EQUIPMENT LEASING FOR STARTUPS

Finding a working capital loan for a new business venture could be challenging and draining at the same time. What is very disappointing to many entrepreneurs is the lack of resources made available to them to secure financing.


 At the moment banks are not lending to small businesses like they once did. Established businesses have a hard enough time securing financing, so it is only safe to assume that startups would have a harder time qualifying for financing of any sort. For startups seeking financing, a good starting point is the SBA (Small Business Administration).


The SBA by itself does not directly lend money to consumers.  What the SBA does is guarantee loans that individual lenders make available to small business owners. The SBA publishes guidelines for lenders to follow, but each lender is allowed to add overlays to the guidelines to protect it. If a business owner can qualify for an SBA loan, it usually affords the best rate and term. The problem is that most entrepreneurs especially startups never qualify.


Equipment leasing is one resource that helps small business owners starting out get additional financing for equipment related purposes. To qualify for equipment financing, here are some things an entrepreneur should be aware of:


1)     Industry: Be familiar with lending sources that are open to working with your particular industry. Some lenders have industries that perform well on the books  (meaning that the loans made to individuals in this industry tend to perform very well). As a result, they are open to lending more money to newcomers in the industry.


2)     Resume: Be realistic. You will have a better chance at getting approved for equipment financing if you can document that you have quantifiable experience in the industry to help you succeed. No lender would want to invest in anyone that has no clue what he is doing. They would rather not have you come in to test the waters in the industry on their dime.


3)     Credit: Review and understand what is on your personal credit profile. If there are blemishes on your credit report, work on fixing them before applying for a loan. A starting point would be to request your credit report from all 3 major bureaus, which are Equifax, Experian and Transunion. Look for any derogatory public records such as liens, judgments etc. and make sure that they have been paid satisfactorily at least within the most recent 24 months.


4)     Comparable Debt: Most lenders would prefer to see that an applicant for equipment leasing has at some point taken on comparable amount of installment debt as is being requested. The lender would also check to ensure that such debt has been paid satisfactorily.


5)     Down payment: As a startup, the ability to put up between 15-20% of the requested financing amount could help in getting an approval. It would also help save money on the overall financing cost.

These are just a few but very effective pointers to get you started in the right direction as you seek funding for your new business venture.