If you own a small business and you want to buy some new equipment, but you don’t have much cash in the bank you might be wondering how you can get a loan. There are several choices to choose from, such as the SBA 7(a) loan, and the bank or credit union however there are penalties involved if you pay back the loan early. In addition, there are other alternatives available, such as leasing and borrowing from an alternative lender. You’ll need to decide whether you should borrow money from a different source or take a loan. Your financial advisor or accountant will help you determine what is best for your company and your needs.
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SBA 7(a), loan
If you’re a company owner looking to purchase new equipment, or an owner of a business looking to acquire the necessary materials for your business you may be eligible to borrow money through the SBA 7(a) loan program. Before you apply, it is important to know the procedure.
The SBA 7(a) loan is a federal government-backed loan designed to offer financial assistance to small businesses. There are numerous alternatives to finance small-sized companies. The loan can be used to finance the purchase of equipment, real estate, supplies and other business needs.
Depending on your situation, you might be able to be approved for an SBA 7(a) loan in just a few days. If you’re eligible the lender will pay your money and you can repay the loan using monthly payments. However, you will have to pay a prepayment of 25 percent or more of the loan’s balance within three years of disbursement.
Alternative lenders who offer equipment loans provide an array of alternative loans to business owners seeking funding. These lenders offer short- and long-term financing options, and are easier to access than banks. Banks usually require lengthy paperwork and an extended approval process.
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They also offer different loan products which range from term loans to invoice financing. The right lender for your business can help you finance the operations and expansion of your business.
While alternative loans can be a bit more costly than bank loans however, they can be a great way to grow your business while keeping your cash flow in check. Additionally, the fees can be cut by selecting an option with a flexible rate.
An equipment loan can give you the money you need to purchase office equipment or machinery, or even vehicles. Before you start the application process, make sure you check your credit rating. Some financing companies for equipment will only approve you for a loan with a high personal credit.
Credit unions and banks
When it comes to financing equipment, there are a lot of options to choose from. Some businesses choose to get the loan through a bank while others prefer to work with credit unions. Regardless of the type of lender you choose, it is important to think about your company’s needs when deciding on a loan.
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A financing for equipment could be a fantastic way to get the cash you require for your business. But, you’ll have to pay the loan off on time. If you don’t, you may end up paying more interest than you thought. It’s important that you compare charges and terms.
Be sure to read the fine print. Although many lenders offer equipment financing loans, each has their own process for applying. Some lenders might require a large downpayment. Some online lenders charge higher interest rates than traditional banks.
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Penalties for repaying early
If you’re planning to launch a new business or if you’re looking to boost the value of your equipment, paying off your loan early can be a smart decision. Not only will it save you money on the interest, it also frees up cash for other needs. The extra cash can be used to purchase new equipment or hire new employees or to cushion your business during low seasons. But it’s important to consider the terms of your lender before making an agreement. Prepayment penalties can be imposed on certain loans, therefore, make sure you study the loan agreement.
You can lower the cost of your equipment loan and enjoy peace of assurance by paying it off early. However, if you choose to pay it off in a timely manner, you will also be resetting your loan’s terms. This can adversely affect your company’s credit. Contact your lender for more about the conditions of your loan.