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7 Reasons to Finance Equipment for your Business

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The majority (78%) of U.S. businesses of all sizes – from small entrepreneurs to Fortune 100 companies – in all industries – from construction to healthcare – lease or finance their equipment.

Here are some reasons why top companies finance their equipment:

    • Finance 100%: arrange 100% financing of your equipment, software, and service with 0% down payment. (OAC)
    • Keep up to date: Keep up to date with technology by acquiring more and better equipment that you could without financing.
    • Accelerate ROI: rather than paying one lump sum for your equipment, make smaller payments while the equipment generates revenue.
    • Benefit from bundling: bundle the equipment, installation, maintenance and more into a single, easy-to-manage solution.
    • Save cash: save your limited cash for areas of your business, such as expansion, improvements, marketing, or R&D.
    • Outsource asset management: Let your equipment financing company manage your equipment from delivery to disposal.
    • Customize your terms: Set customized payments to match your cash flow and even seasonal income fluctuations.

 

When looking at equipment finance companies, Premier Business Lending stands out from the rest. Our name is synonymous with equipment financing and leasing. Since opening our doors, we’ve helped countless business owners acquire equipment at a critical period of their growth. Premier Business Lending has a wide variety of loan programs which helps you the customer meet your goals and in addition to our wide variety of loan programs we offer you customer service that is second-to-none. You will work directly with a Premier Business Lending financing expert who will support you every step of the way via phone or email. Equipment finance has never been faster or easier.

 

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6 Startup Business Loan Options for Entrepreneurs

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Entrepreneurs often have a hard time securing a startup business loan. A new business venture is just too risky for most traditional banks. But there are lenders willing to offer small-business loans to a fledgling startup, including alternative lenders and microlenders, as well as other funding options for scrappy entrepreneurs.

 

Keep in mind: If you’re just starting out, you’ll likely need to borrow money based on your personal finances. But few lenders offer startup business loans for bad-credit borrowers (a FICO score below 630). Be wary of any lender that offers startup loans with no credit check or guaranteed approval. It could be an expensive option — or a scam.

 

1. SBA loans, and microloans from nonprofits

The U.S. Small Business Administration’s microloan program offers loans of up to $50,000 for small businesses looking to start or expand. The average SBA microloan is about $13,000.

SBA microloans are administered by nonprofit community lenders and are typically easier to qualify for than larger-dollar loans. The downside: Funding may not be sufficient for all borrowers.

 

The SBA’s flagship 7(a) loan program also offers financing that borrowers can use to start businesses. But SBA 7(a) loans are tough to get. They typically go to established businesses that can provide collateral — a physical asset, such as real estate or equipment, that the lender can sell if you default. The qualifications are strict, and even if you qualify, applying for a small-business loan can take several months.

Microlenders and nonprofit lenders can be a less difficult route, especially if you have shaky finances

Generally, you’ll get solid loan terms from these lenders, making it possible for you to grow your business and establish better credit. That can help you qualify for other types of financing down the road.

 

2. Friends and family

Perhaps the most common way of financing a new small business is to borrow money from friends or family. Of course, if your credit is bad — and your family and friends know it — you’ll have to persuade them that you’ll be able to pay them back.

In these situations, the potential cost of failure isn’t just financial; it’s personal.

“Business is personal, regardless of what people say,” says Chris Wilcox CMO of Premier Business Lending, a small-business financing company. “For most people, it’d be difficult to separate the two.”

Trim your list of friends and family to those who understand your plans and do your best to make certain they’re comfortable with the risks involved.

 

3. Credit cards

Many entrepreneurs rely on business credit cards for startups as funding. You can use this option as short-term financing for business purchases you know you can pay off quickly.

Let the balance linger and interest charges will pile up, quickly turning your credit card into a very expensive small-business loan.

The annual percentage rates on your business credit card is based largely on your personal credit scores. If you have poor personal credit, you’ll have a higher interest rate.

It’s worth noting: Research shows that small businesses that rely heavily on credit card financing typically fail.

 

4. Personal business loans

New small-business owners can also access financing through personal loans, such as those offered by online lenders. Personal business loans can be a good option for borrowers with excellent personal credit and strong income.

But as with credit cards, personal loans can have high APRs (up to 36%), especially for bad-credit borrowers.

Wilcox says small-business owners should consider personal loans “an option of last resort.”

“Where they can work,” he says, “is when a business just needs a small amount of money for things like… early-stage production or buying equipment.”

 

5. Crowdfunding

Crowdfunding has become a popular way for small businesses to raise money, thanks to such sites as Kickstarter and Indiegogo, which let you solicit funds through online campaigns. Instead of paying back your donors, you give them gifts, which is why this system is also called rewards-based crowdfunding.

New avenues are also opening for equity crowdfunding, in which you tap a public pool of investors who agree to finance your small business in exchange for equity ownership. This became an even broader option recently with new securities regulations that allow small-business owners to reach out to mom-and-pop investors, not just accredited investors.

Crowdfunding is good for the entrepreneur “who has a product and wants to test the market and validate the opportunity,” Wilcox says. “No credit necessary.”

 

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6 Small Business Loan Myths Busted

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Obtaining a loan for your small business is a great way to boost investment and even grow your business when the time is ripe. You might have heard some grumblings about small business loans: they are hard to obtain; your credit has to be flawless; don’t ask for too much money or you’ll be denied. Fortunately, these prominent myths surrounding small business lending are not necessarily true.

It is important to manage debt properly but doing so can help grow your business at a faster rate than scrimping and saving. To help you obtain a small business loan for your company. Here are 6 Small Business Loan Myths Busted:

Myth No. 1: Getting a small business loan is the hardest thing you will ever have to do.

Like other forms of financing, obtaining a small business loan is all about preparation. Ensuring your books are transparent and you maintain the reserve liquidity to encourage the lender that you’ll be able to service your debt on time and consistently will lead to success. And experts agree the best way to avoid unnecessary snags is to prepare ahead of time for the application process.

“A lot of the frustration around obtaining small business financing can be eased by doing your due diligence,” said Michael Adam, founder and CEO of Bankmybiz, a site that connects business owners with business funders. “

Myth No. 2: You must have perfect credit to get a small business loan.

Low credit scores are a concern for some lenders, but banks aren’t the only lenders out there. Alternative and private lenders are often able to offer more flexible terms.

Alternative lending sites such as Premier Business Lending tend to base lending decisions on the financial realities of a business rather than the financial history of business owners. Specifically, Wilcox said, alternative lenders take a close look at business performance, industry type, time in business and cash flow before handing out a loan.

 

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Myth No. 3: The best way to obtain a loan for your business is through a bank.

Entrepreneurs have more than one option for obtaining financing; banks are not the only game in town. There are alternative and private lenders, as well as creative types of lending like invoice factoring, which can help business owners shore up their capital without going through the lengthy and restrictive application process required by conventional lenders.

For business owners looking to borrow a relatively small sum (between $5,000 and $250,000), getting a bank loan is likely to be more trouble than it’s worth. Banks are more suitable for businesses that are interested in borrowing a large amount of cash and repaying the loan over a long period of time at a relatively low interest rate. 

Instead, Wilcox said, alternative lending sources often provide faster approvals for shorter loan repayment periods; sometimes, businesses can obtain access to the funds in as little as seven days, he said. Because the terms are more flexible, interest rates are often higher.

Myth No. 4: The worst way to obtain a loan for your business is through a bank.

Just because you can obtain financing elsewhere, doesn’t mean conventional lenders and bank loans are not for you. Sometimes, a bank offers exactly the funding option you need. In fact, for established businesses looking to grow at a moderate rate, traditional bank funding is generally a great option.

“If you are a younger company, pre-revenue or low revenue — but plan to grow very quickly due to the industry that you’re in (e.g., health care, IT or software consulting) — then a traditional bank loan may actually limit your growth,” Wilcox said.

To decide whether a bank loan is right for your business, research both traditional loans and alternative funding sources. It’s also important to know your business inside and out.

Myth No. 5: The more money you ask for, the less likely you are to be approved for a small business loan.

The requested principal amount of the loan should not have an adverse impact on whether you’re approved. Lending institutions are generally prepared to fulfill large financing requests for the right borrower; it’s more lucrative for them in the long run anyway. Don’t be afraid to ask for the amount of money that you really need!

Evan Singer, general manager at online Small Business Administration loan program SmartBiz Loans, said a business should apply for the amount it needs — no more and no less. He recommends considering both how much money you really need to grow your business, and how much money you can afford to pay back every month.

“Make sure that you have cash flow to make your loan payments,” Singer said. “That’s the biggest thing that a [lender] is going to check — that [the business owner] can actually afford to make their loan payments.”

Myth No. 6: The most important factor to look at is the interest rate.

It’s easy to hyper-focus on the interest rate of the loan. Essentially, the interest rate is telling us just how much this money is going to cost us by the end of our repayment period. It’s certainly a crucial piece of information, but it’s just one aspect of the entire deal.

Although interest rates are an important aspect to consider when choosing a lender, there are many other factors to keep in mind. Wilcox suggested asking what the terms of the loan are, how soon you need to repay the money, and what you can use the loan for.

 

Getting a business loan in times of need

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Spreading the word that you’re considering a loan for your business can be met with all kinds of opinions. From general naysayers to cautionary anecdotes, everyone you meet will have a story as to what might happen if you take out a loan to start or expand your business venture.

While it’s true that not every reason is a good reason to go into debt for your business, that doesn’t mean that good reasons don’t exist. If your business is ready to take a leap, but you don’t have the working capital to do so, here are six reasons you might re-consider applying for a small business loan in Sacramento. Chris Wilcox, Managing Partner with Premier Business Lending says “Today’s marketplace is a great opportunity for small business owners to take advantage of expanding credit windows and private investor funds. It is much easier for small business owners to access capital while helping their business expand.”

1. You’re ready to expand your physical location.

Your cubicles are busting at the seams, and your new assistant had to set up shop in the kitchen. Sounds like you’ve outgrown your initial office location. Or maybe you run a restaurant or retail store, and you have more customers in and out than you can fit inside your space.

This is great news! It likely means business is booming, and you’re ready to expand. But just because your business is ready for expansion, doesn’t mean you have the cash on hand to make it happen.

In these cases, you may need a term loan to finance your big move. Whether it’s adding an additional location or picking up and moving, the up-front cost and change in overhead will be significant.

Before you commit, take steps to measure the potential change in revenue that could come from expanding your space. Could you cover your loan costs and still make a profit? Use a revenue forecast along with your existing balance sheet to see how the move would impact your bottom line. And if you’re talking about a second retail location, research the area you want to set up shop to make sure it’s a good fit for your target market.

2. You’re building credit for the future.

If you’re planning to apply for larger-scale financing for your business in the next few years, the case can be made for starting with a smaller, short in order to build your business credit.

Young businesses can often have a hard time qualifying for larger loans if both the business and the owners don’t have a strong credit history to report. Taking out a smaller loan and making regular on-time payments will build your business’s credit for the future.

This tactic may also help you build relationships with a specific lender, giving you a connection to go back to when you’re ready for that bigger loan. Be careful here, though, and don’t take on an early loan you can’t afford. Even one late payment on your smaller loan could make your chances of qualifying for future funding even worse than if you’d never applied for the small loan at all.

3. You need equipment for your business.

Purchasing equipment that can improve your business offering is typically a no brainer for financing. You need certain machinery, IT equipment or other tools to make your product or perform your service, and you need a loan to finance that equipment. Plus, if you take out equipment financing, the equipment itself can often serve as collateral for a loan — similarly to a car loan.

Before you take out an equipment loan, make sure you’re separating the actual needs from the nice-to-haves when it comes to your bottom line. Yes, your employees probably would love a margarita machine. But unless you happen to be running a Mexican Cantina, that particular equipment may not be your business’s best investment.

4. You want to purchase more inventory.

Inventory is one of the biggest expenses for any business. Similar to equipment purchases, you need to keep up with the demand by replenishing your inventory with plentiful and high-quality options. This can prove difficult at times when you need to purchase large amounts of inventory before seeing a return on the investment.

Especially if you have a seasonal business, there are times when you may need to purchase a large amount of inventory without the cash on hand to do so. Slow seasons precede holiday seasons or tourist seasons — necessitating a loan to purchase the inventory before making a profit off it.

In order to measure whether this would be a wise financial move for your business, create a sales projection based on past years’ sales around that same time. Calculate the cost of the debt and compare that number to your total projected sales to determine whether taking an inventory loan is a wise financial move. Keep in mind that sales figures can vary widely from year to year, so be conservative and consider multiple years of sales figures in your projection.

5. You’ve found a business opportunity that outweighs the potential debt.

Every now and then, an opportunity falls into your lap that is just too good to pass up — or so it seems, at least. Maybe you have a chance to order inventory in bulk at a discount, or you found a steal on an expanded retail space. In these instances, determining the return on investment of the opportunity requires weighing the cost of the loan versus the revenue you stand to generate through the available opportunity.

Let’s say for instance, you run a business where you get a commercial contract for $20,000. The trouble is, you don’t have the equipment to complete the job. Purchasing the necessary equipment would cost you about $5,000. If you took out a two-year loan on the equipment, paying a total of $1,000 in interest, your profits would still be $14,000.

If the potential return on investment outweighs the debt, go for it! When you’re weighing the pros and cons, it often helps to perform a revenue forecast to make sure you’re basing your decisions on hard numbers rather than gut instinct.

6. Your business needs fresh talent.

When working at a startup or small business, you wear a lot of hats. But there comes a time when doing the bookkeeping, fundraising, marketing and customer service may start to wear on you — and your business. If your small team is doing too many things, something will eventually fall through the cracks and compromise your business model.

Some businesses choose to invest their money in their talent, believing that this is one way to keep their business competitive and innovative. This can be a great move, if there’s a clear connection between the hiring decision and an increase in revenue. But if having an extra set of hands around helps you focus on the big picture, that alone may be worth the loan cost.

Regardless of the exact reason you’re considering a business loan, the point is this: If, when all costs are factored in, taking out the loan is likely to improve your bottom line — go for it. If the connection between financing and a revenue increase is hazy, take a second look at whether taking out a loan is your best choice.

You want to be confident in your ability to pay back a business loan over time and to see your business succeed. Every business decision involves taking a risk. Ultimately, only you can decide whether that risk is worthwhile.