For these businesses, effectively purchasing, using, and maintaining equipment is a top priority. Key indicators, like the business’s cash flow, liquidity, and return on investment, depend on how industrial equipment purchases are financed. Given the business implications, it’s important to know how to apply for an industrial equipment loan. So in this post, we’ll review what industrial equipment financing is, how it can be used, and how the application process works.
How Industrial Equipment Financing Can be UsedYou can use industrial equipment financing to purchase or lease tools that you would use to manufacture, process, compound, or produce something for sale. Typically, you’d use industrial equipment financing when:
- Your company is growing
- A new project is starting
- You want to expand your offerings
- Old equipment has become obsolete or damaged
- Industrial robots
- Welding machines
- Food packaging machines
- And more
How to Apply for an Industrial Equipment Loan
Understand Your Current PositionBefore evaluating lenders and equipment financing, you need to answer a few basic questions.
- Why do you need this type of equipment for your business?
- How do you expect to utilize the equipment and for how long?
- How will the equipment impact your cash flow, revenues, and profits?
- When/if you decide to sell your business equipment, what will it be worth at that time?
- What is a monthly payment that your business can afford?
Make Sure You QualifyIndustrial equipment lenders’ eligibility requirements vary widely. So you’ll want to make sure you meet their minimum requirements before you apply. Of course, even if you meet their minimum criteria, you’re not guaranteed approval. However, you can save a lot of time by eliminating options that have too stringent qualification criteria. Generally, qualification criteria include:
- Credit History: To qualify for an industrial equipment loan, you’ll need a credit score of at least 550—though most lenders prefer higher scores.
- Revenues: Lenders often set minimum revenue requirements which you’ll need to surpass to have a chance at approval.
- Business History: All else being equal, the longer your business has been established, the better.