Equipment financing allows you to spread out the hefty price tag of essential equipment over time, freeing up valuable cash flow for other areas of your business. However, navigating the equipment financing process can feel overwhelming. Here’s a breakdown of the steps to follow to help secure the funding you need with confidence:
1) Pre-Planning is Key: Make Sure Your Business Credit and Financials are in Order
Many lenders offer financing options that don’t require a personal guarantee. This protects your personal credit score in case of unforeseen circumstances. To qualify for these options, ensure your business has a Dun & Bradstreet Number (DUNS). This unique identifier helps establish your business credit. Learn how to get your DUNS number at https://www.dnb.com/duns.html.
Lenders will assess your business’s financial health to determine loan eligibility. Make sure your business bank account is active with consistent deposits, and ensure a healthy balance is in your dedicated business bank account. This way lenders will have a basis to judge your spending power. A $500 balance won’t inspire confidence for a $100,000 loan request.
Business failure most often occurs within the first two years. If possible, try to achieve two years in business before seeking a loan to increase your odds of getting approved. Lenders prefer funding businesses that show stability. Business start-ups can still apply for financing, but these loans typically have more stringent qualifications and higher interest rates.
Other Tip: Make sure your business can be located on the internet. This can be through your company website (preferred), Google business listing, Better Business Bureau, or company FB/LinkedIn page.
2) Carefully Choose Your Equipment and Supplier:
Before diving into financing, take a step back. Clearly define the equipment you need and its purpose. Research different options and get quotes. Consider the lifespan of the equipment and how it aligns with your long-term goals. Use a reputable equipment vendor with an established online presence and preferably with at least 2 years in business. Lenders prefer an equipment vendor with a track record of reliability.
3) Gather Your Documentation: Be Prepared
The application process typically involves submitting documents like:
Business bank statements
Invoice from the equipment vendor
Business owner information (this may include personal and business tax returns)
If you’re a start-up – a business plan may be requested.
Make sure to have all of the pertinent information ready to send. You may not need to supply all the listed documents, but, if the lender requests the information, you’ll have it readily available to speed up the process. Not having your documents in order will slow down the loan process.
4) Apply for the Loan: Streamlining the Process
Most lenders will have an online application. EMR Finance has a fast, convenient online application, and documents can be quickly uploaded. If you prefer, you can download an application from EMR Finance and e-mail or fax it in. Our specialists can help you with any questions and will let you know if further documentation is needed.
5) The Underwriting Process: A Look Under the Hood
Once you submit your application, the lender will underwrite it. This involves a thorough review of your business’s financial health and creditworthiness. Be prepared to answer questions and provide additional documentation if needed.
6) Reviewing the Details: Make Informed Choices
Before signing any loan agreement, carefully review the documents. Ensure you understand all aspects of the loan before committing such as monthly loan amount, length of loan, payment options, late fees, and payoff rules (for example, business equipment loans have different payoff rules than a personal home/car loans).
7) Receiving Your Loan: Equipping for the Future
Once approved, the lender will send the funds directly to the equipment vendor. Now you can get to work with your new equipment, driving your business forward!
Remember: Equipment financing is a powerful tool for growth. By planning effectively and following these steps, you can secure the funding you need to equip your business for success.