Things You Should Know Before Opting For Loans For Business Equipment
Business equipment loan is very popular among small businesses as they can preserve their business capital for marketing and development and use the loan for purchasing the required equipment. There is no doubt that loans for business equipment are easy to get and better than a traditional business loan, but there are certain things you should consider and take into account before you can opt for it.
Important Points To Consider
Equipment Under Coverage – A business equipment loan covers any stationery machinery that your business may require irrespective of their cost. Furthermore, it covers commercial vehicles and tractors and much more. Before you apply for an equipment loan, you should know the coverage your chosen financial institution provides.
Business Credit Score and Down Payment – It is true that loans for business equipment get approved easily in comparison to traditional business loans. But it is not completely true that you can get business equipment loan with zero down payment. It depends on your business credit score. The higher the score, the low will be the down payment. But in general, business equipment loans are suitable for small business with low business credit score because the maximum down payment will be 20% of the total amount.
Security Deposit – There is no security deposit money required because the equipment you buy with the loan is the security item. In case you fail to pay the installments in due time, the equipment will go into the possession of the financial institution and they can opt to sell it to get back the money required.
Term and Payment – The term of the loan is determined by the equipment you are planning to buy. Different equipment has a different shelf life and their cost differs a lot. So, the shelf, life, cost, and the type of equipment are some of the parameters taken into consideration before determining the term of the loan. When it comes to the installments, it is determined by the interest percentage on the equipment loan amount. It generally varies from 5 to 9 percent. There are certain other nominal charges also associated. If you have a good business score, your installments will be lower than usual.
Specific Usage – When you take an equipment loan, you can use it only to buy the specific equipment which you have shown in the application form. You cannot use the money for other expenses. For other expenses, you have to take a traditional business loan.