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You may be wondering how to borrow money if you are a small business that needs to purchase new equipment. There are a myriad of options to choose from, including the SBA 7(a) loan or the bank or credit union however, there are also penalties if you repay the loan in advance. There are other options, such as leasing or borrowing from another lender. The decision on whether you should get a loan or borrow funds from another source is a personal choice and you should consult your accountant or financial advisor to find out what is most suitable for your company.

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SBA 7(a), loan
If you’re a company owner looking to buy new equipment, or an owner of a business looking to procure materials for the operation you might be able to get a loan through the SBA 7(a) loan program. But before you apply for a loan, you should be aware of the procedure.

The SBA 7(a) loan is a federal government-backed loan designed to provide financial aid for small-sized businesses. It offers a wide range of financing options to meet different small-scale business needs. You can use the loan to pay for the purchase of business equipment, real estate or supplies, as well as other business-related needs.

Depending on the circumstances You may be able to get approved for a SBA 7(a) loan within a matter of days. If you are eligible, the lender will disburse the money and you are able to pay back the loan with monthly installments. However, you’ll need to pay a prepayment of 25 percent or more of the loan’s remaining balance within three years from the date of disbursement.

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Alternative lenders
Alternative lenders who offer equipment loans provide many different lending options to entrepreneurs looking for financing. These lenders offer short and long-term funding options and are more accessible than banks, who typically require extensive paperwork and a long approval process.

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They offer a variety of loan products, such as invoice financing and term loans. The appropriate lender for your business can assist you in financing the operations and growth of your company.

Although alternative loans are more costly than bank loans but they can be utilized to increase your business’s profitability and keep your cash flow under control. In addition, the cost can be reduced by choosing an option with a flexible rate.

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An equipment loan can give you the cash you need to purchase office equipment and machinery or vehicles. Before you begin the application process, you should look at your credit score. Equipment financing companies won’t approve you for loans if your credit score is good.

Credit unions and banks
There are a variety of options when it is time to finance equipment. Some companies opt for a bank loan while others prefer a credit union. Whatever the lender, you’ll want to think about your company’s needs when deciding on a loan.

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A loan to finance equipment can be a great way to get the cash you need to run your business. But, you’ll have to repay the loan on time. If you don’t, you may discover that you’re paying more interest than you initially anticipated. It’s important that you compare rates and terms.

Be sure to read all the fine print. While numerous lenders offer equipment financing loans, each has their own application processes. Some lenders may require a substantial downpayment. Online lenders might have higher interest rates than traditional banks.

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Penalties for early repayment
Paying off your loan early is a smart decision, whether you want to start a new business or to increase the amount you invest in equipment. Not only does it save you money on the interest, but it also frees up cash for other needs. You can make use of the extra funds to purchase new equipment, hire an employee for the first time or to provide a cushion during times of slowness. Before you commit, it is important to be aware of the terms of the lender. Some loans come with penalties for prepayment and you should review the loan’s terms carefully.

You can reduce the cost of your equipment loan and get peace of assurance by paying it off early. If you pay the loan off too early, you may have to change the terms of your loan. This can adversely affect your credit score for business. Contact your lender to learn more about the terms of your loan.

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