Equipment Financing: Does Your New Business Qualify?
If you are a brand new startup, don’t expect a bank — or equipment leasing company for that matter — to jump at the chance to finance your business equipment. If approved at all, you’ll likely face steep interest rates as opposed to a company that’s more established.
What’s a Startup?
Startups are basically companies that have been in business for less than two years. It’s a sobering fact that 34 percent of businesses fail within the first couple of years. Then, 22 percent of businesses fail between years two and six. The numbers decline after that time period.
If can be an exciting time to be in business, so congratulations on your foray into the business world! You can succeed but you have to go into it knowing financing will cost you a bit more than it would for a company that’s been in this for a long time.
Within the first two years, here’s what to expect when it comes to qualifying for equipment leasing.
Got good credit?
With solid credit, you may be approved for financing no matter how new you are. You’ll still pay higher rates than a company in business for a decade, but those rates won’t be sky high.
You’ll have an easier time leasing heavy equipment, trucks for owner/operators, and vocational vehicles, and other equipment because this type of “collateral” keeps its value better than other equipment types.
Got fair to poor credit?
You may still be able to borrow IF you have collateral to offer, a security deposit or down payment. What you can borrow will depend on your unique business situation, industry and the type of equipment you want.
In the long run, you can usually borrow money for equipment but the rate you get and the amount you are given will depend on a variety of circumstances.