How To Get Equipment Loan Approval
Financing equipment is an absolute necessity for just about every small business at one point or another. Whether it’s something simple like computers and copiers for an office or something complex and custom-built like a metal shop’s electroplating line, it’s still a vital part of empowering your people to do their work so you can prosper. For small business owners who have never needed loans to acquire equipment before, the requirements put on businesses looking for equipment financing can seem a little daunting. Breaking it down step by step makes things a lot easier.
1. Research and Preparation
There are two things to accomplish at once in this step, and you need to do them together. The first is to do the research to figure out the best loan program for your acquisition. Do you need a giant equipment loan for a long term like 15-25 years that will cover multiple pieces? Or a short-term zero down payment option you can take care of in a year or two? Something in-between?
Figuring out the right fit for your current finances provides you with the information you need to take care of the second task in this step, which is to prepare your financial paperwork and business files for the application. Bring together all the information your application will need, from bank statements to background on key personnel, and use the application criteria for a specific loan program to guide you. Since each program is different, research and preparation become a joint step in the application process.
2. Write Your Business Plan
Most of the time, a written business plan is more important than the loan application itself. The application tends to be a short form full of information about your address, history, and so forth, but it’s the combination of financial disclosures and a plan for the loan that really determine your approval in most cases. The business plan needs to cover your current earnings, overhead, financial reserves, and near-term projections in addition to basic information about key personnel, their roles, and your company size.
3. Submit Your Application Package
Equipment financing can take several weeks for approval, or it can happen in just a few days. That depends on your lender. If you are contending with low credit scores or unestablished business credit, using a lender that offers short-term financing is often easier because of the structure of the debt. On the other hand, it’s usually just for one piece at a time, so if you’re refitting a whole shop, you probably need to shepherd it through a longer process with a traditional bank or the SBA.
