If you have an entrepreneur-sized business and are looking to buy new equipment, but you don’t have a lot of cash in the bank, you may wonder what you can do to get a loan. There are numerous options that include the SBA 7(a) or bank or credit union loan. However, there are penalties if you pay the loan off early. Additionally, there are other options available, such as leasing and borrowing from an alternative lender. You’ll have to make a decision about whether you should take out a loan from a different source or take a loan. Your financial advisor or accountant can assist you in deciding what is the best option for your business and you.
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SBA 7(a), loan
Whether you’re a business owner looking to purchase new equipment, or an owner of a business looking to acquire the necessary materials for your business, you may be able to get a loan through the SBA 7(a) loan program. Before you apply, it is important to understand the process.
The SBA 7(a) federally-backed loan, is designed to offer financial assistance to small companies. It offers a variety of financing options to meet different small-scale business needs. The loan can be used to finance the purchase business equipment, real estate and other supplies, as well as for other business-related needs.
You could be eligible to receive an SBA 7(a), according to your specific circumstances in a matter of days. If you’re eligible the lender will then disburse your funds and allow you to pay back the loan through monthly payments. However, you’ll need to pay 25 percent or more of the balance on the loan within three years of disbursement.
Alternative lenders
Alternative lenders for equipment loans provide numerous alternative lending options to business owners who are looking for financing. These lenders offer short- and long-term funding options and are much easier to access than banks. Banks typically require lengthy paperwork and long approval processes.
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These lenders also provide various loan products including term loans and invoice financing. The suitable lender for your company can help you finance the business and expansion of your business.
Although alternative loans are slightly more expensive than bank loans, they can help you grow your business while keeping your cash flow under control. You can also lower the costs by opting for flexible rates.
An equipment loan could give you the cash you need to purchase office equipment and machinery or vehicles. Before you start the application process, make sure to evaluate your personal credit. Some companies that finance equipment will only give you a loan only if you have excellent personal credit.
Credit unions and banks
When you need to finance equipment, there are a lot of options available. Some businesses choose to take out an investment loan from a bank, while others go with a credit union. No matter what type of lender you select, it is essential to think about your business’s needs when choosing a loan.
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A loan for equipment financing is a great way for you to secure the cash that you need for your company. But, you’ll have to pay the loan back in time. You may end up paying more interest than you anticipated. It is important to compare the terms and fees.
Be sure to read the entire fine print. Many lenders offer loans for equipment, but they all have their own procedures for applying. For instance, certain lenders may require a significant down amount. Some online lenders impose higher interest rates than a traditional bank.
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Penalties for late repayment
Whether you’re looking to start a new business or if you’re looking to expand your equipment investment paying off your loan early can be a wise choice. It not only saves you money on the interest, it can also free up cash flow to meet other requirements. You can utilize the extra cash to purchase new equipment, or hire an employee who is new or to provide a cushion in times of low demand. But you must be aware of your lender’s terms before making a commitment. Certain loans come with prepayment penalties and you should read your loan documents carefully.
You can lower the interest on your equipment loan, and gain peace of assurance by paying it off early. However, if your plan is to pay it off in a timely manner you’ll also be resetting your loan’s terms. This can adversely impact your business’s credit. Contact your lender to learn more about the conditions of your loan.
