Equipment financing is a broad term that refers to various financing options available for acquiring business equipment. The specific type of financing can vary based on the products and programs available to you.
Many industries rely on equipment financing, including construction, manufacturing, transportation, healthcare, agriculture, restaurants, and IT. When you’re in the market for new equipment, securing the right financing should be a straightforward process. This article will help you make an informed decision by explaining how equipment financing works, its benefits, and key factors to consider when choosing a financing option.
Types of Equipment Financing
Equipment financing and equipment leasing both provide businesses with access to the equipment they need to complete their projects. However, they differ in how ownership and payments are structured. Let’s break them down:
Equipment Financing
- Purchase the equipment
- Own the equipment when loan is paid in full
Equipment Leasing
- Rent the equipment
- End of lease options:
- Return the equipment to vendor
- Buy it out
- Renew the lease agreement
General Eligibility
To be eligible for an equipment financing product, you will need:
- $250K or more in annual gross sales
- 675+ FICO
- 2+ Years In Business for equipment valued $20K – $75K
- 4+ Years In Business for equipment valued $75K – $1M
How to Apply
Applying for equipment financing is a straightforward process when you have the necessary documents ready. Here’s what you’ll need:
- Four (4) months of recent business bank statements
- A quote or invoice for the equipment
- A completed business financing application
The approval process typically takes 1 to 2 business days. Once pre-approved, the timeline for receiving your equipment will depend on the type of asset being financed. Titled vehicles and specialized machinery may require additional documentation to transfer ownership. If you’re working with Clear Skies Capital, our team will guide you through every step to ensure a smooth process.
Alternative Financing Options
If traditional equipment financing isn’t an option, consider these alternatives:
- SBA 7(a) Loans – Suitable for general equipment purchases
- SBA 504 Loans – Designed for heavy machinery and long-term assets
- Vendor Financing – Some equipment suppliers offer direct financing options
Tips for Approval
To improve your chances of approval with an online lender like Clear Skies Capital, consider these key factors:
- Maintain a Strong Credit Score – Lenders assess creditworthiness when making financing decisions.
- Show Consistent Deposits – Demonstrating financial stability assures lenders of your ability to repay.
- U.S.-Based Equipment Vendors Only – Clear Skies Capital and other lenders will only approve financing for equipment purchased from vendors based in the United States.
Pros & Cons of Equipment Financing
Pros:
- Preserves Cash Flow – Spread payments over time instead of making a large upfront purchase.
- Tax Benefits – Potential deductions on interest payments and depreciation.
- Fixed Monthly Payments – Predictable budgeting for long-term financial planning.
Cons:
- Interest Costs – The total cost of equipment increases over time due to interest rates.
- Debt Obligation – Financing adds to your business’s liabilities, which could impact future borrowing capacity.
Conclusion
Equipment financing is a valuable tool for businesses across various industries, including construction, manufacturing, transportation, healthcare, agriculture, restaurants, and IT. It allows companies to acquire essential equipment without large upfront costs, providing flexibility and financial stability.
At Clear Skies Capital, we specialize in helping businesses secure the funding they need. Contact us today to explore your financing options and take the next step toward growing your business.