When someone comes to me looking to finance a startup– let’s say they tell me, I need $100,000 for my startup– the first thing we’re going to do is try to figure out, out of that $100,000, how much of that is going to be used to purchase equipment? Because equipment is easier to finance, and it relieves our burden in order to get the rest of it. You may be thinking, what’s equipment? What qualifies for equipment financing?
Well, that could be anything from computers, to ovens, could be used for vehicles, anything to shelves on the walls or the sign outside your store. A lot of things qualify for equipment financing. And like I said, the good news is it’s easier to get.
On the range of bank financing, equipment is one of the ones that actually qualifies for startups. Now, if you are a startup or anybody that wants equipment financing, there’s really three things they’re going to look at. They’re going to look at your personal credit, your business credit, and your business cash flow situation. And each of those things vary based on your situation.
The earlier you are, or the more you are a startup, the more important your personal credit is. But once your business has grown for a while, then it’s going to transfer. They’re going to look at your business history, your business cash flow. And those things will become more important.
Business equipment finance varies a lot from one product to the next. Of all the different things I’ll talk about today, equipment financing is the most fractured. There are thousands of specialty lenders all across the US for different types of items. And different types of things are going to cost differently.
So for example, restaurant equipment will depreciate in value very quickly. And because of that, you’re going to have to pay a much higher rate for your equipment financing. Conversely, on the other side, what they call yellow steel, big tractor equipment, that depreciates a lot more slowly. And so you’re able to get better interest rates.
So when you’re financing your business, do not forget to separate out the equipment and get equipment financing independently. That way it leaves all your cash available for whatever else might come up. Equipment financing is important, and it’s easier to get. So definitely make sure to take advantage of that.