery, tools, manufacturing equipment and construction machinery. Anything which falls into the wide bracket of being a heavy-duty item can be purchased with plant equipment finance.
How to compare business equipment finance
We work with a variety of lenders which provide business equipment finance, so there are many options to choose from. However, it is possible to find the ideal loan for your business by entering your details into our finance finder. Our tool will take into account a variety of factors to assess your financial situation, lease requirements and your budget.
Through our vast range of lenders, we can provide loans starting from a minimum of £1,000 up to a maximum of £20,000,000, with repayments of several years available for the larger finance amounts. By entering your requirements into our finance finder, we can provide you with a list of lenders who match your exact needs. Whether this is in the form of a commercial secured loan, hire purchase agreement, or a finance lease.
When comparing the finance options one of the most important factors is the interest rate, as this will influence the total cost of the arrangement. Although, you should factor in any fees and charges which are attached to the loan as a low-interest rate could end up costing more overall if there are a lot of unexpected charges.
The majority of business equipment finance repayment periods are set between 1 and 5 years, so take into consideration how much you can afford to pay each month when deciding which loan to choose. It can be useful to opt for a flexible repayment option, as the payments made can be dictated by how well your business is performing.
How to apply for business equipment finance
Once you have found equipment finance which matches your unique requirements, our comparison tool will guide you through the application process. In many situations, lenders will be able to provide the funds within just 48 hours, although this will depend on the availability of your documentation.
To speed up the underwriting stage ensure you have your financial documents ready to be examined. The documents required will vary between lenders, with traditional banks examining in detail your bank statements, annual turnover and filed accounts. If you are applying to an alternative lender, they may be more relaxed when it comes to the financial documents.
To strengthen your application, it can help to provide a business plan, as this will explain how your business will benefit from the equipment and reassure the lender that you will be able to make the repayments.
Who is eligible for business equipment finance?
With every form of finance your businesses financial position and credit rating will be taken into account when deciding whether to lend to you. Although, with such a large number of potential lenders, a perfect credit history is not always essential when applying for business equipment finance.
To improve your chances of being accepted, in many applications the asset itself will be used as collateral. This means if your business does fall behind with payments the lender will take ownership of the asset.
In some situations, if your business does not meet the lending criteria, the lender may also require a personal guarantee. This will mean that your own personal assets are at risk if the business defaults on the loan. However, if your business has a poor credit rating or weak financial accounts, a personal guarantee could strengthen your application for the finance you require.
If your personal and business credit reports are poor you may struggle to access finance but leasing arrangements could still be available. A leasing agreement may not require any form of upfront payment, security, or personal guarantee, instead you simply hire the equipment for a set period of time. Although you are not committing to full ownership of the equipment, a lease could end up being more expensive than repaying a finance agreement.
Here at Business Comparison, we believe that accessing finance for your business should be simple, quick and flexible. To find out more about the business equipment finance options available to you, please contact our knowledgeable team today.