Planning to get equipment financing?
Equipment financing can help your business in a lot of ways. It can improve your operations because it increases your buying power and gives you a way to get better equipment.
Equipment financing can also prevent potential financial problems. If you get a good deal with your lender, repaying this type of financing is usually fairly easy on your budget. However, you do need to find the best bank for equipment financing for best results. This is vital so you can make the most of your equipment financing.
Now you’re probably wondering what the best bank for equipment financing is. Don’t worry, because we’ll answer that question in this blog post.
Today, I’ll talk about getting funds from the best bank for equipment financing. This should serve as your trusty guide to equipment financing for your business.
How to Find and Approach the Best Bank for Equipment Financing
Right off the bat, let’s say this — there are many ways to find the best bank for equipment financing. This is not the main thing that you should focus on.
You see, there's no assurance that you can get equipment financing even if you find the best equipment lender. Many of the best equipment finance banks that do equipment financing are actually very finicky with applications. The best ones approve only a very small fraction of the equipment financing applications they get.
So, your real concern should be how to get the best equipment financing approval on your next equipment acquisition. Among other things, that means learning the factors that can keep you from getting approval from the best bank for equipment financing.
To help you with that, let’s go over the factors that prevent you from getting equipment financing fast. Knowing this will help you get the best approval from the best bank for equipment financing. Most of these equipment lending banks usually have three to four tiers of which they'll try to qualify in and each tier will have its own respected interest rate. Tier one has the lowest interest rate and is the hardest to qualify for.
Factors that Prevent You from Getting Equipment Financing Fast
Like I said, there’s no assurance that you can get approval even if you find the best bank for equipment financing. There are so many factors that can affect the outcome of your equipment financing application.
So before you apply for equipment financing, make sure that you can meet the minimum requirements of the lender.
After that, check whether or not you or your business have traits that equipment lenders often consider “red flags”.
Let’s go over those red flags now, starting with probably the most obvious one — bad credit.
Bad Credit History Doesn't Help Get Equipment Financing
Keep in mind that even the best bank for equipment financing has requirements. Unless you've been in business for over five years and have at least 10 employees most of them check the personal credit history of their clients.
The personal credit history will be their basis for approval of your equipment financing application. That is because your credit history will determine the amount of monthly payment and interest you pay out. Lenders generally have three to four tiers to try and fit you in for approval.
Usually, you can easily get approval if your credit score is at least a 650. Some lenders go down to a 630 but tier 1 is usually over a 700 FICO score.
If you have a 650 credit score, you can get the usual interest and monthly payment. Businesses with even higher credit scores (say, around 720) can get the lowest monthly payments and lowest interest rates from the best bank for equipment financing.
Credit managers at the best banks are looking for comparable borrowing experience. So if you're asking for an amount of a hundred thousand dollars and you've only borrowed twenty thousand dollars in installment debt before on your personal credit it's going to be hard for you to get approved at the best banks. Credit managers want to see you have installment debt close to the amount you're looking to borrow for your business to prove you can handle repaying this kind of money. If you don't have the personal installment history, business loan history can substitute for that. Six figure average bank balances could possibly substitute for it as well.
Credit managers are also wanting five or more active trade lines on your personal credit history. Very important to remember credit managers are looking for seventy percent or more revolving credit availability.
Now, if you have a credit score below a 630, expect to provide three months of business bank statements with good opening and ending balances proving you can qualify for equipment financing. Lenders including the best bank for equipment financing will doubt your capability to repay the borrowed money. So you'll have to seek out private equipment leasing companies to lend you money if have bad credit. These lenders will make a decision based on your cash flow and not your personal credit history.
Limited Cash Flow
If you're asking for an amount over the lenders application only limit then the cash flow of a business also affects your equipment financing application. Every bank has a different application only limit. Some go all the way up to $500,000. So be sure to ask and find out which bank has the application only limit that covers your equipment purchase or be prepared to provide three months business bank statements.
If you have insufficient cash flow, it’s more likely that the lender and the best bank for equipment financing won’t approve your equipment financing application. So you'll have to find an equipment lender that has an application only program that covers the cost of the equipment you're looking to buy.
Insufficient cash flow is a red flag for the best banks. It’s a clear indication that the applicant won’t pay the equipment financing in time and in full.
It’s best to look for other equipment lenders that can approve you with a simple one page application with out looking at your bank statements if you have limited cash flow. You also want to ask yourself if you should be buying this piece of equipment if you don't have sufficient cash flow to support the monthly payments each month.
Mission Critical Financing
The best banks will lend equipment to you that's mission critical for your business. Your plan on how you're going to use the equipment will tell the lender how you’re going to use the borrowed money. With that said, having a solid reason to purchase the equipment will increase your chance of getting equipment financing approval.
Prepare an explanation of how you’re going to use the equipment financing. Tell the lender how you’re going to maximize its use and get high ROI from it. Presenting a detailed and well-thought-out email on how you're to use the equipment and how it will help your business will get you the best approval from the best bank for equipment financing.
Many Loan Applications
If you’re currently applying for a bunch of other loans for working capital, don’t expect to get the best equipment financing approval. Banks are careful with their decisions. They won’t give you money if your company looks like it’s in bad shape.
Having too many loan applications is a sign that your company is in bad shape. This just means that you’re having a lot of financial problems. Be ready to give explanations or better yet offer explanations up front when you submit the application if you know there's one or more recent inquiries. Especially offer up explanations if their not for business loans or other equipment financing approvals.
The loan applications indicate that you can’t finance many aspects of your business or operations. This is a red flag that can keep you from getting a loan approval, especially from the best bank for equipment financing. Sometimes you're just shopping for the best rate or sometimes you're in growth mode. Whatever the reason is just be prepared to give explanations.
The Best Bank for Equipment Financing
Once you know what pitfalls to avoid when trying to get equipment financing, it’s time to find the best bank for that financing. First off, the best bank for equipment financing depends on your business needs and capabilities.
You can get additional funds from national and community banks. Some of them offer low-interest rates and long terms on loans. Usually, you can expect an interest rate of around 5% to 10%, for instance. However, that amount actually depends on the market.
There’s no assurance that you can always get the best interest rate for your equipment loan, either. Keep that in mind so you don’t leap into this with overly high expectations. Despite that, you shouldn't hesitate to get equipment financing. This can help you finance the overall cost of your equipment more effectively than if you were to pay for it using your capital alone.
In addition to that, note that equipment financing requires no collateral or personal guarantees, unlike common bank loans. The equipment will be the collateral and security for the lender.
Many banks offer equipment financing, luckily enough. But to narrow down your list, here are some of your options for the best bank for equipment financing:
- Wells Fargo.
- Bank of America.
- JPMorgan Chase.
- US Bank.
Alternatives to Bank Equipment Financing
Now, we have to discuss alternatives to the best bank for equipment financing because of something I mentioned earlier. Namely, that it’s hard to get equipment financing approval from banks if you have bad credit.
If you’re one of the many who think (or already know!) that they can’t get equipment financing from a bank, don’t despair. You can look for other lenders.
Banks are not the only institutions that offer equipment financing. You can also get it from equipment financing companies.
Unlike banks, these offer equipment financing with fewer requirements and a shorter application process. Also, you can get approval within the day of your application with some equipment financing companies.
Moreover, you may still get approval even if you have a bad credit score but have strong cash flow every month.
Equipment financing with bad credit is still possible for a lot of equipment financing companies, you see, you have to show you have six times your monthly payment in cash flow per month. However, you should expect a high-interest rate for your monthly payments in such a situation.
Final Thoughts on the Best Bank for Equipment Financing
In this blog post, I talked about the best bank for equipment financing.
Getting equipment financing can help your business. It can improve your operations and keep you from having financial problems.
However, many businesses fail to get approval for equipment financing. To avoid having the same fate, make sure you know the factors that can keep you from getting approval for equipment financing. Also, be sure to find the best bank for equipment financing. This can help you make the most of this business decision.
And if you can’t get it from a bank, remember that you can look for other lenders like Trust Capital. They are one of the most reliable providers of equipment financing. To know get the best rates for equipment financing, contact (866)458-4777.