Loan

What Are The Pros and Cons of Equipment Loans?

You probably use at least one form of equipment as a business owner, regardless of the industry of your company. This equipment is likely to be integral to how your organization operates, or makes it easier to do so.

Unfortunately, most machinery is costly, and it may be too expensive for you to buy with the multitude of other business expenses you have to afford. Fortunately, this is why business owners resort to loans for equipment for their funding needs!

Deciding whether a loan for equipment is right for your company would depend on many factors. However, equipment financing may be a good choice if you rely on expensive equipment to run your company.

We’ve compiled a list of the advantages and disadvantages of equipment loans to help you decide whether an equipment loan is right for your business.

Equipment Loan Disadvantages

Usage is limited to Equipment

Equipment loans may, as the name suggests, only be used for equipment. That means that the proceeds from an equipment loan would not be able to be used to fund payroll costs, rent, or anything else. For instance, in this case, if your business needs funding for construction equipment but also wants to use the funds for payroll, this is not the best form of loan for you.

Other forms of extra working capital allow you the ability to use the funding as you see fit, such as a merchant cash advance, lines of credit, or a credit card. This is not a very significant downside, of course, if the only thing you need the cash for is to buy equipment.

Higher rates than regular loans

Equipment loans usually offer attractive interest rates, as low as five percent. However by taking out a standard loan, if you have an excellent business credit history, you’ll usually be able to find a lower interest rate. Review your credit score before applying for any form of financing. That way, you can fix it prior to applying if you have bad credit.

Still, to have a loan amount (up to 30 to 90 days), some conventional lenders can be slower and may need more paperwork. In addition, many lenders have a business obligation period, meaning you will have to wait for a certain amount of time until you’ve been operational. Therefore, you may not be able to wait for a conventional lender to accept your request if your equipment needs are pressing.

You Own the Equipment

Depending on how you look at it, complete ownership of business equipment could be an advantage or a disadvantage. You’re borrowing money to buy and own equipment when you take out a small business loan for equipment. Equipment leasing is an alternative to this. You make monthly payments for an equipment lease to use the equipment, and then return it when the lease is over.

Owning rather than leasing may be costly for your organization for machines that could become outdated or depreciate relatively quickly. For long-term equipment, however, ownership is typically more affordable.

Equipment Loan Advantages

 

Receive money for buying, repairing, or leasing equipment

Even if your company is well-established, chances are that you don’t have enough money to spend on equipment. Fortunately, cash is just what these forms of loans offer for equipment.

Since business equipment loans allow you to specifically borrow money to pay for equipment, you don’t have to wait until you have the money on hand to make a big purchase or repair equipment that you already own.

Getting this money would boost the bottom line of your business; waiting to buy, lease or repair equipment may seriously hurt the annual revenue of your company especially if the equipment is crucial to your operations. For example, you’ll need to fix or replace it as soon as possible if your restaurant’s oven fails.

Spread The Purchase Cost

Cash flow is a constant issue for any business owner, and acquisitions of equipment only exacerbate cash flow problems further. However, since a loan for equipment allows you to spread the expenses, this form of loan helps address the issue of cash flow raised by acquisitions of equipment.

Let’s assume, for instance, you need to buy a large-format printer for several business locations, and the total cost would be $100,000. You could put down 10 percent with an equipment loan, and pay an average interest rate of six percent for five years. That means you’d pay $10,000 on day one and make only $1,700 in monthly payments over a five-year period. Without an equipment loan, you will immediately need $100,000 in cash to purchase the equipment directly.

No additional collateral needed

You may be forced to set up assets that you already own, such as real estate or cars, to apply for a term loan. This isn’t necessarily the case for a loan for equipment. Alternative and online lenders would typically be happy with using the equipment that you purchase as collateral for the loan. This can be very positive since the downside risk is greatly minimized by this.

Raising the potential revenues of your business

If you obtain a loan for equipment, it could increase the overall efficiency of your business. For example, getting additional machinery could help you complete orders quicker if you own manufacturing business. You might also be able to take on more clients, which will raise the bottom line.

You will be investing in your company by having an equipment loan and will even be able to gain more money in the long run!

Conclusion

Equipment loans are intended for a very particular reason, unlike many other forms of financing. Although that keeps these loans from being flexible, it also means that equipment loans can be extremely productive for the right individual. Take the time to perform an analysis, consider your needs, and decide the type of equipment your company requires to help yourself make the final decision. That way, to make the best decision for your business, you’ll have all the details you need.

 

 

 

Can You Get an Emergency Loan While on Unemployment?

Can You Get an Emergency Loan While on Unemployment?

Although the unemployment rate saw a decrease to 11.1 percent in June, that rate is still extremely high. Add to that the risk of potential decreases as we continue to struggle with coronavirus, and it is easy to see why emergency loans have risen in need.

But what if you were among the millions of workers who were unemployed? When it comes to applying for emergency loans with no work, we’ll discuss the choices you have.

When I’m unemployed, can I apply for a loan?

It depends. Even if you don’t have a job, there are two variables that can help your chances of being accepted for a personal loan: alternative income and your credit.

Alternative Income Option

If you have no evidence of employment due to a layoff, you can offer alternate income opportunities to your lender to show that you can pay back what you borrow. To reflect your wages, unemployment insurance may be used, as well as the following:

  • Alimony/child support
  • Spousal income (for co-signing or a joint personal loan)
  • Retirement benefits/pension
    Disability
  • Social Security benefit payments

These can also qualify as revenue for certain lenders if you already have money in your savings account, or have freelance work or a pending job offer.

Your Credit

Your credit can be a big factor in whether you can get accepted with no work for an emergency loan. To see how trustworthy you are when it comes to handling your loans and paying back what you borrow, lenders may want to look at your financial history and credit score.

The higher your rank or score, the better for creditors. A strong credit score is usually 670 or above. Ultimately, it depends on the FICO scoring model used.

Credit scores are measured using credit report data that you can review every 12 months for free. If your history is in good condition, your score would be strange. To get your score where it needs to be it is important to review your credit and correct any inaccuracies immediately.

Remember: You can charge at least 100 points on your credit score on any past-due account that is more than 30 days old. Make sure to keep on top of your bills and correct any inaccurate details.

Options If a Personal Loan is not available for you or you don’t qualify.

If you simply don’t have the income to make a personal loan happen, if you don’t have a career, there are emergency loan alternatives.

Apply for a line of credit on home equity (HELOC)

If the above solutions do not suit your current situation and you are a homeowner, it might be possible for a home equity line of credit, or HELOC, to provide you with the emergency cash you need while you are searching for a job. A HELOC enables you to borrow in your home against the equity because it’s not dependent on your income. It’s a revolving credit line from which you can borrow as little or as much as you like.

Although a HELOC is not funded by your income, it uses your home as collateral. Be very vigilant and consider selecting another path for financial aid if you do not keep up with payments.

emergency loans

Get a personal joint loan

A mutual personal loan, like a co-signer, allows you to apply to someone who has financial security protection and good credit. The difference? Both borrowers own the loan, while the co-signer only shares obligation, not ownership, in the above case. Friends, families, and couples in which one person is unemployed will benefit from this, while the other has steady revenue.

Apply with a co-signer

If your credit score prevents you from being accepted for a personal loan while unemployed, using a co-signer can help. A friend or family member who has a decent credit score may be a co-signer. A greater chance of acceptance, stronger prospects for a lower interest rate, and probable access to a higher amount are the benefits of using a co-signer.

Remember: both you and your co-signer are liable for payments, so you’re both on the hook financially if you miss or lose one.

Additional Unemployed Aid

Circumstances often do not make emergency loans without work. You do not have a co-signer, or a home, or any extra revenue. From temporary help with your bills to federal assistance explicitly set up for COVID-19, it’s important to know what financial relief is available at this time.

To keep your financial well-being in check, do your homework, and do what you can. You know, choices, relaxation, and alternatives are open to you. To learn more, be sure to reach out to lenders.

Related Articles: