Small business owners understand the importance of purchasing, upgrading or replacing the equipment they need to produce their products. After all, it’s impossible to make your business run at maximum efficiency and productivity without the right kind of equipment. This could be a medical and dental medical machinery, a restaurant oven, some catering supplies, or vehicles for commercial use. However, a big equipment purchase can totally decimate your working capital. If you won’t preserve your working capital, how can your business checking account manage to handle utilities, payroll, marketing, and other expenses? Since obtaining equipment outright can put a strain on your cash flow, equipment financing might just be your best option. Check out these tried and tested steps to getting equipment financing.
1. Make Sure that Your Credit is Excellent
If you’ve had late credit card payments or a history of bad credit, your chances of getting equipment financing are slim. Small businesses that appear to be too risky aren’t going to fare well when it comes to equipment financing application. Keep in mind that keeping your credit in good shape is a critical requirement when you’re applying for equipment financing.
The key is to make the necessary preparations including doing your research and knowing your FICO score. In case you’re not familiar, your FICO score gives lenders an idea of your credit risk. Financing institutions use this as they assess your application. However, some people don’t know how to identify their credit risk or find out what their FICO score is. The good news is that there’s a slew of online tools that you can use to address this issue.
Aside from your business credit history, you may be asked to present your personal credit history as well. Know that your credit card debt and your late car payments can delay or halt your equipment financing approval process. It’s best to fix any kind of credit reporting errors by promptly reporting any discrepancies. Furthermore, be sure to clean up your credit as well.
2. A Solid Business Plan is a Must
If you want to get your equipment financing application approved, you must have a craft a solid business plan. For financing institutions, this document serves as a roadmap of your success. It should clearly identify the type of business you have as well as your product or service. Plus, it should include your current cash flow system while projecting realistic goals for future growth.
Your target market should also be identified as much as the socio-economic demographics of your business’ primary market. Be sure to have a detailed explanation of how your business can fulfill the needs of the market. Lastly, have a concise Executive Summary that summarizes your business plan in just a few paragraphs.
Remember that a great business plan doesn’t need to be lengthy. However, it needs to be extremely thorough and well thought out.
3. Update Your Personal Resume
If you think that your personal resumes are only needed for job applications, think again. When you’re applying for equipment financing, this can be a valuable resource to have. Financial institutions usually check personal resumes to search for character traits that support business plans. They want to know the person behind the company to see if that person is a good credit risk for equipment financing.
4. Get Your Finances in Order
This means that you must have cash flow statements ready. Most financial institutions will require you to show your funds coming in and going out in current terms. Therefore, it’s extremely important to get your finances in order. If you have to hire a certified public accountant to help you achieve this goal, do it. Ensuring that the integrity in your reporting is accurate and ethical is the best way to illustrate how your company is doing. This is also one of the primary things that various financial institutions look at when they review equipment financing applications.
Do You Need More Tips on Preparing for Equipment Financing Application?
Is your industrial equipment or your specialized machinery old and worn? Does it need to be replaced? Perhaps your business is expanding to meet increasing demand. As it grows, you’ll need to upgrade or replace your key equipment.
If you want to discover how equipment financing can be the best financing solution for your business, reach out to the experts at SMB Compass. Our team of professionals knows all there is to know about equipment financing as well as other types of programs that might be suited to your needs. Don’t hesitate to call us (888) 853-8922 or email us at firstname.lastname@example.org to talk to one of our finance specialists.