Starting a new business can be an exciting time, but having sufficient funds available to make sure your new venture gets off to a flying start is a crucial part of the start-up process.
As well as business registration fees, insurance and marketing costs, one of the biggest outlays most start-up businesses need to purchase is the equipment they require to deliver the products and services they are looking to sell.
While some start-up business owners may have the funds available to purchase this equipment upfront, another option to is look at taking out a start-up business loan to help finance these purchases.
Why Business Equipment Loans Matter for Startups
Equipment loans for start-up businesses make a lot of sense for several reasons.
Firstly, the cost of purchasing equipment can be significant. For certain industries such as retail, medical and manufacturing this can amount to tens of thousands of dollars. Having that money at hand is out of the reach of many prospective entrepreneurs, so applying for a start-up business loan is often essential.
In addition, having access to the equipment your business needs to grow without waiting to build up the capital you require to purchase it outright can build capacity and efficiency quicker. Remember that the equipment you purchase is an investment in future earning potential, allowing you to realise your financial goals for the business in a shorter timeframe.
Another benefit of taking out a start-up business loan at the outset of your business is the ability to aid cash flow as you work towards making the new venture profitable.
Ongoing costs such as marketing, recruiting staff and day-to-day operations will eat into any revenue you generate in the early stages. As a result, having a cash buffer to support the business until it is established and trading profitably can be crucial.
Types of Equipment You Can Finance
Business equipment loans for start-up businesses can be used for a whole range of assets that may be needed to get your new venture up and running.
For retail outlets, this could include shop or industrial kitchen fit-outs to provide the equipment needed to service your customers.
Other examples may be specific manufacturing equipment to produce your chosen products, IT hardware to ensure your business has the technology in place to operate efficiently, or company vehicles to deliver your goods and service your client base.
The list of items you can utilise business equipment finance for is almost endless – as long as it’s an asset that contributes to running your business, there will be a finance option to help purchase it.
It’s also worth considering that business equipment finance can come in the form of leasing equipment as well as purchasing an asset outright. Leasing equipment can be a useful option for many start-up businesses, as it can help preserve your working capital as you build towards turning a profit.
Whatever option you choose, flexible business equipment finance can be tailored to what’s best for your circumstances.
How to Apply for a Business Startup Loan for Equipment
Once you’ve identified the type of equipment your business needs, the next step is identifying the best way of applying for a start-up business loan to fund this.
Given the wealth of funding options available, it’s worth contacting a specialist business equipment finance broker to help guide you through the process.
A specialist broker will initially meet with you to discuss your business plan and lending requirements, gathering the information needed to provide you with the best funding solution.
A typical application process for business equipment finance will look like this:
- Once lending requirements are determined, your broker will liaise with their existing network of lenders to source suitable options
- With lending options identified, a further discussion with your broker will determine the best option to pursue for your business requirements
- You will then be asked to provide your broker with documentation and information required by the lender to submit the application. A good business plan in addition to all financial records is essential at this point.
- Your broker will package the application and submit to the lender, before managing the application through the assessment stage and negotiating the best rate available.
- Once the application is approved, loan documents will be drawn up and your broker will arrange for both parties to sign.
- Funds will be released on receipt of a signed loan agreement, allowing you to purchase your equipment.
While larger business loans for start-ups can be more complex, having a broker in your corner to navigate the process is a good investment whatever the size of your lending requirement.
Overcoming Common Startup Loan Hurdles
Although the process of applying for small business loans for startup companies can be significantly aided by a good finance broker, there will often be hurdles that many small businesses need to overcome to secure the required funding.
One objection lenders can have is an applicant’s poor credit score. While this is not necessarily a deal breaker, it can make that application more challenging.
The key to overcoming this objection – and many others – is being able to provide evidence of your expertise in your chosen market. Your understanding of the specific market your business will operate in will and how this will increase your chances of business success will be a key factor for many lenders when considering start-up business loans.
If this is still not enough to satisfy the major banks – who tend to be the biggest providers of equipment loans for start-up businesses – alternative lending solutions with non-bank lenders can be a viable fallback option. A specialist business finance broker will be able to guide you on which non-bank lenders will consider your application.
It’s worth noting that these options tend to come at a premium – often in the form of a higher interest rate – so considering a shorter-term loan agreement with these lenders can be more cost-effective until your business gains traction.
Whether your credit score is an issue or not, a strong business plan with demonstrated evidence of your experience in the industry will go a long way to overcoming lender objections and reassuring them of your suitability for securing business equipment finance.
Power Your Startup with the right Equipment Loan
Securing finance to assist in acquiring business equipment can be the difference between success and failure for many, so ensuring you apply for the right funding option for your circumstances is essential.
The benefits of getting access to equipment faster are clear – powering your business to success in a shorter timeframe, while alleviating cashflow issues in the meantime.
Having an experienced business finance broker to help you make the right lending choice for funding equipment purchases will save you money in the long run, as well as free up time to focus on getting your business off to a successful start.
Loanscope has extensive experience in assisting Australian businesses secure funding for equipment finance across a wide range of industries. Contact us today for an obligation-free discussion with our specialist business finance team and take the first step to securing your business goals.
