A large number of companies in construction, trucking, farming, and landscaping, among others, rely on heavy equipment. However, at price tags mostly in the hundreds of thousands, new or even used machinery is not always within reach. This is where heavy equipment financing comes in.
Are you willing to grow your business, but you are just not sure how to be eligible to be financed? Do not worry. It is easier than you would imagine. Here is a basic process to assist you in preparing, applying, and obtaining approval.
Know what you need
It is important to understand what you want to finance before you sit down and negotiate with any lender. That is the type, make, model, age, and price of the equipment.
Lenders like particulars. They would like to know what they are investing in, and with this information at hand, your application will be easier and quicker. It also makes you remain focused on what your business really needs, not just what is available.
Check your credit
Credit history plays a significant role in financing approval. The lenders examine your business credit score as well as your personal credit score to determine how you have handled debt in the past.
A good credit score will help you get more favorable interest rates and longer payment periods. If your score is lower, do not panic. You still can obtain equipment financing with bad credit. But you may need to provide a larger down payment or other security.
Before applying, it is always good to check your credit reports beforehand to make corrections in case of errors or red flags.
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Gather financial documents
Then prepare your paperwork. Lenders would need to be convinced that your business is financially stable to pay. Be ready to provide:
- Current financial reports
- Latest bank statements
- Your business (and even personal) tax returns.
- A short business plan or description of how the equipment is going to bring revenue.
Getting such documents in place demonstrates professionalism and confidence.
Review your down payment options
Although there are lenders giving 100% financing, most lenders require a down payment. It is usually between 10% and 20% of the purchase price.
Having the ability to deposit some money also minimizes the risk to the lender and may enhance your chances of approval. It can also assist you in getting more favorable conditions.
Choose the right lender
Financing partners are not all the same. Traditional banks, credit unions, and specialized equipment finance companies have different requirements and levels of flexibility.
Take time to compare interest rates, repayment agreements, and service to the customer. Go with a lender who understands your industry and business.
Apply and get approved
When you are ready, apply. The majority of lenders take a few days of business to make decisions. Upon approval, the money is paid directly to the seller of the equipment, and you start paying in terms of what you have agreed.
A key takeaway
Preparation and transparency are the keys to qualifying for heavy equipment financing. When you know what lenders check and how to make your business appear at its best, you will be in good standing to obtain the equipment you need and continue running your operation.
