Every business owner, small or big, offline or online, new or established, requires Equipment ranging from basic ones such as computers, printers, phones, desks and other furniture to large ones such as trucks, cars, specialized machinery and other industrial equipment on a daily basis. No business can run smoothly without proper equipment to reduce the workload and increase work efficiency. Hence, equipment is a vital accessory to all sorts of business.

Equipment loans refers to loans which provide monetary assistance to purchase business equipment without having to compromise a substantial amount of cash from the company revenue. Moreover, an equipment Loan also provides funds for repairing existing equipment or to upgrade to state-of-the-art technologies. An equipment loan increases the productivity of your business and expands your customer base, thereby increasing profits. All types of business loan in India including machinery loans have seen an upsurge in the recent years.

Although the terms of an equipment loan vary with different lenders, you can usually finance almost 80 percent of your inventory with a business loan. After you pay the amount in full, the equipment officially belongs to you. The best thing about an equipment loan is, the equipment is the collateral for your loan. Hence, you do not need to pay for the loan upfront. This is a boon, especially to small business owners, Micro, Small and Medium Enterprises (MSMEs) and startups. However, if you can afford a security, it is advisable to utilise what you got to get the best you can.

Securing an equipment loan, however, is not a layman’s job. Without proper knowledge and understanding, it might cost you and your company valuable time and effort. Following are the steps you should follow to secure an equipment loan the right way:

Guide to Get an Equipment Loan for Business

Maintain a Good Credit Score

The most obvious criteria to obtain any kind of loan is to have a good to excellent business as well as personal credit score. The closer your score is to 900 the lower is are the risks involved in sanctioning a loan to you as perceived by your lenders. However, a credit history doesn’t improve overnight. But repaying your outstanding loans gradually and avoiding defaults to keep your record as clean as possible can help build up your credit score in time. Moreover, a good credit can increase your chances to secure a loan involving huge capital at much cheaper rates than someone with lower credit score.

Have an Agenda

Foresight is often associated with entrepreneurship. You should be thorough with the objectives and long-term goals of your business and consequences should also be counter-measured in advance. Lenders will ask for a detailed insight into your business and if they are impressed with your synopsis and specifics, your chances of securing a loan will increase multiple folds.

Determine the Loan Amount

One must invest a good amount of time to come up with exact figures for an equipment loan. This is because lending a sum more than you require will make you pay unnecessarily for the extra funds and take you longer than your anticipated time to repay your debts. Lenders are in business for enough time to know their math well. The more realistic your figures are, the more competence you portray to your lenders.

Determine the Appropriate Lender

Gone are the days when the only institution to bestow you with a business loan was the traditional bank. There are a variety of lenders available at your discretion in recent times. Yet, bank loans are still the ones that provide the cheapest rates. However, they are difficult to qualify and have low approval rates. Also, they do not cater to small capital loan needs. Non-Banking Financial Companies, on the other hand, are easier to qualify and have flexible loan terms. They provide loans in all ranges depending on your needs; the catch being their slightly higher interest rates. Other lenders include micro and alternative lenders, online lenders, commercial lenders, peer to peer lenders to name a few.

Prepare Necessary Documents

Cash flow statements, ID proof, business licenses, ITR statements, revenue records, sales statements, bank statements, etc. are the documents generally needed to seal a loan with your lender. Hence, keeping these documents ahead of time can be useful.

Securing an equipment loan takes time and might test your patience to the optimum level. Even a flawless business background cannot guarantee you a loan because a lot goes into convincing a lender. One wrong move can hijack your chances drastically. Therefore, work on your credit history and seek the aid of a financial advisor before diving into uncharted waters of equipment loans.

The post How To Get An Equipment Loan Approved? appeared first on MyDailyLifeTips.